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CM_FS54 - Corporate Finance* - CLOSED FOR FURTHER ENROLLMENT

Faculty
M.Sc. in Finance and Strategic Management program
Course Coordinator
Claus Parum
Prerequisite/progression of the course
Course status
This is a basic course in corporate finance that complements strategic decision analysis and that forms the basis for the second semester course in applied corporate finance and governance.
Aim of the course
Course objective is to provide students with a solid knowledge of corporations’ capital budgeting and financing decisions.
Corporate finance is concerned with economic decisions in corporations:
  • How corporations allocate capital (capital budgeting decision).
  • How corporations obtain capital (financing decision).
  • Corporation’s investment decision.
  • Raising capital (e.g. IPO, seasoned public offerings).
  • Corporation’s payout policy.
  • Financing of corporations.
  • Corporate control and corporate governance.
Course content, structure and teaching
The course starts with a general introduction to corporate finance and a discussion of the goal of the corporation.
  • First focus is on the capital budgeting decision.
  • We start with investment decisions under certainty.
  • Hereafter, we focus on the relationship between risk and return (portfolio risk, beta and CAPM).
  • Then we analyze capital budgeting and risk, and practical problems in capital budgeting.
  • Then focus shifts to the financing decision starting with an overview of the efficient market hypothesis.
  • Hereafter, we focus on three central areas within the field of corporate finance: To understand the importance of a firm’s payout policy, why firms choose a specific capital structure, and how to estimate the cost of capital.
  • An analysis of options, financial leasing, mergers, corporate restructuring, corporate governance, and corporate control finishes the course.
Learning Objectives
After having followed the course FS54 Corporate Finance – are able to
  • Master the vocabulary of corporate finance (i.e. define and explain all the relevant corporate finance terms and concepts in the syllabus).
  • Document knowledge on theories, methods and models in the syllabus.
  • Document regulatory, institutional and practical knowledge according to the syllabus.
  • Document knowledge on the validity of theories, methods and models from the syllabus (i.e. the empirical evidence).
  • Demonstrate an independent presentation.
  • Combine and apply all the insight (vocabulary, theories, methods, models, regulatory, institutional and practical knowledge, and empirical evidence) from the syllabus to solve both simple and complex and realistic corporate finance problems through accurately and correctly calculations (e.g. calculate project NPV by first deciding that the WACC method is appropriate for the specific problem at hand, then estimate after-tax cash flows used in the WACC method, thereafter estimate project after-tax WACC after taking into consideration project after-tax WACC may be different from company after-tax WACC, and finally calculate project NPV).
  • Show and explain all relevant calculations to solve a given problem.
  • Make additional assumptions if necessary to unambiguously solve a given problem.
  • State the assumptions behind the theories, methods and models in the syllabus.
  • Demonstrate analytical thinking/skills.
  • Independently combine and structure the corporate finance vocabulary, theories, methods, models, regulatory, institutional and practical knowledge, and empirical evidence to solve corporate finance essay problems (e.g. analyzing efficient markets, payout policy, capital structure).
  • Analyze to what extent the models and theories from the corporate finance syllabus (primary developed for a public US corporation) are directly applicable in other countries (e.g. different regulatory and institutional assumptions) or whether modifications are needed.
Type of examination, exam aids and assessment
  • 2-hour multiple choice closed book exam (weight: 25% of the grade) and
  • 4-hour written closed book exam (weight: 75% of the grade). The 4-hour written closed book exam is graded by faculty and an external examiner.
Teaching methods
Lectures with exercises.
Course literature
  • Brealey, R. A., S. C. Myers and F. Allen (2008). Principles of Corporate Finance (9th edition). McGraw Hill.
  • Corporate Finance Exercises. 2008.
  • More literature may come up during the course.

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