Corporate Finance

Course ID

B500014101

Course Title

Corporate Finance

Teaching language

English

ECTS value

Responsible study board

Study Board of Market and Management Anthropology, Economics, Mathematics-Economics, Environmental and Resource Management

Date of Approval

08-05-2018

Course Responsible

Name	Email	Department
Kenneth Schultz	ksc@sdu.dk

Offered in

Odense

Level

Bachelor

Offered in

Autumn

Duration

1 semester

Mandatory prerequisites

None.

Recommended prerequisites

Mathematics corresponding to B-level from Upper Secondary School.

Furthermore, the student must understand and be able to apply central concepts from introductory statistics such as: sampling and sampling distributions; descriptive statistics; elementary probability rules; discrete and continuous random variables and respective theoretical distributions (e.g. Normal, Binomial); expected values (the mean), variance, covariance, and correlation; confidence intervals; hypothesis testing; linear regression; and the student must be able to apply these concepts independently in concrete problems. These competences have typically been obtained in Social and Economic Statistics (course id: 9851401). In addition, the student must be able to perform basic operations in a spreadsheet program like Microsoft Excel or a statistical analysis package like STATA.

Aim and purpose

The subject is a central subject within business economics. The purpose of the course is that the student gains knowledge about the financial issues of investors and companies accounting for uncertainty regarding the future financial consequences of financial decisions. The student obtains competencies to handle certain financial investment problems and to be a part of the company's financial function at an assistant and analytical level. The purpose of the course is also to provide methods for assessing the economic benefit of given economic decisions. It is thus the aim of the subject that the student acquires skills in application of the course's methods in the analysis and assessment of investment and financial aspects within all types of business economics problems. The course also addresses that economic decisions must consider possible ethical dilemmas in the prioritization of economic attractiveness relative to other, non-economic goals.

In addition to giving the student knowledge about investors and companies' issues in finance and investment, the subject also provides knowledge about the characteristics and functioning of the capital markets. In addition, the course provides skills enabling the student to choose between specific sources of funding and investment projects accounting for risk and other frictions such as tax and inflation. The course will give the student skills to, from an investor perspective, put together an optimal portfolio of financial assets based on an assessment of the relationship between risk and return and investor preferences.

Content

The subject covers three main areas: 1) Interest rates and time value of money, 2) Financial markets, financial instruments and pricing of these and 3) Valuation of real assets, companies' investment choices and capital structure.

Main themes are as follows:

1. Interest rates and time value of money:

a)Discounting, annuities and perpetuities.

b)Internal rate of return and effective yield.

c)Accrual of interest and interest compounding.

d)Discrete and continuous rates.

2. Financial markets, financial instruments and their pricing:

a)Capital market efficiency.

b)Optimal portfolio choice (risk vs. return: choosing an efficient portfolio of securities) under uncertainty.

c)Mean-variance analysis.

d)Pricing of financial assets (securities eg. Stocks and bonds) under uncertainty.

3. Valuation of real assets, firm’s choice of investment (capital budgeting), and capital structure:

a)Valuation of risk free assets and projects.

b)Valuation of risky assets and projects.

c)Choice of real investment and (simple) tax effects in valuation.

d)Capital structure theory in a Perfect Market and Costs of Capital.

Please notice that the content of the subject predominantly takes its point of departure in an international context. This is evident from the literature foundation of the subject.

Learning goals

The student must be able to account for theory and carry out analyzes in relation to the subject content, see below list. When accounting for theory and doing the analysis, the student must be able to explain very clearly the preconditions and the individual elements of the analysis by means of explanatory text and by specifying the formulas used and explaining how they are used to solve the problems.

Specifically, the student should be able to:

1. Interest rates and time value of money:

•Explain the concept time value of money.

•Calculate value of cash flows (e.g. PV and NPV of cash flows)

•Calculate internal rate of return and effective yield.

•Carry out calculations relating to interest rate in cases of non-annual terms of payments, e.g., with continuous compounding.

2. Financial markets, financial instruments and their pricing:

•Explain, apply and assess the importance of the Law of One Price.

•Explain the functioning of the capital market and its importance to the pricing of financial assets, including making simple analyzes based on the Law of One Price.

•Can perform simple bond analyses, valuation and term structure analyses.

•Valuing stocks taking into account, inter alia, systematic and non-systematic risk and various risk factors.

•Can analyze an investor’s portfolio choice under uncertainty in simple settings (eg. mean-variance analysis) including CAPM and Multifactor Models of Risk.

3. Valuation of real assets, corporations’ choice of investment (capital budgeting), and capital structure:

•Identify and analyze cash flows for real investments based on an incremental perspective.

•Identify, calculate and analyze the optimal capital structure of a firm both in a Perfect Market and including tax and tax effects.

•Determine, calculate and analyze the cost of capital of a firm by including, inter alia, capital structure and systematic risk (beta).

•Carry out valuation of real investments both without and including tax and debt.

Literature

Examples:

1)Package including acces to MyFinanceLab and eText: ISBN-13: 9781292163031

The package includes the following:

3.MyFinanceLab - Instant Access - for Corporate Finance, Global Edition, 4/E, Berk & DeMarzo ISBN-10: 1292160233 • ISBN-13: 9781292160238.

Teaching Method

The purpose of the lectures is to provide an overview of the subject's theory and method and to provide knowledge about the key concepts and contexts. Furthermore, the lectures are organized and conducted to support a suitable academic progression during the semester. This ensures that the student is given a solid academic foundation for his studies. In the exercise lessons, students will be helped to solve the exercises. The students will be helped to identify and use the correct methods when solving the exercise problems and the problems related to the known problems in part 1 of the exam. The students' own efforts will be an essential foundation for the teaching in exercise classes. It is therefore expected that the students, before attending the exercises, have attempted to solve all the required exercises. This prerequisite is a central part of the calculation of the total ECTS of the course.

Workload

Scheduled classes:

2x2 lecture hours for 10 weeks and 2 class exercises per week for 10 weeks. Minor variations in the scheduled classes can occur in the weeks where the online webinar is completed, cf. below.

In 3 of the teaching weeks, there will be conducted an online 2-hour webinar via Adobe Connect. The specific weeks will be stated in the lecture plan uploaded on Blackboard. In the weeks where the webinar is conducted there will be 3 lecture hours (2+1) and 1 class exercise.

The ECTS is 5 equaling 135 SAT, broken down as follows:

Lectures including preparation: 60 hours.

Exercises including preparation: 50 hours.

Exam including preparation: 25 hours.

Examination regulations

Examination

Name

Examination

Timing

Ordinary examination: In situ written exam in January.

Re-examination: In situ written exam in February.

Multiple choice tests: Across the semester.

Re-examination for Multiple choice tests: December.

Tests

Multiple Choice Tests

Name

Multiple Choice Tests

Form of examination

Multiple choice

Censorship

Second examiner: None

Grading

Pass/Fail

Identification

Student Identification Card - Exam number

Language

English

Duration

60 minutes.

Length

Examination aids

All aids allowed except for communication with others.

Assignment handover

On Blackboard.

Assignment handin

On Blackboard. The student must submit the test when finished.

ECTS value

Additional information

Part 1 is passed, when both tests are passed. To pass a test minimum 50% of the answers must be correct.

Duration of multiple choice test: 60 minutes. Dates and time of the test will be stated in the exam plan. The problems for each multiple-choice test consist of 1) Problems disclosed at least one week before the test is carried on Blackboard and 2) Problems not known in advance.

Re-examination

Form of examination

Multiple choice

Identification

Student Identification Card - Exam number

Preparation

None.

Duration

120 minutes.

Examination aids

All aids allowed except for communication with others.

Assignment handover

On Blackboard.

Assignment handin

On Blackboard. The student must submit the test when finished.

Additional information

Duration of multiple choice test: 120 minutes. Dates and time of the test will be stated in the exam plan. The problems are not known in advance.

EKA

B500014112

Written in situ exam

Name

Written in situ exam

Form of examination

Written examination on premises

Censorship

Second examiner: None

Grading

7-point grading scale

Identification

Student Identification Card - Exam number

Language

English

Preparation

Duration

3 hours.

Length

Examination aids

The Internet may only be used to access the SDU Assignment upon submission. All aids allowed except for use of the internet. Communication with others inside or outside the examination room are not allowed.

Assignment handover

Handed out in hard copy.

Assignment handin

SDU Assignment on Blackboard.

ECTS value

Additional information

Part 2: Written in situ exam. (weight: 100%).

A passed exam or part-exam cannot be re-taken. A passed part-exam will be transferred to the next exam period.

The exam tests the achievement of the goals for all the goals mentioned (cf. the goal description) by random check.

EKA

B500014102

External comment

NOTE - This course is identical with the former course Corporate Finance, 8111421.

Used examination attempts in the former identical course will be transferred.

Courses that are identical with former courses that are passed according to applied rules cannot be retaken.

The student is automatically registered for the first examination attempt when the student is registered for a course or course element with which one or more examinations are associated. Withdrawal of registration is not possible, and students who fail to participate in an examination have used one examination attempt, unless the University has made an exemption due to special circumstances.

The form of reexam is subject to change. The students are informed about the change in format after the students have signed for the reexam.

Courses offered

Offer period	Offer type	Profile	Education	Semester