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Essentials of Corporate Finance

Description

Course objectives

  • Learn how to evaluate an investment project
  • Learn the basics of risk, return and portfolio analysis
  • Learn how to determine the cost of capital of a firm
  • Learn how to evaluate a firm with a DCF methodology
Course description

The course provides a framework for understanding and analyzing investment and financial decisions of corporations. Lectures and readings provide an introduction to present value techniques, capital budgeting, company valuation, capital structure decisions, corporate cost of capital, initial and seasoned equity offerings. The goal is to provide students with a solid understanding of the theories underlying the firms’ investment and financing decisions as well as with the practical skills needed to solve real-life cases. However, the course will be split in two parts to allow students in Corporate Communications to attend only the first part, which will be focused on investment decisions and om an overview of financial markets and corporate financing.

Course content

The readings can be found in the Brealey-Myers-Allen textbook (BMA), while the professor’s slides (available for most lectures) are downloadable from the course website. The course topics marked with “Corp Comm” are the lectures that should be taken by students of Corporate Communications, approximately half course and 28 teaching hours.

  • Lecture 1: September 21th:
    • Course introduction and firm’s goals. BMA Chpt 1. - Corp. Comm. –
    • Financial statement basics and financial analysis. BMA: Chpt 28 - Corp. Comm. -
  • Lecture 2: September 28th:
    • Present value formulas for financial valuations. BMA: Chpt 2 - Corp. Comm. –
    • Making investment decisions. Payback, IRR and NPV. BMA: Chpt  5, 6 - Corp. Comm. –
    • Net present value and determination of Cash Flows. BMA: Chpt  6 - Corp. Comm. –
  • Lecture 3: October 5th:
    • Essentials on bonds and stocks valuation. BMA: Chpt 3, 4 - Corp. Comm. -
  • Lecture 4: October 12th:
    • Risk aversion and how to measure single securities’ and portfolios’ risk. BMA: Chpt 7, 8
    • Risk diversification, Portfolio Theory and CAPM. BMA: Chpt 8
  • Lecture 5: October 19th:
    • Capital Budgeting: Windowlux Case Study in Excel - Corp. Comm. –
  • Lecture 6: October 26th:
    • Beta assets, beta equity and their determinants. BMA: Chpt 9
    • Some exercises on the “Risk, Return, Portfolio Divesification” topic
  • Lecture 7: November 2nd:
    • Efficient markets and overview of corp. financing: BMA: Chpt 13, 14 - Corp. Comm. -
  • Lecture 8: November 9th:
    • Initial Public Offerings and seasoned equity offerings. BMA: Chpt 15 - Corp. Comm. -
  • Lecture 9: November 10th (remote):
    • Dividend Policy BMA: Chpt 16
    • Course recap and preparation for the final exam for Corp. Comm. Class
  • Lecture 10: November 16th:
    • Optimal Financial Structure, corporate and personal taxations. BMA: Chpt 17, 18
    • Other determinants of Optimal Financial Structure. BMA: Chpt 18
  • Lecture 11: November 23rd:
    • Companies’ Cost of Capital (WACC) and Valuation BMA: Chpt 19
  • Lecture 12: November 30st:
    • LBO Valuation case study in excel
  • Lecture 13: December 7th
    • Additional Case Study in excel
  • Lecture 14: December 14th
    • Course recap and preparation for the final exam
  • Lecture 14: December 21th
    • Course recap and preparation for the final exam

Evaluation procedures and Grading criteria
In case the Covid conditions will allow an exam in class, the exam will be closed book and with the following structure. Students need only bring a calculator and writing utensils to class. All information other than your own knowledge will be provided with the exams.  Final Examination Date: To be determined.

  • Final Exam’s structure for the whole course: 20 multiple choices (5 points), 4 short exercises (2 points) and one capital budgeting/valuation exercise (3 points) for a total of 10 points.
  • Final Exam’s structure for the first part of the course: 24 multiple choices (6 points), 2 short exercises (1 points) and one capital budgeting/valuation exercise (3 points) for a total of 10 points.
    Exam policy for students from the Master in Corporate Communication (3 ECTS)
    In case the Covid conditions will allow an exam in class the exam will also be closed book and with the following structure. Students need only bring a calculator and writing utensils to class. All information other than your own knowledge will be provided with the exams. Final Examination Date: to be determined.
  • Final Exam’s structure: 25 multiple choices (6 points), 2 short exercises (1 points) and one capital budgeting exercise (3 points) for a total of 10 points.

Required Material
The text for the course is:
R. A. Brealey, S. C. Myers, F. Allen, Principles of Corporate Finance – International Student Edition, McGraw Hill, 2020.
Textbook website with some useful links and information at https://www.mheducation.co.uk/ise-principles-of-corporate-finance-9781260565553-emea-group
It would be ok also the last Global edition: R. A. Brealey, S. C. Myers, F. Allen, Principles of Corporate Finance – Global Edition, 11th edition, McGraw Hill, 2014, ISBN: 0077151569.
There is also a textbook website with some useful links and information at http://www.mcgraw-hill.co.uk/html/0071314261.html In addition to the textbook, there is also a student study guide and a solutions manual for chapter questions: Study Guide to Accompany Brealy, Myers and Allen's Principles of Corporate Finance. The study guide is not required, but is advised if you like to have additional material to study from. The study guide is helpful for learning that material, especially for those with limited background in finance.
As far as an exercise book, this one is quite fit to the course:
https://www.amazon.com/Corporate-Finance-Exercise-Book-Kevin-ebook/dp/B00HM81JGW/ref=sr_1_1?dchild=1&keywords=kevin+king+finance+exercise+book&qid=1627471532&sr=8-1

DISCLAIMER

The information contained in this syllabus may be subject to moderate changes. The course instructor will communicate any modifications to students.

People

 

Bigelli M.

Course director

Additional information

Semester
Fall
Academic year
2021-2022
ECTS
6
Language
English