Essentials of Corporate Finance

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.

Textbook
R. A. Brealey, S. C. Myers, F. Allen, Principles of Corporate Finance – Global Edition, 11th edition, McGraw Hill, 2014, ISBN: 0077151569

Exam policy

The exam is closed book. 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.

Course content

The readings can be found in the Brealey-Myers-Allen textbook (BMA), while the professor’s slides (available for some lectures) are downloadable from the course website. The course is split in two parts, as students of Corporate Communications will have to take only the first part, made of approximately 28 teaching hours.

First Part: Capital budgeting and overview of corporate financing

• Course introduction and firm’s goals. BMA Chpt 1.
• Financial statement basics and financial analysis. BMA Chpt 28.
• Present value formulas for financial valuations. BMA: Chpt 2
• Essentials on bonds and stocks valuation. BMA: Chpt 3, 4
• Making investment decisions. Payback, IRR and NPV rules. BMA: Chpt 5, 6
• Net present value and determination of Cash Flows. BMA: Chpt 6
• Efficient markets and overview of corporate financing: BMA: Chpt 13, 14
• Initial Public Offerings and seasoned equity offerings. BMA: Chpt 15

Second part: Risk, portfolio theory, optimal financial structure, WACC and corporate valuation.

• Risk aversion and how to measure single securities’ and portfolios’ risk. BMA: Chpt 7, 8
• Risk diversification, Portfolio Theory and CAPM. BMA: Chpt 8
• Beta assets, beta equity and their determinants. BMA: Chpt 9
• Dividend Policy BMA: Chpt 16
• Optimal Financial Structure, corporate and personal taxations. BMA: Chpt 17, 18
• Other determinants of Optimal Financial Structure. BMA: Chpt 18
• Companies’ Cost of Capital (WACC) and Valuation BMA: Chpt 19