NUS Business School Department of Finance
FIN3101 CORPORATE FINANCE
Session: Semester II, 2013/2014 (13 January 2014 – 18 April 2014) Instructors Associate Professor Ruth Tan (
[email protected])
#07-48 Tel: 6516-6265
Course Objectives This course aims to provide students with an in-depth understanding of Corporate Finance. Students will be exposed to key financial issues faced by modern-day finance managers of corporations. The course will also equip students with conceptual and analytical skills necessary to make sound financial decisions. Cases will be used to illustrate the concepts taught in lectures. Textbook and Reference Main Textbook: (RWJ) Corporate Finance 10th edition, 2010 Ross, Westerfield, and Jaffe McGraw-Hill Irwin
Assessments Methods Class Participation and Pop Quizzes 3 Tutorial Assignments (group basis) 1 Case study and 2 Critiques (group basis) Test 1 Test 2 Total
15% 9% 26% 20% 30% 100%
Please note the dates for Tests 1 and 2. There will be no make-up.
FIN3101 – A/P Ruth Tan
Page 1
FIN3101 CORPORATE FINANCE Semester II 2013/2014 Limited Open Book Tests No formula sheet will be provided in the tests. Students are allowed to bring in ONE (1) sheet (A4 size, double-sided) of notes. Only NUS approved calculators are allowed. The tests may consist of open-ended questions that examine the total understanding and creativity of the student with respect to the course materials. Class Participation Students are expected to have done pre-class readings and be actively involved in class discussions. Extra credit will be granted to those who can contribute towards class discussions and/or the discussion forum. Case Assignments Each class will be divided into 9 groups for case assignments. We will cover 3 cases during the semester. Out of the 9 groups, there will be 3 primary groups for each case. Groups 1A, 1B & 1C will take on the primary responsibility for case 1; groups 2A, 2B & 2C for case 2 and groups 3A, 3B & 3C for case 3. The 3 primary groups for the case will each submit a typewritten, double-spacing, font 11 comprehensive report not exceeding 15 pages (the 15 pages include texts, tables and appendices) by the due date in both hard and soft copies. The soft copies will facilitate distribution of reports to the other 6 non-primary groups. The 6 nonprimary groups are each required to submit an A4 sized, double-sided, font 11, 1.5 spacing critique of the reports in class before the case presentation. During the case presentation, the 3 groups with primary responsibility will be given 30 minutes each to present their analysis. All students are expected to actively participate in the case discussions. Case assignment and guidelines will be made available two weeks before the due date. Tutorial and Discussion Students are expected to come prepared for the tutorial. Each tutorial consists of a number of questions and/or mini-cases related to topics that are covered in class. These questions may require downloading and analysis of financial data. Please note that group-based answers will be collected for grading. The group membership is the same as that for case study. Based on the quality of the submissions, certain groups will be requested to present the tutorial answers in class. Submission Policy Tutorial submissions, case reports and critiques are done on a group-basis. The hard copies must reach the instructor by the due date and time. Late submissions will be penalized by at least 20 percent.
FIN3101 – A/P Ruth Tan
Page 2
FIN3101 CORPORATE FINANCE Semester II 2013/2014
Schedule Week Week 1:
Topic and Readings Topic 1: Introduction and Overview of Risk & Return
Common Stock Valuation
Review of portfolio theory
CAPM and APT
Risk, return, and cost of capital
Readings: RWJ Chapter 1, 10, 11, 12, 13 Week 2:
Topic 2: Capital Budgeting
Review of Payback, NPV, IRR, PI, etc
Sensitivity, scenario and break-even analysis
Real Options
Readings: RWJ Chapter 6, 7 Week 3
Topic 3: Capital Structure I
Efficient market hypothesis
Raising capital
Issuing securities
Venture capital and IPO
Rights issue
Readings: RWJ Chapters 14, 20 Week 4
Topic 4: Capital Structure II
Theories of capital structure
Tax effects
Readings: RWJ Chapter 16 Topic 5: Capital Structure III
Week 5
Limits to the use of debt
Costs of financial distress
Agency costs
Is there an optimal capital structure?
Topic 6:Capital Structure IV
Interactions between Investments and Financing
FIN3101 – A/P Ruth Tan
Page 3
FIN3101 CORPORATE FINANCE Semester II 2013/2014
Adjusted Present Value Approach
Flow to Equity Approach
WACC approach
Readings: RWJ Chapters 17, 18 Assignment due by 12nn Fri Feb 14: Tutorial 1 Week 6
Topic 7: Mergers and Acquisitions
Merger motives
Types of acquisitions
Value of corporate control
Merger valuations
Empirical evidence
Readings: RWJ Chapter 29 Presentation and discussion of Tutorial 1 Recess Week
from Feb 22- Mar 2 Assignment due by 12nn Fri Feb 28: Tutorial 2
Week 7
Topic 8: Dividend Policy
Is dividend policy irrelevant?
Share repurchase and dividend policy
Readings: RWJ Chapter 19 Presentation and discussion of Tutorial 2 Assignment due by 12nn Fri Mar 7: Case 1 (hard and soft copies). Instructor will email case reports to Groups 2A, 2B, 2C, 3A, 3B and 3C. Week 8
Test 1 covers topics up to Tutorial 2 Sat Mar 14, 10am-12pm Allowed to bring 1 A4 size SINGLE-sided sheet of notes and fin calculator
Week 9
Presentation and discussion of Case 1 Critique (1 A4 size double-sided sheet, font 11, 1.5 spacing) due at beginning of class from Groups 2A, 2B, 2C, 3A, 3B and 3C. Assignment due by 12nn Fri Mar 21: Tutorial 3
Week 10
Presentation and discussion of Tutorial 3 Assignment due by 12nn Fri Mar 28: Case 2 (hard and soft copies). Instructor will email case reports to Groups 1A, 1B, 1C, 3A, 3B and 3C.
FIN3101 – A/P Ruth Tan
Page 4
FIN3101 CORPORATE FINANCE Semester II 2013/2014 Week 11
Presentation and discussion of Case 2 Critique (1 A4 size double-sided sheet, font 11, 1.5 spacing) due at beginning of class from Groups 1A, 1B, 1C, 3A, 3B and 3C. Assignment due by 12nn Fri Apr 4: Case 3 (hard and soft copies). Instructor will email case reports to Groups 1A, 1B, 1C, 2A, 2B and 2C.
Week 12
Presentation and discussion of Case 3 Critique (1 A4 size double-sided sheet, font 11, 1.5 spacing) due at beginning of class from Groups 1A, 1B, 1C, 2A, 2B and 2C.
Week 13
Test 2 covers all topics. Sat Apr 19, 10am-12pm Allowed to bring 1 A4 size DOUBLE-sided sheet of notes and fin calculator
FIN3101 – A/P Ruth Tan
Page 5
