PREREQUISITES JUSTIFICATION

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1 Profession MBA Program GBA 546 Fundamentals of Financial Management Section P200 CRN: Winter Quarter 2006 Tuesday: 6:00-9:50 p.m. P. Sarmas CATALOG DESCRIPTION: Theoretical and conceptual framework for financial decision making stressing analytical and quantitative techniques. Analysis of controversial and sophisticated methods of allocating resources and raising funds both internally and externally within the corporate context. 4 lecture-discussions. Prerequisites: GBA 510, GBA 514, EC 521 and Microcomputer proficiency. PREREQUISITES: GBA510, GBA514, EC 521 and Microcomputer Proficiency. PREREQUISITES JUSTIFICATION: Mastery of the principles and methods of managerial finance requires knowledge of the principles and methods of financial statement construction and of basic principles of micro- and macroeconomics. Modern financial analysis also requires the ability to utilize a variety of computer software programs. Good performance in this course also requires knowledge of basic accounting principles, principles of economics, and basic statistical techniques. EXPECTED OUTCOMES: In this course, business students, as prospective managers, will gain knowledge and acquire skills related to financial decision making in a business firm. Upon successful completion of the course, the student should be able to do the following: interpret financial statements and financial ratios and to use them to assess the financial strengths and weaknesses of a firm; employ simple techniques of financial planning; apply compounding and discounting techniques to calculate present and future values of money and rates of return; value bonds and stocks; utilize basic investment performance measures in making investment decisions; interpret them, and explain the strengths and shortcomings of each measure; assess the impacts of changes in the economic environment on investment values and financial decisions; describe the basic sources and types of long-term financing; and other topics related to risk and financial analysis.

2 Fundamental of Financial Management GBA 546 Winter COURSE OBJECTIVES: This course is primarily designed to help you understand the modern theory of corporate finance. It explains the procedures, practices, and policies by which financial managers contribute to the successful performance of organization. The course also provides you with knowledge of key finance concepts and theoretical principles relating to the time value of money, the effects of debt and dividend policy on firm value, the operation of financial markets, and the operation of foreign exchange markets. In addition, the course is intended to provide you with the tools to calculate the value of stock and bond investments; to evaluate investments in productive firm assets; to assess the risk of investments, to determine the cost of capital for firms and for individual projects; and to calculate exchange rates across different national currencies. REQUIRED TEXT: Author: Stephen A. Ross, Randolph W. Westerfield, and Jeffrey F. Jaffe Title Corporate Finance Publisher: Irwin and McGraw-Hill, 2005, 7 th Edition RECOMMENDED TEXTS: Title: Financial Management Theory and Practice Author: Eugene F. Brigham and Louis C. Gapenski Publisher: Dryden Press, Harcourt Brace College Publishers. tenth Edition ACADEMIC INTEGRITY: The University is committed to maintaining academic integrity throughout the University community. Academic dishonesty is a serious offense that can diminish the quality of scholarship, the academic environment, the academic reputation, and the quality of a Cal Poly degree. Please read the University catalog to learn about academic dishonesty at Cal Poly and to the responsibility of students, faculty, and administrators relating to this subject. COURSE REQUIREMENTS: Attendance: 1. Students are expected to attend each class session. Please, read the assigned chapter before each meeting. Class participation is strongly encouraged. Please turn off your phone while in class. Use of cell phone (including text messaging) in the class during lecture by any one student will result in 5 points deduction from all students enrolled in the class. Assignments: 1. The problem assignments are listed in the lecture schedule section. The problems are located at end of each assigned chapter, and you are required to answer all questions. 2. You are required to submit each completed assignment in printed form. 3. Make sure your name and Bronco ID number is on the assignment sheet 4. Assignments can be submitted by (as attachment) on the due date, no later then 4:00 p.m. 5. Late assignments will NOT be graded and will receive ZERO points.

3 Fundamental of Financial Management GBA 546 Winter Examinations: 1. Please note that you will need to present your student ID at the time of examination. 2. You will be asked to sign the attendance sheet during the exam. 3. Turn-off your cell phones. 4. You will not permitted to leave the classroom after examinations are distributed. 5. You will have to bring your own calculator (financial calculator). 6. Palm-held computer or programmable calculators are not permitted. 7. You will be provided with a formula sheet. 8. Each examination is composed of multiple-choice (20%), short-essay (40%) and short-problem (40%) questions. 9. You will have to show all your calculations in the problem section for full credit. 10. Your writing should be legible in the essay section for full credit. 11. ABSOLUTELY NO MAKE-UP! COURSE ASSISTANCE: Office Information Office Hours Location: Building 66, #219 Monday: 1:30 p.m. 3:30 p.m. Telephone: (909) Wednesday: 1:30 p.m. 3:30 p.m. Fax: (909) Thursday 5:00 p.m. 6:00 p.m. psarmas@csupomona.edu Others: By appointment

4 Fundamental of Financial Management GBA 546 Winter COURSE GRADE: Grades are determined in the following format: Assignments: Mid-term Examination: Final Examination: 20 percent 35 percent 45 percent If necessary the course grade will be curved to meet a course-average GPA of 3.0 of C. The course grade is based on the following scale: Score Grade Score Grade Score Grade Score Grade Score Grade 93 A 86 B+ 76 C+ 66 D+ 0 F 90 A- 83 B 73 C 63 D 80 B- 70 C- 60 D- Please, understand that a grade of Incomplete may be assigned if a student, through circumstances beyond his or her control, has not completed a small portion of a course by the conclusion of the term. A written request for an Incomplete grade must be filed with the faculty member. According to the University Catalog, a grade of Incomplete may not be assigned in order to give a student a chance to do more work to improve a grade. Important Dates: Dates January 10 January 10 January 24 January 31 February 15 March 14 Event Last day to withdraw without W Last day to add classes Last day to withdraw without a petition Mid-term examination Last day to withdraw. Final Examination: 6:00 p.m. 8:00 p.m.

5 Fundamental of Financial Management GBA 546 Winter CLASS SCHEDULE: Tuesday: January 3 Class List Check Course Introduction Chapter 1: Introduction to Financial Management What is Corporate Finance? Corporate Securities as Contingent Claims on Total Firm Value Corporate Firm The Goal of the Corporate Firm Financial Markets Chapter 2: Financial Statements and Cash Flow The Balance Sheet The Income Statement Net Working Capital Financial Cash Flow The Accounting Statement of Cash Flows Assigned Problems: 1, 2, 3, 6, and 8 Tuesday: January 10 Chapter 3: Financial Planning and Growth What is Financial Planning? Financial Planning Model The Percentage of Sales Method What Determines Growth? Some Caveats of Financial Planning Models Assigned Problems: 2, 3, 4, and 8 Tuesday: January 17 Chapter 4: Net Present Value The One-Period Case The Multi-Period Care Compounding Periods Simplifications Assigned Problems: 1, 2, 3, 4, 6, 10, 11, 14, 16, 20, 32, and 34.

6 Fundamental of Financial Management GBA 546 Winter Tuesday: January 24 Chapter 5: How to Value Bonds and Stocks Definitions and Examples of Bonds How to Value Bonds Bond Concept The Present Value of Common Stocks Estimates of Parameters in the Dividend Discount Model Growth Opportunities Price-Earnings Ratio Assigned Problems: 1, 2, 4, 5, 7, 11, 13, 17, 18, 25, and 27. Chapter 6: Some Alternative Investment Rate Why Use Net Present Value? The Payback Period Method The Discounted Payback Period Method The Average Accounting Return Method The Internal Rate of Return Problem with the IRR Approach The Profitability Index The Practice of Capital Budgeting Assigned Problems: 1, 2, 3, 7, 13, 23, and 28. Tuesday: January 31 Chapter 7: Net Present Value and Capital Budgeting Incremental Cash Flow Inflation and Capital Budgeting Investment of Unequal Lives: The Equivalent Annual Cost Method Some Different Types of Bonds Assigned Problems: 3, 4, 6, 8, and 25. May 1, 2002: Mid-Term Examination Tuesday: February 7 Chapter 10: Return and Risk: Capital Asset Pricing Model Individual Securities Expected Return, Variance, and Covariance The Return and Risk for Portfolio The Efficient Set for Two Assets The Efficient Set for Many Securities Diversification Relationship between Risk and Expected Return Assigned Problems: 1, 2, 3, 4, 6, 8, and 11.

7 Fundamental of Financial Management GBA 546 Winter Tuesday: February 14 Chapter 12: Risk, Cost of Capital, and Capital Budgeting The Cost of Equity Capital Estimation of Beta Determinants of Beta Expansions of the Basic Model Reducing the Cost of Capital Assigned Problems: 3, 4, 5, 11, 14, and 15. Tuesday: February 21 Chapter 15: Capital Structure: Basic Concepts The Capital Structure Questions Maximizing Firm Value versus Maximizing Shareholder Interests Financial Leverage and Firm Value Modigliani and Miller Taxes Assigned Problems:2, 6, 12, 16, and 18. Tuesday: February 28 Chapter 18: Dividends and Other Payout Different Types of Dividends Standard Method of Cash Dividend Payment Repurchase Stock Personal Taxes, Issuance Costs, and Dividends The Clientele Effect: A Resolution of Real World Factors? Stock Dividend and Stock Splits Assigned Problems: 2, 3, 4, and 6. Tuesday: March 7 Chapter 31: International Corporate Finance Terminology Foreign Exchange Markets and Exchange Rates The Law of One Price Interest Rates and Exchange Rates International Capital Budgeting International Financial Decisions Assigned Problems: 2, 4, 5, and 6. Final Examination Cumulative Topics Tuesday: March14, :00-8:00 p.m.