SAMPLE FIN300: PRINCIPLES OF FINANCE FOR THE PRIVATE SECTOR

Size: px

Start display at page:

Download "SAMPLE FIN300: PRINCIPLES OF FINANCE FOR THE PRIVATE SECTOR"

Laurence Haynes
6 years ago
Views:

1 FIN300: PRINCIPLES OF FINANCE FOR THE PRIVATE SECTOR Credit Hours: 3 Contact Hours: This is a 3-credit course, offered in accelerated format. This means that 16 weeks of material is covered in 8 weeks. The exact number of hours per week that you can expect to spend on each course will vary based upon the weekly coursework, as well as your study style and preferences. You should plan to spend hours per week in each course reading material, interacting on the discussion boards, writing papers, completing projects, and doing research. COURSE DESCRIPTION AND OUTCOMES COURSE DESCRIPTION: A study of the financial aspects of businesses, including the costs of capital, fund acquisition sources, time value of money, efficient management of assets, and investment decisions. Particular emphasis is on determining the optimal capital structure between utilization of debt and equity financing. Recommended Prior Course: None COURSE OVERVIEW: In this course, students will master the fundamental principles of finance. Various topics include financial institutions and markets that serve as intermediaries between suppliers and demanders of funds; financial statements and analysis; the importance of estimating cash flows; the time value of money used as a tool in the measurement of shareholder wealth; measurement of risk and reward or return; valuations of bonds and stocks; evaluating long-term capital projects; the cost of capital; capital structure and dividend policy. The goal of this course is to facilitate students in becoming proficient in the applications of financial techniques, tools and models using real world examples. Students will develop an understanding of how the various topics in finance are applied in corporate managerial decision-making. COURSE LEARNING OUTCOMES: 1. Demonstrate an understanding of financial statements and ration analysis. 2. Describe managerial aspects of financial decision making to maximize shareholder s wealth and analyze ethical issues faced by corporations. 3. Apply the concepts of the time value of money and its implication for making financial decisions. 4. Analyze the process for best sources and uses of organizational funds. 5. Evaluate investment alternatives for capital expenditures and understand the concept of the cost of capital and how the cost of capital is used to evaluate capital expenditures. 6. Understand challenges faced by multinational corporations due to differences in foreign culture, standards, political environment, and other factors. 7. Analyze valuation of financial securities (corporate bond, preferred stock, and common stock) and understand the basic types of dividend policies.

2 PARTICIPATION & ATTENDANCE Prompt and consistent attendance in your online courses is essential for your success at CSU-Global Campus. Failure to verify your attendance within the first 7 days of this course may result in your withdrawal. If for some reason you would like to drop a course, please contact your advisor. Online classes have deadlines, assignments, and participation requirements just like on-campus classes. Budget your time carefully and keep an open line of communication with your instructor. If you are having technical problems, problems with your assignments, or other problems that are impeding your progress, let your instructor know as soon as possible. COURSE MATERIALS Textbook Information is located in the CSU-Global Booklist on the Student Portal. COURSE SCHEDULE Due Dates The Academic Week at CSU-Global begins on Monday and ends the following Sunday. Discussion Boards: The original post must be completed by Thursday at 11:59 p.m. MT and Peer Responses posted by Sunday 11:59 p.m. MT. Late posts may not be awarded points. Opening Exercises: Take the opening exercise before reading each week s content to see which areas you will need to focus on. You may take these exercises as many times as you need. The opening exercises will not affect your final grade. Mastery Exercises: Students may access and retake mastery exercises through the last day of class until they achieve the scores they desire. Critical Thinking: Assignments are due Sunday at 11:59 p.m. MT. Live Classroom: Although participation is not required, Live Classroom sessions are held during Weeks 1, 3, 5, and 7. There are four total sessions. WEEKLY READING AND ASSIGNMENT DETAILS MODULE 1 Chapter 1 & 2 in Principles of Managerial Finance Dittmar, A., & Duchin, Ran. (2016). Looking in the rearview mirror the effect of managers' professional experience on corporate financial policy. The Review of Financial Studies, 29(3),

3 Live Classroom (0 points) MODULE 2 Chapter 3 in Principles of Managerial Finance Critical Thinking (120 points) Choose one of the following two assignments to complete this week. Do not do both assignments. Identify your assignment choice in the title of your submission. Option #1: Ratio Analysis and Interpretation Using the attached financial statements for Vanguard Group, Inc. complete the financial statement analysis and ratio analysis by answering questions 1 through 2 listed after the financial statements. Your answers must be presented in a Word document or Excel spreadsheet. Show all calculations. Your paper must be formatted according to CSU-Global Guide to Writing and APA Requirements. Use terms, evidence, and concepts from class readings. **See attached document Review the Module 2 Critical Thinking Rubric for full details on how you will be graded on this assignment. Option #2: Financial Statement Analysis Problems Complete the following problems: 1. For this problem, use the following list of accounts to prepare an income statement. Accounts ($000,000) Depreciation 25 General and administrative expenses 22 Sales 345 Sales expenses 18 Cost of goods sold 255

4 Accounts ($000,000) Lease expense 4 Interest expense 3 a. Arrange the accounts into a well-labeled income statement. Make sure you label and solve for gross profit, operating profit, and net profit before taxes. b. Using a 35% tax rate, calculate taxes paid and net profit after taxes. c. Assuming a dividend of $1.10 per share with 4.25 million shares outstanding, calculate EPS and additions to retained earnings. 2. Explain why the income statement can also be called a profit-and-loss statement. What exactly does the word balance mean in the title of the balance sheet? Why do we balance the two halves? 3. CS Industries, Inc. began 2016 with retained earnings of $25.32 million. During the year, it paid four quarterly dividends of $0.35 per share to 2.75 million common stockholders. Preferred stockholders, holding 500,000 shares, were paid two semiannual dividends of $0.75 per share. The firm had a net profit after taxes of $5.15 million. Prepare the statement of retained earnings for the year ended December 31, Sky Metals, Inc. is a metal fabrication firm that manufactures prefabricated metal parts for customers in a variety of industries. The firm s motto is If you need it, we can make it. The CEO of Sky Metals recently held a board meeting during which he extolled the virtues of the corporation. The company, he stated confidently, had the capability to build any product and could do so using a lean manufacturing model. The firm would soon be profitable, claimed the CEO, because the company used state-of-the-art technology to build a variety of products while keeping inventory levels low. As a business press reporter, you have calculated some ratios to analyze the financial health of the firm. Bluestone s current ratios and quick ratios for the past 6 years are shown in the following table: Current ratio Quick ratio What do you think of the CEO s claim that the firm is lean and soon to be profitable? 5. If we know that a firm has a net profit margin of 4.5%, total asset turnover of 0.72, and a financial leverage multiplier of 1.43, what is its ROE? What is the advantage to using the DuPont system to

5 MODULE 3 MODULE 4 calculate ROE over the direct calculation of earnings available for common stockholders divided by common stock equity? Requirements: Submit your paper in a Word document, showing all of your calculations. Use terms, evidence, and concepts from class readings. Your paper must be formatted according to CSU-Global Guide to Writing and APA Requirements. Review the Module 2 Critical Thinking Rubric for full details on how you will be graded on this assignment. Chapter 4 in Principles of Managerial Finance Live Classroom (0 points) Chapter 5 & 8 in Principles of Managerial Finance Lucko, G. (2013). Supporting financial decision-making based on time value of money with singularity functions in cash flow models. Construction Management & Economics, 31(3), Critical Thinking (125 points) Choose one of the following two assignments to complete this week. Do not do both assignments. Identify your assignment choice in the title of your submission. Option #1: End-of-Year Loan Payment Summary Messineo, LLC borrowed $15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal annual end-of-year payments. As the CFO of Messineo, LLC you must prepare a report of the pertinent information in a short summary for the CEO. 1. Calculate the annual end-of-year loan payment amount. 2. Prepare a loan amortization schedule showing the interest and principal break down of each of the three loan payments.

6 3. Prepare a one-page executive summary for the CEO, Linda Messineo, with the loan payment schedule explaining why the interest portion of each payment declines with the passage of time. Also, be sure to remind her that the interest portion of the loan payment is tax deductible. You should include your spreadsheet as an appendix to your executive summary to prove your figures in the loan payment schedule. Hint: Using a spreadsheet, you will start with the PMT function to calculate the annual payment. Next, you will use the IPMT function to find the interest portion for each of the three years. Requirements: Submit your response in a Word document, showing all your calculations. Use terms, evidence, and concepts from class readings. Your paper must be formatted according to CSU-Global Guide to Writing and APA Requirements. Review the Module 4 Critical Thinking Rubric for full details on how you will be graded on this assignment. Option #2: Financial Analysis Problem Set Complete the following problems: 1. An analyst predicted last year that the stock of LW, Inc. would offer a total return of at least 10% in the coming year. At the beginning of the year, the firm had a stock market value of $10 million. At the end of the year, it had a market value of $12 million even though it experienced a loss, or negative net income, of $2.5 million. Did the analyst s prediction prove correct? Explain using the values for total annual return. 2. Four analysts cover the stock of FLW Chemical. One forecasts a 5% return for the coming year. The second expects the return to be negative 5%. The third predicts a 10% return. The fourth expects a 3% return in the coming year. You are relatively confident that the return will be positive but not large, so you arbitrarily assign probabilities of being correct of 35%, 5%, 20%, and 40%, respectively, to the analysts forecasts. Given these probabilities, what is FLW Chemical s expected return for the coming year? 3. The expected annual returns are 15% for investment 1 and 12% for investment 2. The standard deviation of the first investment s return is 10%; the second investment s return has a standard deviation of 5%. Which investment is less risky based solely on standard deviation? Which investment is less risky based on coefficient of variation? Which is a better measure given that the expected returns of the two investments are not the same? 4. Your portfolio has three asset classes. U.S. government T-bills account for 45% of the portfolio, largecompany stocks constitute another 40%, and small-company stocks make up the remaining 15%. If the expected returns are 3.8% for the T-bills, 12.3% for the large-company stocks, and 17.4% for the smallcompany stocks, what is the expected return of the portfolio? Requirements: Submit your response in a Word document, showing all your calculations.

7 MODULE 5 MODULE 6 Use terms, evidence, and concepts from class readings. Your paper must be formatted according to CSU-Global Guide to Writing and APA Requirements. Review the Module 4 Critical Thinking Rubric for full details on how you will be graded on this assignment. Chapter 6 in Principles of Managerial Finance Cai, K., & Heiwai, L. (2015). Stock price reactions to private placements of convertible debt. Journal Of Accounting & Finance ( ), 15(8), Live Classroom (0 points) Chapter 10 & 11 in Principles of Managerial Finance Critical Thinking (125 points) Choose one of the following two assignments to complete this week. Do not do both assignments. Identify your assignment choice in the title of your submission. Option #1: NPV and IRR Approaches Galaxy Satellite Co. is attempting to select the best group of independent projects competing for the firm's fixed capital budget of $10,000,000. Any unused portion of this budget will earn less than its 20 percent cost of capital. A summary of key data about the proposed projects follows. Project PV of Inflows Initial Investment IRR A $3,050,000 $3,000,000 21% B $9,320,000 $9,000,000 25% C $1,060,000 $1,000,000 24% D $7,350,000 $7,000,000 23% 1. Use the NPV approach to select the best group of projects. (Note that just the PV of inflows is given, you must subtract the initial investment to find the NPV.)

8 2. Use the IRR approach to select the best group of projects. (Note that the discount rate or the cost of capital is 20%.) 3. Which projects should the firm implement based on your analysis of both techniques and given the capital rationing amount? Write an to your boss, Andy Fast, the CFO, explaining your rationale proving the choices based on the considerations of shareholder value and the maximum investment budget. Keep in mind that you are less concerned with using the whole budget than with maximizing the total return to Galaxy satellite. Requirements: Submit your response in a Word document, showing all your calculations. Use terms, evidence, and concepts from class readings. Your paper must be formatted according to CSU-Global Guide to Writing and APA Requirements. Review the Module 6 Critical Thinking Rubric for full details on how you will be graded on this assignment. Option #2: Opportunity, Investment, and Depreciation Complete the following problems: 1. ITD Corp. has spent $3.5 billion over the past decade developing a satellite-based telecommunication system. It is currently trying to decide whether to spend an additional $350 million on the project. The firm expects that this outlay will finish the project and will generate cash flow of $15 million per year over the next 5 years. A competitor has offered $450 million for the satellites already in orbit. Classify the firm s outlays as sunk costs or opportunity costs, and specify the relevant cash flows. 2. Focus Reproductions, Inc., has spent $4,500 dollars researching a new project. The project requires $20,000 worth of new machinery, which would cost $3,000 to install. The company would realize $4,500 in after-tax proceeds from the sale of old machinery. If Focus working capital is unaffected by this project, what is the initial investment amount for this project? 3. A few years ago, Morris Industries implemented an inventory auditing system at an installed cost of $175,000. Since then, it has taken depreciation deductions totaling $124,250. What is the system s current book value? If Morris sold the system for $110,000, how much recaptured depreciation would result? 4. MG Golf Products, Inc. spent 3 years and $1,000,000 to develop its new line of club heads to replace a line that is becoming obsolete. To begin manufacturing them, the company will have to invest $1,800,000 in new equipment. The new clubs are expected to generate an increase in operating cash inflows of $750,000 per year for the next 10 years. The company has determined that the existing line could be sold to a competitor for $250,000. a. How should the $1,000,000 in development costs be classified? b. How should the $250,000 sale price for the existing line be classified? c. Depict all the known relevant cash flows on a time line.

9 MODULE 7 MODULE 8 5. John and Jane Brown have been living at their present home for the past 6 years. During that time, they have replaced the water heater for $375, have replaced the dishwasher for $599, and have had to make miscellaneous repair and maintenance expenditures of approximately $1,500. They have decided to move out and rent the house for $975 per month. Newspaper advertising will cost $75. John and Jane intend to paint the interior of the home and power-wash the exterior. They estimate that that will run about $900.The house should be ready to rent after that. In reviewing the financial situation, John views all the expenditures as being relevant, so he plans to net out the estimated expenditures discussed above from the rental income. a. Do John and Jane understand the difference between sunk costs and opportunity costs? Explain the two concepts to them. b. Which of the expenditures should be classified as sunk cash flows, and which should be viewed as opportunity cash flows? Requirements: Submit your response in a Word document, showing all your calculations. Use terms, evidence, and concepts from class readings. Your paper must be formatted according to CSU-Global Guide to Writing and APA Requirements. Review the Module 6 Critical Thinking Rubric for full details on how you will be graded on this assignment. Chapter 9 & 12 in Principles of Managerial Finance Mangena, M., Li, J., & Tauringana, V. (2016). Disentangling the effects of corporate disclosure on the cost of equity capital. Journal Of Accounting, Auditing & Finance, 31(1), Live Classroom (0 points) Chapter 13 in Principles of Managerial Finance Li, O. Z., Liu, H., Ni, C., & Ye, K. (2017). Individual investors dividend taxes and corporate payout policies. Journal Of Financial & Quantitative Analysis, 53(3), Portfolio Project (350 points)

10 Choose one of the following two assignments to complete this week. Do not do both assignments. Identify your assignment choice in the title of your submission. Option #1: Business Report Design your own project based on a real-life situation. You will have to obtain approval from your instructor if you choose this option. The project must be regarding a presentation for a recommendation for financing or change in financing for a real company. You must include at a minimum the company s WACC, capital structure, dividend policy if applicable, and the reason for the change in financing. Your proposal presentation will be either for the source of financing (describe the use that has already been determined) or the use of the financing (describe the source that has already been decided). If neither the source nor use has been decided, you should present alternatives that meet the company s expectations for increasing shareholder value. Write your proposal as a business report with executive summary and appendices if applicable. See rubric for specific graded criteria. Your answers must be presented in a Word document or Excel spreadsheet. Show all calculations. Your paper must be formatted according to CSU-Global Guide to Writing and APA Requirements. Option #2: Capital Budgeting Case From the given case information, calculate the firm s WACC; then use the WACC to calculate NPV and evaluate IRR for proposed capital budgeting projects with a capital rationing constraint. After you choose the project(s), recalculate the capital structure based on the assumption that the project(s) are implemented and determine if the new capital structure will signal the investors either positively, negatively, or not at all. Write a business report on your findings. Include an executive summary and appendices if applicable. See rubric for specific graded criteria. Click on the attached document for additional information. **See attached file Your answers must be presented in a Word document or Excel spreadsheet. Show all calculations. Your paper must be formatted according to CSU-Global Guide to Writing and APA Requirements

11 COURSE POLICIES Course Grading 20% Discussion Participation 0% Opening Exercises 0% Live Classroom 8% Mastery Exercises 37% Critical Thinking Assignments 35% Final Portfolio Project Grading Scale A A B B B C C D F 59.9 or below

12 IN-CLASSROOM POLICIES For information on late work and incomplete grade policies, please refer to our In-Classroom Student Policies and Guidelines or the Academic Catalog for comprehensive documentation of CSU-Global institutional policies. Academic Integrity Students must assume responsibility for maintaining honesty in all work submitted for credit and in any other work designated by the instructor of the course. Academic dishonesty includes cheating, fabrication, facilitating academic dishonesty, plagiarism, reusing /re-purposing your own work (see CSU-Global Guide to Writing and APA Requirements for percentage of repurposed work that can be used in an assignment), unauthorized possession of academic materials, and unauthorized collaboration. The CSU-Global Library provides information on how students can avoid plagiarism by understanding what it is and how to use the Library and Internet resources. Citing Sources with APA Style All students are expected to follow the CSU-Global Guide to Writing and APA Requirements when citing in APA (based on the APA Style Manual, 6th edition) for all assignments. For details on CSU-Global APA style, please review the APA resources within the CSU-Global Library under the APA Guide & Resources link. A link to this document should also be provided within most assignment descriptions in your course. Disability Services Statement CSU Global is committed to providing reasonable accommodations for all persons with disabilities. Any student with a documented disability requesting academic accommodations should contact the Disability Resource Coordinator at and/or ada@csuglobal.edu for additional information to coordinate reasonable accommodations for students with documented disabilities. Netiquette Respect the diversity of opinions among the instructor and classmates and engage with them in a courteous, respectful, and professional manner. All posts and classroom communication must be conducted in accordance with the student code of conduct. Think before you push the Send button. Did you say just what you meant? How will the person on the other end read the words? Maintain an environment free of harassment, stalking, threats, abuse, insults or humiliation toward the instructor and classmates. This includes, but is not limited to, demeaning written or oral comments of an ethnic, religious, age, disability, sexist (or sexual orientation), or racist nature; and the unwanted sexual advances or intimidations by , or on discussion boards and other postings within or connected to the online classroom. If you have concerns about something that has been said, please let your instructor know.

SAMPLE. FIN350: Principles of Finance for the Public Sector Credit Hours: 3. Course Description and Outcomes

SAMPLE. FIN350: Principles of Finance for the Public Sector Credit Hours: 3. Course Description and Outcomes FIN350: Principles of Finance for the Public Sector Credit Hours: 3 Contact Hours: This is a 3-credit course, offered in accelerated format. This means that 16 weeks of material is covered in 8 weeks.