Introduction to Financial Management

Transcription

1 Introduction to Financial Management Course Number: FIN 765 Semester: Fall 2017B (30OCT DEC2017) Meeting: (LEC 005) Mon/Wed 9:30AM 10:45AM; Thu 8:00AM 9:15AM (LEC 006) Mon/Wed/Thu 11:00AM 12:15PM Grainger 2335 Instructor: Dr. Adam R. Smedema Address as (in order): Adam ; Dr. Smedema Office Hours / Teleconf: Thu 1:00PM 6:00PM AND by appointment Office: TBD arsmedema@wisc.edu Telephone: TBD Course Materials o o o Corporate Finance, 2016, 11 th Ed., by Ross, Westerfield, Jaffe, and Jordan in a format that includes access to the McGraw-Hill Connect course for the text Note: The access key for Connect (ISBN: ) includes a six-month access to the electronic copy of the readings that is printable. So, students may wish to purchase access to the Connect course and print the readings as needed. For students who wish to purchase a print copy of the text (e.g., those in a finance specialization) in addition to the electronic copy, Dr. Smedema recommends the loose-leaf version that includes the Connect registration key (ISBN: ). Selections from Case Studies in Finance, 2014, 7 th Ed., by Bruner, Eades, and Schill (A custom printing of the selections will be available) Financial Calculator. Texas Instruments BAIIPlus preferred; HP 10bII+ acceptable. All other calculators must be explicitly approved by Dr. Smedema. Course Description Introduction to financial management of firms and investment decision making; both theory and practice are emphasized. Topics covered include the financial environment and securities markets, financial statements and analysis, working capital management and capital budgeting, cost of capital, dividend policy, asset valuation, investments, decision making under uncertainty and selected topics such as mergers, options, futures. Prerequisites MBA students only

2 Communication Homework Dr. Smedema will communicate to the class through . He promises to not spam you, so please read them, as he will only send them out with critical information (when grades are posted, emergency class cancellation, etc.) Important documents, such as course notes, presentations, etc. will be made available through our Canvas page. Homework problems will be assigned throughout the semester through McGraw-Hill Connect. These are to assist students in studying for the tests, but are NOT graded. Through Connect, step-by-step solutions are also provided. Case Write-Up Assignment: Students, working in their core groups, will write up one case (greater details will follow). The write-up is worth 10 points towards students semester total. Case: Target Corporation (BES Case 20) Due: Before class on Monday, December 4 th Testing Tests: Students will take three in-class tests during the semester. The tests will each be 20 multiple choice questions and worth 30 points towards the semester grade. Test Dates: Test Date 1 Monday, November 13 th 2 Wednesday, November 29 th 3 Thursday, December 14 th Testing Procedures:On test days, students will gather outside of the classroom. As they enter, students will receive a test with a randomly assigned seat. Dr. Smedema will discuss this process more thoroughly in class. Students are only to have available to them pencils and previously approved calculators (generally, nothing that stores text). Cell phones are not permitted. Once a student enters the room with a test, they will not be allowed to leave without first completing and turning in the test. Students will not be allowed to return while the test is in progress. They should work with Dr. Smedema beforehand for any illness-related issues.

3 Test Make ups: Early Exams: Test Retakes: Make-up tests are given only after the regular test time. Students must provide documentation for any missed test (e.g., doctor s note, etc.). The test dates (see above) are fixed, so students should check their schedules as soon as possible to identify any conflicts. Except for scheduling restrictions due to disability accommodations, no early exams will be given. Retakes of previously taken tests will not be offered. Grading Accommodations: Students requiring disability accommodations must have the accommodation documented through the McBurney Disability Resources Center. Dr. Smedema will work with students to ensure their accommodations are met. Semester Grade: Student s semester grades will be determined only by their test scores and case study write-up. Students will take 3 30-point midterm tests and turn in 1 10-point case write-up. Letter grades will be assigned based on the total number of points earned during the semester. Homework and attendance are not graded and do not factor into the semester grade. Extra Credit: No extra credit or additional work will be awarded this semester. Letter Grade: A letter grade will be assigned based on the following standard scale: Semester Grade Letter Semester Grade Letter [100,92] A (78,70] C (92,88] AB (70,60] D (88,82] B (60,0] F (82,78] BC Note: ] means greater than or equal to and ( means less than. McGraw-Hill Connect Students will need a registration key (available on a card at the bookstore or purchased on the Connect website) to access the McGraw-Hill Connect site. This will be accessible through Canvas. Connect homework assignments are not graded and do not factor into a student s semester score. Once they submit an assignment in Connect, students will receive feedback on the assignment, including step-by-step solutions to all problems. Many problems use randomly generated numbers, so students may rework problems with different values and answers.

4 Videos Supplements Throughout the semester, Dr. Smedema will post videos (streaming from the course Canvas page). These videos represent additional practice problems and extensions and variations of inclass examples. Dr. Smedema expects students to use these videos in preparation for the tests. Policy Statements Nameplates: Students have been given nameplates by the College. Dr. Smedema requests students display these to assist him in learning students names. Technology policy: Students can use laptops and tablets for notetaking purposes only. Students should be respectful to their peers and refrain from using their phones. Students are prohibited from taking photos or recordings of lecture without explicit permission from Dr. Smedema. Academic Integrity: By enrolling in this course, each student assumes the responsibilities of an active participant in UW-Madison s community of scholars in which everyone s academic work and behavior are held to the highest academic integrity standards. Academic misconduct compromises the integrity of the university. Cheating, fabrication, plagiarism, unauthorized collaboration, and helping others commit these acts are examples of academic misconduct, which can result in disciplinary action. This includes but is not limited to failure on the assignment/course, disciplinary probation, or suspension. Substantial or repeated cases of misconduct will be forwarded to the Office of Student Conduct & Community Standards for additional review. For more information, refer to Disability Accommodation Policy: The University of Wisconsin-Madison supports the right of all enrolled students to a full and equal educational opportunity. The Americans with Disabilities Act (ADA), Wisconsin State Statute (36.12), and UW-Madison policy (Faculty Document 1071) require that students with disabilities be reasonably accommodated in instruction and campus life. Reasonable accommodations for students with disabilities is a shared faculty and student responsibility. Students are expected to inform faculty [me] of their need for instructional accommodations by the end of the third week of the semester, or as soon as possible after a disability has been incurred or recognized. Faculty [I], will work either directly with the student [you] or in coordination with the McBurney Center to identify and provide reasonable instructional accommodations. Disability information, including instructional accommodations as part of a student's educational record, is confidential and protected under FERPA. Questions regarding classroom accommodations or working with individual students can be directed to the student's accommodation specialist listed on the student VISA (McBurney accommodation plan) or to the McBurney Disability Resource Center (mcburney@studentlife.wisc.edu, 608/ ).

5 Class Schedule for FIN765 Fall 2017 Subject to change with notice Date Topic RWJJ Readings Part 1: The Basic Framework for Financial Decision-Making M 10/30 Introduction to Financial Management: What is Finance? 1.1 Introduction to Financial Management: The Firm & the Financial Manager 1.2, 1.3 Introduction to Financial Management: The Goal of Financial Management 1.4 Introduction to Financial Management: Agency Problems 1.5 W 11/1 Long-Term Financing: Equity 15.1 Long-Term Financing: Long-term Debt 15.2, 15.4 Long-Term Financing: The Capital Structure Decision 15.6, 15.7 h 11/2 Discounted Cash Flow Valuation I: Value none Discounted Cash Flow Valuation I: The One-Period Case 4.1 Discounted Cash Flow Valuation I: Net Present Value 4.1 Discounted Cash Flow Valuation I: The DCF Value of a Lump Sum 4.2 Discounted Cash Flow Valuation I: The DCF Value of a Stream of Cash Flows 4.2 Discounted Cash Flow Valuation I: The DCF Value of a Non-Annual Compounding 4.3 M 11/6 Discounted Cash Flow Valuation II: The DCF Value of a Perpetuity 4.4 Discounted Cash Flow Valuation II: The DCF Value of a Growing Perpetuity 4.4 Discounted Cash Flow Valuation II: The DCF Value of an Annuity 4.4 Discounted Cash Flow Valuation II: The DCF Value of an Annuity Due 4.4 Discounted Cash Flow Valuation II: The DCF Value of a Growing Annuity 4.4 W 11/8 Bond Valuation: Bond Valuation 8.1 Bond Valuation: Interest Rate Risk 8.1 Bond Valuation: Zero-Coupon Bonds 8.1 Bond Valuation: Bond Types 8.2, 15.3 Bond Valuation: Bond Markets & Quotes 8.3 h 11/9 Interest Rates: Promised vs. Expected Returns none Interest Rates: Credit Risk none Interest Rates: Inflation 8.4 Interest Rates: Other Determinants of Bond Yields 8.5 M 11/13 Test 1

6 Class Schedule for FIN765 Fall 2017 Subject to change with notice Date Topic RWJJ Readings Part 2: Capital Budgeting & Equity Valuation W 11/15 Financial Statements: The Balance Sheet 2.1 Financial Statements: The Income Statement 2.2 Financial Statements: Cash Flow of the Firm 2.4, 2.5 h 11/16 Investment Rules: DCF Value-Based Rules 5.1, 5.4, 5.6 Investment Rules: Payback Period 5.2 Investment Rules: Internal Rate of Return 5.4 Investment Rules: Problems with IRR 5.5 Investment Rules: The Practice of Capital Budgeting 5.7 M 11/20 Capital Budgeting: Incremental Cash Flows 6.1 Capital Budgeting: Expansion Projects 6.2, 6.3 Capital Budgeting: Cost-Cutting Projects 6.5 Capital Budgeting: Setting the Bid Price 6.5 W 11/22 Capital Budgeting: Evaluating Projects with Unequal Lives 6.5 Capital Budgeting: Sensitivity Analysis 7.1 Capital Budgeting: Scenario Analysis 7.1 h 11/23 No Class (Thanksgiving) M 11/27 Equity Valuation: Dividend Discount Models 9.1, 9.2 Equity Valuation: Comparables 9.3 Equity Valuation: Free Cash Flow Models 9.4 Equity Valuation: The Stock Market 9.5 W 11/29 Test 2

7 Class Schedule for FIN765 Fall 2017 Subject to change with notice Date Topic RWJJ Readings Part 3: The Cost of Capital h 11/30 Lessons from Market History: Single-Period Returns 10.1 Lessons from Market History: Holding Period Returns 10.2 Lessons from Market History: Risk & Returns 10.3, 10.4, 10.5 Lessons from Market History: The Equity Risk Premium 10.6 M 12/4 Portfolios: Individual Securities 11.1, 11.2 Portfolios: Portfolio Allocations 11.3 Portfolios: Portfolio Returns & Expected Returns 11.3 Portfolios: Portfolio Variance 11.3 Portfolios: The Relation of the Risk of a Portfolio and the Risk of its Assets 11.3 W 12/6 The Capital Asset Pricing Model: Efficient Sets 11.4, 11.5 The Capital Asset Pricing Model: Diversification 11.6 The Capital Asset Pricing Model: Market Equilibrium 11.8 The Capital Asset Pricing Model: The Relation between Risk and Expected Return 11.9 h 12/7 The Cost of Capital: Definition 13.1 The Cost of Capital: Cost of Equity The Cost of Capital: Cost of Debt 13.7 The Cost of Capital: The Weighted Average Cost of Capital 13.8 The Cost of Capital: Divisions & Projects 13.6 The Cost of Capital: Flotation Costs M 12/11 Capital Structure: Definition 16.1 Capital Structure: M&M Irrelevance Capital Structure: Irrelevance of M&M Irrelevance (Taxes) 16.5 W 12/13 Capital Structure: Irrelevance of M&M Irrelevance (Bankruptcy Costs) Capital Structure: Optimal Capital Structure 17.4 Capital Structure: Signaling & the Pecking Order Theory 17.5, 17.7 h 12/14 Test 3