University of Alberta, Alberta School of Business Department of Finance
Instructor: Sheng-Jun Xu Class Room: Virtual (Zoom)
Email: [email protected] Class Time (Section B1): Mon, Wed 12:00 – 13:20 Phone: 780-492-8057 Class Time (Section B2): Mon, Wed 13:30 – 14:50
Course Description: This course discusses the capital investment decisions of firms. These are decisions about the size, allocation, and financing of capital expenditures, the relatively large, long-term investments that may be tactical or strategic in nature. Taken in the aggregate, these decisions determine the economic future for a society. To the firm, they constitute one of the most demanding challenges confronting management.
Prerequisites: FIN 301, MGTSC 312.
Learning Objectives: This course incorporates the learning goals of the BCom Program, in particular critical thinking, oral communication, teamwork, quantitative skills, and written communications. At the end of this course, you will have developed the following course-specific knowledge:
1. You should understand the theory of finance related to the allocation of a firm’s long-term capital resources.
2. You should acquire tools to deal with the practical application of theory. Special emphasis will be placed on decision-making under uncertainty. Real options analysis will be discussed.
3. You should have gained experience applying the theory and tools to real-world problems. This will be achieved through the valuation project.
Course Structure: The course will be delivered through a combination of synchronous (i.e., live) and asyn- chronous (i.e, pre-recorded) lectures. Please see the tentative class schedule for a detailed breakdown.
Asynchronouslectures will be pre-recorded and posted on eClass. These will mostly contain exposition on underlying theory and methods.
Synchronouslectures will be delivered live via Zoom (links will be posted on eClass). These will contain more examples and interactive exercises that involve the class. Zoom lectures will be recorded and made available to students.
Office Hours: Office hours will be held virtually on Zoom on Tuesdays and Thursdays from 13:30 - 15:00.
Students mustbook appointments ahead of time (at least one day in advance) for 20-minute slots. Links for the Zoom sessions and sign-up forms will be posted on eClass.
Course Textbook: Berk, De Marzo, Stangeland: Corporate Finance, 4th Canadian Edition, Pearson Canada, 2018, ISBN-13: 9780134632285 (The 3rd edition is also acceptable but it is your responsibility to monitor differences between the editions). You can purchase the textbook from the bookstore using thislink.
Method of Evaluation: Final grading in the course is done on the basis of individual student achievement.
Individual student achievement is measured by the following assessments:
Assignments (3 assignments, 5% each) 15%
Valuation Project Presentation & Report 15%
Class Participation 10%
Midterm Exam 25%
Final Exam 35%
If you miss the midterm examination, the weight of the midterm will be applied to your final exam. These represent the only marks available to students.
Make-up or extra work to improve your grade is not possible. Once assigned, the final grade in the class will not be changed except in the case of a recording error. If you feel that your grade is incorrect, you must notify me in writing during the one-week period following the return of the midterm. After that, the problem will not be reassessed. Please note thata request to have a question on your midterm re-graded entails a request to have the entire exam re-graded, which means your grade may go up or down.
Final grades in the course will follow generally the historical distribution of grades in a FIN course that includes third-year and fourth-year students. The link to the official University of Alberta Assessment and Grading Policy can be foundhere.
Important Dates:
Assignment 1 Thursday, February 4
Assignment 2 Thursday, March 11
Assignment 3 Thursday, April 1
Midterm Monday, February 22
Valuation Project Report Wednesday, April 7 Final Exam (B1) April 23 - 9:00 am (B1) Final Exam (B2) April 26 - 9:00 am (B2)
Assignments: Three assignments will be given. Each person in the class must submit his/her indi- vidual assignments. The due dates are listed above. Assignments are to be submitted in electronic format on eClass. The cutoff time for dropping off assignments on the due dates is 3:00 p.m. Assignments handed in after 3:00 p.m. on the stated due dates will not be accepted.
The assignment are to be completed individually. TAs have been instructed to look for evidence of copying among students, as well as tracking online solution providers.
“One way to work appropriately with your colleagues is to discuss concepts, research and ideas together and then go your separate ways to write your individual assignments When two or more students submit identical work claiming it is their own, it is a clear sign of inappropriate collaboration... Having someone write, rewrite, extensively edit or correct your work for you is Cheating.” (University of Alberta, Truth in Education)
Examinations: The exams will be on: material discussed in class, material in the class notes (incl. suggested questions from the textbook listed at the beginning of each note), and material covered in the three assignments.
Midterm: will cover topics covered before reading week. It will take place during normal class time.
Final exam: will focus primarily on the material covered following the mid-term. Note that Finance is a cumulative discipline so core dumping the materials in the first half of the class after the mid-term is not advisable.
Both the midterm and final will be administered virtually through eClass. Please refer to theonline guideline on how to take exams under Smart Exam Monitoring (SEM) on eClass. Formulas will be provided on the exam, so you will not have access to a “cheat sheet”. More information will be posted on eClass closer to the exam dates.
In the case of absence from the final exam, the student must apply through the Undergraduate Office to write a deferred exam. Students interested in deferred final examinations should consult the Undergraduate Office.
More information on what a deferred exam is can be found in this link. If you miss the final exam and meet the criteria for a deferred final, thedeferred final will be on May 18.
Students with accessibility needs can request special accommodations for exam. Please refer to the online guidelinesfor more details about what types of accommodations are available, requirements, and deadlines.
Valuation Group Project: This course requires students to produce a written report and deliver a presentation regarding the valuation of an actual company. The project is to be completed in groups of five (5) students (some groups of four or six may be possible, depending on class size). Each group is expected to pick one company, from a predetermined list of three companies listed on eClass. I will assign a company to any group that has not yet selected their cases for presentation.
The valuation group project will account for 15% of your final grade. The written submission and presentation portions of the project will each account for 6%. The remaining 3% will be based on a peer evaluation in which each group member is to evaluate the performance of all other members of their group.
If problems arise during the term with any of the members of your group, please advise the instructor promptly.
Students who make no contribution to their group stand to lose all of the marks allocated for the valuation project presentation and written report. In this circumstance, the instructor may penalize nonparticipating members of a group based upon complaints received from other group members. Such complaints must be made to the instructor prior to the day that valuation project reports are due (Wednesday, April 7).
A student will not lose any marks for nonparticipation, in excess of the 3% of your final grade based on the peer evaluation, without the instructor giving that student an opportunity to explain her/his lack of participation.
A student who wishes to explain her/his lack of participation should contact the instructor before the last day of classes (Wednesday, April 8).
Class Participation: Students will have multiple ways to earn participation marks in the class
1. Participating during live Zoom lectures. Students will have the opportunity volunteer ahead of time to answer pre-assigned questions.
2. Participating during the Q&A portion of valuation project presentations.
3. Participating on the eClass topic forums. These forums provide a venue for students to post and answer each other’s questions, as well as questions posted by the instructor.
Grades will based on not only the volume of questions/comments, but also on how constructive/insightful your questions and comments are (i.e., spamming the forums will not work).
Academic Integrity: The University of Alberta is committed to the highest standards of academic integrity and honesty. Students are expected to be familiar with these standards regarding academic honesty and to uphold the policies of the University in this respect. Students are particularly urged to familiarize themselves with the provisions of the Code of Student Behaviour (online atwww.governance.ualberta.ca) and avoid any behaviour which could potentially result in suspicions of cheating, plagiarism, misrepresentation of facts and/or
participation in an offence. Academic dishonesty is a serious offence and can result in suspension or expulsion from the University.
Academic dishonesty is a serious offence and can result in suspension or expulsion from the University. Please be aware that writing help is available at the Centre for Writers website.
Missed Term Work: Any student who misses term work for a valid reason will be permitted to transfer the weight of that term work onto the final exam. Supporting documentation (either a form from the student’s faculty or a Statutory Declaration) may be required to demonstrate valid cause.
Recording of Lectures: Audio or video recording, digital or otherwise, of lectures, labs, seminars or any other teaching environment by students is allowed only with the prior written consent of the instructor or as a part of an approved accommodation plan. Student or instructor content, digital or otherwise, created and/or used within the context of the course is to be used solely for personal study, and is not to be used or distributed for any other purpose without prior written consent from the content author(s).
Outline Policy: Policy about course outlines can be found in Course Requirements, Evaluation Procedures and Grading of the University Calendar.
Tentative Class Schedule(S = Synchronous, AS = Asynchronous):
Date Scheduled Topic Readings from Berk et al. 4th Cdn Ed.
Jan 11 Introduction (S) Ch. 1 & 2
Jan 13 Investment criteria (AS) Ch. 3 – 4, 9, p. 586 – 588 (3rd Cdn Ed. p.
571 – 574)
Jan 18 Investment criteria (S) Ch. 3 – 4, 9, p. 586 – 588 (3rd Cdn Ed. p.
571 – 574)
Jan 20 Cash flows (AS) Ch. 7.1, 7.2, 9, 13.8
Jan 25 Cash flows (AS) Ch. 7.1, 7.2, 9, 13.8
Jan 27 Cash flows (S) Ch. 7.1, 7.2, 9, 13.8
Feb 1 Risk and the Cost of Capital (AS) Ch. 17 - 19 Feb 3 Risk and the Cost of Capital (S) Ch. 17 - 19
Feb 8 Estimating the Cost of Capital (AS) Ch. 5, 10 – 12, 13.7 Feb 10 Estimating the Cost of Capital (S) Ch. 5, 10 – 12, 13.7 Feb 15, 17 Reading Week
Feb 22 Midterm Exam (S)
Feb 24 DCF methods (AS) Ch. 21.1 – 21.7
Mar 1 DCF methods (S) Ch. 21.1 – 21.7
Mar 3 Valuing firms (AS) Ch. 7, 22
Mar 8 Valuing firms (S) Ch. 7, 22 Mar 10 Guest lecture (S)
Mar 15 Sensitivity Analysis (AS) Ch. 9.5
Mar 17 Real options (AS) Ch. 15 - 16
Mar 22 Real options (S) Ch. 15 - 16
Mar 24 Real options (S) Ch. 15 - 16
Mar 29, 31 Special topics (time permitting) TBD
Apr 5 Easter holiday
Apr 7, 12, 14 Valuation Presentations (S)
