Overview, objective, and contents
Teaching methods
Evaluation and grading
Textbook
Tutorial
Course outline

1. The Time Value of Money, Valuation of Bonds
2. Valuation of Stocks, Capital Budgeting
3. Portfolio Diversification, CAPM
4. Case discussion: Warren Buffett &
   Leverage and Capital Structure
5. Leverage (continued) &
   International Corporate Finance
6. Hedging and Derivatives &
   Case Discussion (continued)

This course is designed as a rigorous introduction to the principles of modern corporate finance. It will serve as an introduction for those who want to specialize in finance and take more advanced courses in finance later on as well as a survey for those pursuing other disciplines.

Participants of this course will learn the main concepts of modern financial theory. The main objective is to familiarize participants with the most relevant subjects in corporate finance. After completing this course, everybody should be able to value a company, assess an investment proposal, discuss the valuation of a stock, and understand the main principles of capital structure policy and hedging. At a minimum, participants new to finance should feel competent to analyze the contents of the financial pages of the Financial Times or the Wall Street Journal.

This is an introduction and the concepts are presented by way of an interactive lecture course. Participants should do some reading before they come to class and be prepared to ask questions in class. We will also set up a bulletin board where everybody can ask questions before and after sessions. We will use one case to illustrate and apply some the main concepts introduced during the course. 

Evaluation will be based on a final exam (individual exam) that accounts for 60% of the grade, a group assignment that accounts for 40% of the grade. The exam will take place at 9:00am on December 9, 2011 (90 minutes). The group assignment should be completed in groups of three participants (not in the 5-6 member MCTs) and consists of structured responses to the case “Warren E. Buffett, 2005.” The groups will be assigned by the MBS. Please refer to the case questions for further details. The assignment has to be handed in by 13:45 on November 26, 2011. 

Please refer to the seesion outlines below for the itemized readings for each subject we are going to cover in this course. All chapter assignments refer to the text by Brealey, Myers, and Allen, referred to as BMA for brevity.
Brealey, Richard A., Stewart C. Myers, and Franklin Allen, Principles of Corporate Finance, 10^th Edition, McGraw Hill, 2010.

There will be tutorials on November 11 (14:15-18:15) and November 12 (13:45-17:45) to discuss questions on the problem sets and as exam preparation. 

Lecture slides and examples: Time Value of Money (examples), Valuation of Bonds (examples)

Problem sets and solutions: Time Value of Money (solution), Valuation of Bonds (solution)

Required readings: On the time value of money and present value techniques (module 1): BMA, chapter 2 [exercise solutions]; on the valuation of bonds (module 2): chapter 3 [exercise solutions].

Further readings: BMA, chapter 1 is not discussed in class, but may be helpful to put the contents of this class and of the course into context. The institutional features of debt are covered in chapter 14.3. 

Lecture slides and examples: Valuation of Stocks (examples), Capital Budgeting (examples)

Problem sets and solutions: Valuation of Stocks (solution), Capital Budgeting (solution)

Required readings: On the valuation of stocks (module 3): BMA chapter 4 [exercise solutions]. On capital budgeting and investment appraisal (module 4): BMA, chapters 5 [exercise solutions] and 6 [exercise solutions].

Further readings: In class we will focus on the analytic aspects of valuing stocks. The institutional aspects (offering procedures, private versus public placements) are covered in BMA, chapter 15. Some other features (voting rights, ownership) are covered in chapter 14.2. Some of the practical aspects of capital budgeting (sensitivity analysis, simulations) are covered in BMA, chapter 10. We will briefly discuss the issue of strategy and capital investment decisions in class to bring home the main issues. Chapter 11 in BMA extends this discussion further and is worthwhile for those interested in the link between corporate finance and strategy.

Lecture slides and examples: Portfolio Diversification (examples), CAPM (examples)

Problem sets and solutions: Portfolio Diversification (solution), CAPM (solution)

Required readings: On portfolio diversification (module 5): BMA, chapter 7 [exercise solutions]. On diversification and the CAPM (module 6): BMA, chapter 8 [exercise solutions]; on determining the cost of capital in capital budgeting: chapter 9.1 – 9.3 [exercise solutions].

Further readings: None.

We will spend up to 45 minutes discussing questions that arose in the preparation of the case. The purpose of this session is to clarify questions that came up with the preparation of the case, especially with respect to the quantitative analysis that you have to conduct.

Lecture slides and examples: Leverage and Capital Structure (examples)

Problem sets and solutions: Leverage and Capital Structure (solution)

Required readings: Read and analyze the case Warren E. Buffett, 2005. We will introduce the Modigliani-Miller theorems and discuss capital structure policy (module 7), these are the subject of chapter 17 in BMA [exercise solutions].

Further readings: None.

Lecture slides and examples: International Corporate Finance (examples)

Problem sets and solutions: International Corporate Finance (solution)

Required readings: We will cover one example on international corporate finance (module 8), this is covered in BMA, chapter 27 [exercise solutions].

Further readings: A more comprehensive discussion of the institutional features and some issues on corporate funding decisions can be found in chapter 14.1.

Lecture slides and examples: Hedging and Derivatives (examples)

Problem sets and solutions: Hedging and Derivatives (solution)

Required readings: We will cover risk management and hedging only at an introductory level (module 9). This is covered in chapter 26.1 to 26.4 [exercise solutions]. Should we have more time at the end we would also cover options, in that case chapter 20 [exercise solutions] would also be required reading.

Further readings: None.