Course Outline School: Department: Business Accounting Course Title: Corporate Finance 2 Course Code: ACCT 334 Course Hours/Credits: 56 Prerequisites: ACCT 224 Co-requisites: Eligible for Prior Learning, Assessment and Recognition: Originated by: Revised by: N/A Yes Basil Chen Basil Chen, Ann Overton Revision Date: Winter 2015 Current Semester: Summer 2015 Approved by: Chairperson/Dean Students are expected to review and understand all areas of the course outline. Retain this course outline for future transfer credit applications. A fee may be charged for additional copies. This course outline is available in alternative formats upon request.
Course Description This course follows ACCT224 Corporate Finance 1. The student studies advanced topics in the financial management of profit-seeking organizations. A major objective is the development of analytical/decisionmaking and information presentation skills through the use of theory questions and practical problems. Many of the problems/assignments will require the application of an electronic spreadsheet program such as Excel. Program Outcomes Successful completion of this and other courses in the program culminates in the achievement of the Vocational Learning Outcomes (program outcomes) set by the Ministry of Training, Colleges and Universities in the Program Standard. The VLOs express the learning a student must reliably demonstrate before graduation. To ensure a meaningful learning experience and to better understand how this course and program prepare graduates for success, students are encouraged to review the Program Standard by visiting http://www.tcu.gov.on.ca/pepg/audiences/colleges/progstan/. For apprenticeship-based programs, visit http://www.collegeoftrades.ca/training-standards. Course Learning Outcomes The student will reliably demonstrate the ability to: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Evaluated the entity's cost of capital.calculate an organization s weighted average cost of capital and use this information to rank investment opportunities. Apply capital budgeting methods such as Net Present Value (NPV), cost-benefit analysis, payback period and internal rate of return (IRR) and evaluate investments. Evaluate capital investments at various levels of risk. Apply risk management analysis to generate information for decision. Define primary, secondary, money, and capital markets. Evaluate decisions affecting long-term debt and outline the distribution process, the allocation of securities amongst syndicate participants, and the calculation of the spread as cost or a return. Analyze a lease versus buy decision and recommend the most financially advantageous course of action. Calculate the value of rights, shares, and shareholders wealth during right-offering process. Determine whether internally generated funds should be reinvested or paid out as dividend. Evaluate International considerations and foreign exchange risks. Essential Employability Skills (EES) The student will reliably demonstrate the ability to*: 4. Apply a systematic approach to solve problems. 5. Use a variety of thinking skills to anticipate and solve problems. 7. Analyze, evaluate, and apply relevant information from a variety of sources. *There are 11 Essential Employability Skills outcomes as per the Ministry Program Standard. Of these 11 outcomes, the following will be assessed in this course. Global Citizenship and Equity (GC&E) Outcomes THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 2
N/A Text and other Instructional/Learning Materials Text Book(s): Foundations of Financial Management Ninth Canadian Edition, Block, Hirt, Danielsen, Short, Peretta. Publisher: McGraw-Hill Ryerson Foundations of Financial Management with Access Card ISBN 9780071320566 + ebook Stand Alone ISBN 9780071062626 Online Resource(s): e.centennialcollege.ca Material(s) required for completing this course: Financial calculator (BA II Plus; HP 10) Evaluation Scheme #1: Online assignment using publisher support () Chapter 11 #2: Online assignment using publisher support () Chapter 12 Test #1: Chapter 11,12 #3: Online assignment using publisher support () Chapter 13,5 Test #2: Chapter 13,5 #4: Online assignment using publisher support () Chapter 14,15,16 #5: Online assignment using publisher support () Chapter 17 Final Exam: Comprehensive Exam Evaluation Name CLO(s) EES GCE Outcome(s) Outcome(s) Weight/100 #1 1 4, 5 3 #2 2 7 3 Test #1 1, 2 4, 7 20 #3 3, 4 4 3 Test #2 3, 4 4, 5 20 #4 5, 6 4 3 #5 7, 8, 9 4 3 Final Exam 2, 4, 5, 6, 7, 4, 5 45 8, 9, 10 Total 100% If students are unable to write a test they should immediately contact their professor or program Chair for advice. In exceptional and well documented circumstances (e.g. unforeseen family problems, serious illness, or death of a close family member), students may be able to write a make-up test. All submitted work may be reviewed for authenticity and originality utilizing Turnitin. Students who do not THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 3
wish to have their work submitted to Turnitin must, by the end of the second week of class, communicate this in writing to the instructor and make mutually agreeable alternate arrangements. When writing tests, students must be able to produce official College photo identification or they may be refused the right to take the test or test results will be void. Student Accommodation It is College Policy to provide accommodation based on grounds defined in the Ontario Human Rights Code. Accommodation may include modifications to standard practices. Students with disabilities who require academic accommodations must register with the Centre for Students with Disabilities. Students requiring accommodation based on other human rights grounds should talk with their professors as early as possible. Please see the Student Accommodation Policy. Use of Dictionaries Any dictionary (hard copy or electronic) may be used in regular class work. Dictionaries may be used in tests and examinations, or in portions of tests and examinations, as long as they are non-electronic (not capable of storing information) and hard copy (reviewed by the invigilator to ensure notes are not incorporated that would affect test or examination integrity). Program or School Policies N/A Course Policies NA College Policies Students should familiarize themselves with all College Policies that cover academic matters and student conduct. All students and employees have the right to study and work in an environment that is free from discrimination and harassment and promotes respect and equity. Centennial policies ensure all incidents of harassment, discrimination, bullying and violence will be addressed and responded to accordingly. Academic honesty is integral to the learning process and a necessary ingredient of academic integrity. Academic dishonesty includes cheating, plagiarism, and impersonation. All of these occur when the work of others is presented by a student as their own and/or without citing sources of information. Breaches of academic honesty may result in a failing grade on the assignment/course, suspension or expulsion from the college. For more information on these and other policies, please visit www.centennialcollege.ca/aboutcentennial/college-overview/college-policies. Students enrolled in a joint or collaborative program are subject to the partner institution's academic THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 4
policies. PLAR Process This course is eligible for Prior Learning Assessment and Recognition (PLAR). PLAR is a process by which course credit may be granted for past learning acquired through work or other life experiences. The PLAR process involves completing an assessment (portfolio, test, assignment, etc.) that reliably demonstrates achievement of the course learning outcomes. Contact the academic school to obtain information on the PLAR process and the required assessment. This course outline and its associated weekly topical(s) may not be reproduced, in whole or in part, without the prior permission of Centennial College. THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 5
Topical Outline (subject to change): Week Topics Readings/Materials Weekly Learning Outcome(s) Instructional Strategies Evaluation Name 1-2 Time Value of Money Review Chapter 9 Time Value of Money Cost of Capital Chapter 9 Review the time value of money: 1.Compute future value of single sum. Chapter 9 Cost of Capital 2.Compute present value of single sum. Problems: Chapter 11 3.Compute future value of an annuity. 1,2,3,11,13,38, 4.Compute present value of an annuity. 3-5 The Capital Budgeting Decision Chapter 12 Chapter 11 1.Emphasize that the investor s required rate of return translates into the cost of financing for the firm. 2.Explain that the cost of capital represents the overall cost of financing to the firm. 3.Define cost of capital as the discount rate normally used to evaluate an investment. 4.Calculate the weighted average cost of capital (WACC) and Capital asset pricing model (CAPM): a)cost of debt (bonds) b)cost of preferred shares c)cost of common equity 5.Describe how a firm attempts to minimize its cost of capital by varying the mix of its sources of financing. 6.Explain marginal cost of capital. 7. Explain Tax Effects on Capital Budgeting 1.Define capital budgeting decisions as a long-term investment decisions 2.Explain and emphasize that cash flows rather than accounting earnings are evaluated in capital budgeting decision 3.Discuss the use of the cost of capital as discount rate in capital budgeting analysis 4.Evaluate investments by: a.average accounting return b.payback period c.internal rate of return (IRR)using discounted Chapter 11 Problems: 1,3,5,6,7,10,11,12,13,1 4,15,16,17,18,27 Problems: 1,2,3,7,8,11,15,20,21,2 6,40 #1 (Chapter 11)Due Week 3A #2 (Chapter 12)Due Week 5A Test #1 Week 5B Evaluation Date THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 6
Week Topics Readings/Materials Weekly Learning Outcome(s) Instructional Strategies Evaluation Name cash flow models d.net present value (NPV) using discounted cash flow models e.profitability index Perform NPV analysis to assist in the decision-making concern of long-run investments. Evaluation Date 6 Risk and Capital Budgeting 7-8 Operating and Financial Leverage Chapter 13 Chapter 5 5. Perform NPV analysis to assist in the decision-making concern of long-run investments. 6. Examine asset based approaches to valuation, including adjusted book value, liquidation value, and replacement cost 7. Discuss effects of tax (CCA) and non-cash items (depreciation) on capital budget and cash flow analysis 1.Describe the concept of risk based on the uncertainty of future cash flows. 2.Define risk as standard deviation, coefficient Problems: of variation or beta. 1,2,3,8,10, 3.Describe the concept of risk aversion. 12,17,18,19,23 4.Utilize the basic methodology of risk adjusted discount rates for dealing with risk in capital budgeting analysis. 5.Describe and apply the technique of certainty equivalents, simulation models, sensitivity analysis, and decision trees to help assess risk. 6.Describe how a project s risk may be considered in a portfolio context. 7.Apply decision trees for project financing. 1.Define and calculate: a.operating leverage b.financial leverage c.combined leverage 2.Assess the opportunities/limitations of each type of leverage. Problems: 1,2,8,11,12,18, Excel: Set up a standardized worksheet that will solve problems 8,11. #3 (Chapter 13,5) Due Week 8B Test #2 Week 8B THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 7
Week Topics Readings/Materials Weekly Learning Outcome(s) Instructional Strategies Evaluation Name Evaluation Date 9-10 Capital Markets Investment Underwriting 11 Long Term Debt and Lease Financing Chapter 14 Chapter 15 Chapter 16 Chapter 16 A 1.Define primary, secondary, money and capital markets. 2.Describe the competition of funds in the capital markets. 3.Outline the organization of the securities markets. 4.Explain the concept of market efficiency and its benefits to the economic systems. Including capital market efficiency (Efficient Market Hypotheses) 5.Describe the role of investment dealers how they act as intermediaries between lenders and borrowers. 6.Evaluate the pros and cons of going public versus private when raising funds. 7.Explain a leveraged buyout. 8. Examine other factors in marking pricing. 9.Examine Venture Capital, Initial Public Offering, Bank Loans and Government Assistance, Securitization and Internally generated funds Chapter 16 1.Explain and describe the key features of long term debt instruments 2.Discuss and examine bond yields, prices and ratings. 3.Investigate other forms of financing such as the Eurobond market 4.Examine the advantages and disadvantages of debt. 5.Apply the concept of time value of money and capital budgeting to analyze a leaseversus-purchase decision. Chapter 14 Questions: 1-15 Chapter 15 Problems: 5,6,16 Problems: 2,4,6,8, 24,26,27,30 #4 (Chapter 14,15,16) Due Week 12A Chapter 16 A 12 Common and Preferred Stock Chapter 17 1. Discuss Financial Alternatives for Distressed Firms ( technical insolvency or bankruptcy) 1.Outline and describe the rights of common shareholders. THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 8
Week Topics Readings/Materials Weekly Learning Outcome(s) Instructional Strategies Evaluation Name Financing 2.Examine preferred shares from the Problems: 1,2,3,4,5,6,7, perspective of a hybrid security and outline provisions associated with preferred stocks. 3.Explain income trusts. 4.Describe the features of various securities in the risk-return framework. 13 Dividend Policy and Chapter 18 Retained Earnings 13-14 External Growth through Mergers International Financial Management Chapter 20 Chapter 21 1.Examine existing dividend theories: a)the marginal principles of retained earnings b)the residual theory 2.Discuss other factors influencing dividend policy. 3.Describe dividend payment procedures. 4.Assess the impact of stock splits and stock dividend on the position of shareholders. 5.Explain a dividend reinvestment plan. 6. Explain alternatives to cash dividends Chapter 20 1.Evaluate the forms of expansion and divestitures 2.Discuss the valuation of intangible assets 3.Discuss the fair market value concept 4.Describe the Portfolio Effect Chapter 21 1.Evaluate International considerations 2.Evaluate Foreign Exchange transactions and their risks. Discuss the approaches to valuation (asset based, transaction based and market based) Problems: 1-10, 20 Lecture & Discussion Review Instructor-led high level overview of approaches to valuation: Asset based (adjusted book value, liquidation value, replacement cost) Transaction based (capitalization of earnings and cash flows) Valuation using price multiples #5 (Chapter 17) Due Week 13B Final Exam (Comprehensi ve) Evaluation Date THIS COURSE ADHERES TO ALL COLLEGE POLICIES (See College Calendar) 9