COURSE SYLLABUS FINA 311 FINANCIAL MANAGEMENT FALL 2013 Section 618: Tu Th 12:30-1:45 pm (PH 251) Section 619: Tu Th 2:00-3:15 pm (PH 251) As this is a hybrid course, some of the class meetings will be replaced with on-line instruction. Please see the course schedule for meeting dates. Additional on-line activities will be announced during the semester. You are responsible for knowing and understanding the contents of this syllabus. I reserve the right to modify the syllabus if needed, but only under the most unusual circumstances. INSTRUCTOR: OFFICE: E-MAIL: OFFICE HOURS: FACULTY WEBSITE: COMMUNICATION: REQUIRED TEXT: MyCLASSES ACCESS: REQUIRED MATERIALS: SUGGESTED MATERIALS: Dr. Herman Manakyan 224 Perdue Hall hxmanakyan@salisbury.edu TuTh 3:30-5:00 pm, W 2:00-3:30pm and by appointment http://facultyfp.salisbury.edu/hxmanakyan Preferred method of communication is via the e-mail address listed above. In general, I will respond to e-mails within 48 hours of receipt, or by Monday afternoon if over a weekend. The University s official mode of communication with students is your campus e-mail account. ALL campus offices use this mode of communication. Failure to read notices sent to your campus e-mail account is not an excuse for missing deadlines. Essentials of Corporate Finance, by Ross, Westerfield and Jordan, 8th Ed. custom SU paperback version along with Connect Access Card (10 and 13 digit ISBN:1259130304, 9781259130304) available at the SU bookstore. As this is a hybrid course, a significant amount of the instruction will be offered through the MyClasses site: http://www.salisbury.edu/instructionaldesign/cms/ You must have access to a computer with internet access in order to be able to complete this course. You are expected to check your campus e-mail and MyClasses course site regularly for assignments and announcements. Please see detailed course schedule for class meeting and on-line instruction schedule. Financial Calculator (Model supported by instructor is Texas Instruments BAII plus) Wall Street Journal Student Subscription.
ENROLLMENT POLICY: All students must have junior standing and completed the following prerequisites: For PSB majors: Admission to the professional program and ECON 211 and ECON 212. For Minors and others: ACCT 201 MATH 155, ECON 211 or 150. ATTENDANCE: Attendance is not mandatory, but is strongly recommended. Class lectures are an essential part of the course and examination material. Students are responsible for all material covered in class. Any absence leaves you responsible for finding out what was presented in class, as well as any special assignments or announcements. It is the student's responsibility to read all assigned chapters prior to the class discussion. The lectures will highlight only the more difficult materials in each chapter. Lectures are NOT a substitute for reading the text. LAST DAY TO DROP: The last day to drop this course with a W, or to change to audit is October 25, 2013, according to the University Administrative Calendar. No exceptions will be granted. MAKE-UP POLICY: Students are allowed to drop the lowest exam score. If a student has to miss an exam, the missed exam will automatically be the dropped score. Students who have taken all other exams may choose to designate the comprehensive final exam as the dropped score by opting out of the final exam. CONDUCT: Students in this class are expected to adhere to the PSB Student code of professionalism found at: http://www.salisbury.edu/perdue/student_prof_code.html In addition, students are subject to the SU policy on academic integrity found at: http://www.salisbury.edu/provost/academicmisconductpolicy.html STUDENTS WITH SPECIAL NEEDS: Any student who feels they may require an accommodation in this course based on the impact of a disability should contact me as soon as possible to arrange a meeting to coordinate any and all accommodations. Any such need must be documented through the Office of Student Disability Support Service, GUC Rm 242, 410-677-6536. CATALOG DESCRIPTION: Adresses fundamental concepts in Financial Management such as security markets, interest rates, taxes, risk analysis, time value of money, valuation models and related global issues. Explains how financial managers help maximize the value of a firm by making capital budgeting, cost of capital and capital structure decisions. COURSE DESCRIPTION: Finance as a discipline is a hybrid of Economics, Accounting and Mathematics. The material requires a very clear understanding of the materials presented in the pre-requisite courses. The course aims to enable students to develop an understanding of the basic concepts of finance, including the time value of money, basic security valuation models, the finance function of the firm, capital budgeting, and gain an appreciation for the current issues in the world of corporate finance.
COURSE LEARNING OBJECTIVES: CHAPTER 1 After completing the study of Chapter 1, the student should be able to: 1. Identify and discuss the three primary financial management decisions. 2. Identify the three different forms of organization for a business and explain their characteristics. 3. Discuss the advantages and disadvantages of each form of organization. 4. Explain the concept of stockholder wealth maximization and identify the elements considered in determining that maximized stockholder wealth. 5. Discuss the issue of social responsibility in a stockholder wealth maximization context. 6. Explain the nature of agency conflict and identify the relationships where conflict may arise. 7. Cite examples of mechanisms used to alleviate agency conflict and explain their functions. 8. Explain the role of profit maximization as it relates to stockholder wealth. 9. Differentiate between the money market and capital markets. Provide examples of both. 10. Differentiate between the primary markets and secondary markets. Provide examples of both. 11. Discuss the characteristics of an organized securities exchange versus an over-the-counter market. Provide examples of both. CHAPTER 4 After completing the study of Chapter 4, the student should be able to: 1. Demonstrate the use of a time line to show cash inflows and outflows. 2. Differentiate between simple and compound interest. 3. Demonstrate the calculation of a future value of a lump sum using compounding.* 4. Explain the concept of an opportunity cost rate (discount rate). 5. Demonstrate the calculation of a present value of a lump sum using discounting.* 6. Demonstrate the calculation of an interest rate in both the present and future value formats.* 7. Demonstrate the calculation of a number of periods in both present and future value formats. * calculations must be demonstrated using numerical and financial calculator methods CHAPTER 5 After completing the study of Chapter 5, the student should be able to: 1. Differentiate between an ordinary (deferred) annuity and an annuity due. 2. Demonstrate the calculation of the future value of an annuity.* 3. Demonstrate the calculation of the present value of an annuity.* 4. Demonstrate the calculation of the value of a perpetuity. 5. Demonstrate the calculation of both future and present value of an unequal stream of cash flows.* 6. Demonstrate the present and future values with compounding periods other than annual. 7. Differentiate between stated rate, effective annual rate, and annual percentage rate. 8. Demonstrate the calculation of an effective annual rate and an annual percentage rate. 9. Compare stated and periodic rates. 10. Demonstrate the calculation of present value, future value, payment, and interest rate with a pure discount loan.* 11. Demonstrate the calculation of present value, future value, payment, and interest rate with an interest-only loan.* 12. Demonstrate the calculation of present value, future value, payment, and interest rate with an amortized loan.* * calculations must be demonstrated using numerical and financial calculator methods
CHAPTER 6 After completing the study of Chapter 6, the student should be able to: 1. Explain the characteristics of a bond including par value, coupon payment, coupon interest rate, period, maturity, and yield. 2. Demonstrate the calculation of present and future values of a bond.* 3. Explain the principles behind bond value changes over time. 4. Demonstrate the calculation of a premium and a discount on a bond.* 5. Explain the principles behind bond values approaching par value as it approaches maturity. 6. Explain the concept of interest rate risk. 7. Explain and demonstrate the calculation of a bond's yield to maturity. 8. Demonstrate the calculation of the value of a bond with payment periods other than annual.* 9. Discuss the following terms associated with bonds: indenture, register vs. bearer, debenture, seniority, sinking fund, call provisions, call premium, covenants. 10. Discuss the bond rating system and discuss the use of a bond rating. 11. Differentiate between a bid and ask price and define the spread. 12. Discuss the relationship between nominal (quoted) interest rates and real interest rates. 13. Explain the components of the nominal interest rate including the real risk free rate, inflation premium, default risk premium, taxability premium, and interest rate risk premium. 14. Discuss the relationship between the interest rate and the term of the security. 15. Explain the implications of a normal yield curve versus an inverted yield curve. CHAPTER 7 After completing the study of Chapter 7, the student should be able to: 1. Explain the concepts used in stock valuation including dividend, market price, intrinsic (present) value, growth rate, required rate of return, dividend yield, capital gain yield, and expected total return. 2. Demonstrate the calculation of the value of a stock with zero, constant, and non-constant growth. 3. Demonstrate the calculation of a dividend yield. 4. Demonstrate the calculation of a capital gains yield. 5. Explain the following terms as they apply to features common stock: cumulative vs. straight voting, proxy, dividend rights. 6. Identify and discuss the key features of preferred stock. 7. Differentiate between the primary markets and secondary markets. Provide examples of both. CHAPTER 8 After completing the study of Chapter 8, the student should be able to: 1. Demonstrate the use of net present value (NPV) and discounted cash flows (DCF) techniques to determine the capital budget. 2. Explain the concept, purpose, and importance of capital budgeting. 3. Differentiate between mutually exclusive and independent projects. 4. Demonstrate the calculation of net present value (NPV) for a given project. 5. Explain the use of internal rate of return (IRR) in capital budgeting. 6. Demonstrate the calculation of IRR for a given project. 7. Demonstrate the use of a NPV profile in capital budgeting. 8. Explain the concept of the NPV crossover rate. 9. Discuss the limitations of the IRR technique in capital budgeting. 10. Demonstrate the calculation and use of a profitability index. 11. Discuss the advantages and disadvantages to using the various capital budgeting techniques.
CHAPTER 9 After completing the study of Chapter 9, the student should be able to: 1. Discuss the critical importance of cost and revenue estimation in the capital budgeting process. 2. Define the term incremental cash flow. 3. Identify and explain the relevant cash flows used in project analysis including costs of fixed assets, non-cash charges, opportunity costs, changes in NWC, and side effects. 4. Identify and explain key cash flows not considered in project analysis including interest expenses, depreciation, and sunk costs. 5. Demonstrate the use of pro forma financial statements to estimate cash flows. 6. Discuss the impact of taxes on a project s cash flows with particular emphasis on depreciation. 7. Demonstrate the calculation of annual depreciation using both straight line and MACRS. 8. Demonstrate the estimation of cash flows for an expansion project versus a replacement project. CHAPTER 10 1. Explain the concept of stock market and stock price equilibrium. 2. Explain the concepts involved in the formation of the Efficient Markets Hypothesis in its weak, semi-strong, and strong form. CHAPTER 11 After completing the study of Chapter 11, the student should be able to: 1. Demonstrate the calculation of the expected rate of return given a probability distribution. 2. Explain the use of variance and standard deviation as measures of risk. 3. Demonstrate the calculation of variance and standard deviation given a probability distribution. 4. Demonstrate the calculation of the coefficient of variation and explain its significance in comparing the riskiness of two investments. 5. Discuss the concept of risk aversion and explain the risk premium. 6. Discuss the concept of a portfolio of investments reducing risk. 7. Demonstrate the calculation of portfolio weights. 8. Demonstrate the calculation of the expected return, variance, and standard deviation of a portfolio. 9. Explain the correlation coefficient, positive correlation, and negative correlation. 10. Differentiate between expected and unexpected returns. 11. Explain the concept of unsystematic (diversifiable) risk and provide examples. 12. Explain the concept of market or systematic (non-diversifiable) risk. 13. Discuss the concept of diversification in a portfolio risk context. 14. Explain the concept of systematic risk in the Capital Asset Pricing Model (CAPM) framework. 15. Explain the beta coefficient and interpret values of beta as indicators of relative riskiness. 16. Demonstrate the calculation of market risk premium and stock risk premiums. 17. Demonstrate the calculation of a portfolio beta. 18. Demonstrate the use of the security market line (SML) equation to calculate the required return for an individual security and a portfolio. CHAPTER 12 After completing the study of Chapter 12, the student should be able to: 1. Discuss the relationship between project risk (required rate of return) and cost of capital. 2. Identify and explain the various components of corporate capital. 3. Demonstrate the calculation of cost of equity using dividend growth and SML methods.
4. Discuss the advantages and disadvantages of each method of calculating the cost of equity. 5. Discuss the importance of taxation in the use of debt capital compared to equity. 6. Demonstrate the calculation of after-tax cost of debt. 7. Demonstrate the calculation of cost of preferred stock 8. Explain the concept of the weighted average cost of capital. 9. Explain the concept of optimal capital structure. 10. Demonstrate the calculation of a weighted average cost of capital (WACC). 11. Discuss factors within and beyond the firm s control that affect WACC. 12. Explain the relationship between risk and WACC for a project. 13. Identify and discuss factors to be considered when estimating project risk. 14. Identify the problem areas in determination of costs of capital and optimal capital structure. CHAPTER 3 After completing the study of Chapter 3, the student should be able to: 1. Create and discuss the usefulness of common-size financial statements. 2. Explain how financial statement analysis is used by managers, investors, and creditors. 3. Define liquidity and explain how liquidity ratios are used to measure the performance of the firm. 4. Identify the components of the liquidity ratios, demonstrate their calculation, and discuss their importance to the firm. 5. Explain the concept of leverage and explain how long-term solvency ratios are used to measure the performance of the firm. 6. Identify the components of the debt management ratios, demonstrate their calculation, and discuss their importance to the firm 7. Explain how asset management ratios are used to measure the performance of the firm. 8. Identify the components of the asset management ratios, demonstrate their calculation, and discuss their importance to the firm. 9. Explain how profitability ratios are used to measure the performance of the firm. 10. Identify the components of the profitability ratios, demonstrate their calculation, and discuss their importance to the firm. 11. Explain how market value ratios are used to measure the performance of the firm. 12. Identify the components of the market value ratios, demonstrate their calculation, and discuss their importance to the firm. 13. Discuss the usefulness of the DuPont identity and identify the components of ROE. 14. Demonstrate the calculation of payout and retention ratios. Demonstrate their use. 15. Differentiate between the internal growth rate and the sustainable growth rate. 16. Discuss the usefulness of trend analysis with respect to financial ratios and statement analysis. 17. Demonstrate financial ratio trend analysis. 18. Discuss the usefulness of comparative ratio analysis (peer group analysis) and benchmarking. 19. Demonstrate comparative ratio analysis and benchmarking. 20. Explain the problems and limitations of financial ratio analysis. CHAPTER 16: After completing the study of Chapter 16, the student should be able to: 1. Trace cash account changes, and understand net working capital accounts. 2. Identify, compute and interpret the cash cycle and operating cycle of a firm. 3. Discuss issues in carrying current assets and alternative financing methods for current assets 4. Compute the cash budget for a firm 5. Discuss short-term borrowing methods such as unsecured loans, secured loans, inventory loans, factoring receivables, etc.
CHAPTER 17: After completing the study of Chapter 17, the student should be able to: 1. Identify components of credit policy and trade credit. 2. Compute the cost of trade credit. 3. Discuss formulation of the optimal credit policy and receivables monitoring and collection. CHAPTER 18 After completing the study of Chapter 18, the student should be able to: 1. Explain the concept of foreign exchange markets and exchange rates. 2. Interpret exchange rate quotations, compute cross rates, and demonstrate the calculation of triangle arbitrage COURSE SEQUENCE: For successful completion of the course, you should: (1) be intimately familiar with ALL material in the chapters listed, (2) Attend ALL lectures and review all lecture material related to the listed chapters, (3) complete all LearnSmart Modules (4) complete all graded Connect homework assignments (5) attempt as many of the ungraded Connect practice problems as possible (6) study All Critical Thinking and Concept Review questions. The end of chapter questions and problems represent an excellent preparation for the exams, and form the basis for most of the Connect assignments. The complete solutions to ALL questions and problems in your text are available at the course site. I expect you to attempt the problems and consult the solutions before seeking my assistance. The outline below is a guide, and is subject to change, including the possibility of additional online sessions. Date Chapter Title 8/27 1 Introduction to Financial Management 8/29 4 Introduction to Valuation: Time Value of Money 9/3 9/5 5 Discounted Cash Flow Valuation 9/10 9/12 9/17 Exam 1 9/19 6 Interest Rates and Bond Valuation 9/24 9/26 7 Equity Markets and Stock Valuation (7.1 and 7.2 only) 10/1 10/3 (on line) 8 Net Present Value and other Investment Criteria (8.1 and 8.4-8.6) 10/8 10/10 9 Making Capital Investment Decisions (9.1-9.5 only) 10/15 10/17 Exam 2 10/22(on line) 10, 11 Efficient Market Hypothesis (10.6 only), and Risk and Return 10/24 10/29(on line) 12 Cost of Capital (12.1-12.4 only) 10/31 11/5(on line) 3 Working with Financial Statements 11/7 11/12 Exam 3
11/14(on line) 16 11/19 11/21(on line) 17, 18 Short term Financial Planning Working Capital Management & International Aspects of Financial Management (17.3-17.5 and 18.1-18.2 only) 11/26 11/28 Thanksgiving Break 12/3 12/5 Exam 4 12/9 @ 4:15 pm sec 619 Comprehensive Final Exam 12/12 @ 10: 45 am sec 618 Comprehensive Final Exam INTEGRATED TOPICS: Writing across the curriculum requirements will be met through essay and short answer questions on exams. Ethical behavior will be discussed throughout the semester wherever appropriate with particular emphasis on board responsibilities, agency issues, shareholder value maximization, etc. International issues and globalization will be discussed throughout the semester wherever appropriate and more specifically in Ch 18. Technology and computing will be used extensively with MyClasses, spreadsheet technology and financial calculators. EXAMINATIONS: There will be four exams during the course, and a COMPREHENSIVE FINAL EXAM. The exams will be a combination of problem solving and multiple choice formats. The majority of the questions on the exam will be problem-solving oriented, and will require the use of a financial calculator. The use of any calculator other than the TI-BAII Plus is subject to prior approval by the instructor. Calculators and other devices capable of storing and/or transmitting data/equations are not permissible. The exams cover ALL assigned reading material and class lectures. All exams will be retained by the instructor. Failure to return an exam after the in-class review will result in an "F" for the course. You are welcome to review your previous examinations during office hours, anytime during the semester. However, the exams must be confined to my office, and no notes can be made. HOMEWORK: There will be required graded Learnsmart Modules and graded homework problems assigned for each chapter covered. All homework will be completed through the MyClasses site. In addition to the graded homework, the MyClasses site will provide additional practice problems on an ungraded basis. Reviewing and studying the end-of chapter problems is also highly recommended. The course site provides complete solutions to these problems. The Connect practice problems and end-of-chapter problems provide an excellent way to reinforce the course material and prepare for the exams.
GRADING AND EXAM SCHEDULE: The final grade will be determined according to the following formula: Weight Tentative Date Exam I 20% Sept 17 Exam II 20% Oct 17 Exam III 20% Nov 12 Exam IV 20% Dec 5 Final 20% Dec 9 (sec 619) or Dec 12 (sec 618) (Only 4 exams will be included in course grade for total of 80%. Lowest exam score will be dropped) Homework 10% TBA Learnsmart 10% Extra Credit: Up to 5% You can earn 3% extra credit by posting on the course discussion board a link to a current news story related to a finance topic, with a summary/interpretation of at least 500 words. You can earn up to 1% extra credit by posting a response/commentary of at least 250 words on another student s post. Your response must convey an understanding of the cited article. You can receive a maximum of 5% through combination of posts, responses, and in-class participation. All extra credit posts must be completed by November 30. No extra credit will be assigned after that date. The grading scale for this course is as follows: A = 90-100% B = 80-89% C = 70-79% D = 60-69% F = Below 60% Do NOT anticipate any scaling of grades.