HAI.2CF - Corporate Finance* Q3 CLOSED FOR FURTHER ENROLEMENT

Faculty
Ulf Nielsson

Course Coordinator
Ulf Nielsson

Prerequisite/progression of the course

None

Course content, structure and teaching

This is an introductory course in finance focusing on corporate applications in the international environment. It covers the basic theories of interest rates, valuation of streams of cash flows, pricing of risk, and it draws practical implications for capital structure, project valuation, financing, and risk management.

More specifically, the course contains a basic introduction to topics such as:

The main characteristics of corporations
The relationship between accounting information and the information analysed in corporate finance
Interest rates and the time value of money
The valuation of bonds and stocks
The investment decision
The financing decision including capital structure theory and the cost of capital
Payout policy
Mergers and acquisitions
International financial management and capital budgeting
Financial and real options
Risk management

Thereby, the course reflects the BSc IB programme learning goals in the following way:

Practical Application of Theory

The course includes many exercises and cases illustrating the practical application of theory. Furthermore, it is discussed how the relevant data for such applications can be obtained.

Relation to a Business or an Institutional Setting

Several aspects of different types of financial markets are examined including public versus privately owned companies and various types of providers of capital (investors).

Relation to International Business or Economics

The international perspective is taken in connection with many of the topics covered during the course especially including mergers and acquisitions, financial management and capital budgeting, and risk management. Several cases and examples are looking at multinational firms.

Research Based Teaching

The curriculum includes an article written by the course coordinator and several other research papers. Furthermore, evidence from several empirical studies is discussed during the course.

The class time will be devoted to a combination of lectures, discussions of different exercises and minor cases. Exercises and cases will be home-work assignments during the course. They will not be graded but discussed in class. The material is large and well explained in the book. Therefore, students are expected to study parts of the material on their own and, as a minimum, to have read through the material and tried to solve exercises/cases assigned as home-work in advance. In some of the lectures, it will be discussed how the relevant calculations and analysis can be performed using Excel.

Learning Objectives

At the exam the students must be able to:

Describe the various types of risks related to a corporation and how these impact the investment and financing decision.
Be able to apply various techniques for valuation of projects and corporations taking the riskiness of these into account.
Describe financial options and apply financial options for hedging and risk management.
Describe real options and the roles of real options in project valuation.
Demonstrate an understanding of a firm’s payout policy and of mergers and acquisitions.
Explain the various ways by which corporations, including multinational corporations, obtain the information that is needed for the investment and financing decision.

Type of examination, exam aids and assessment

Written 4-hour open book exam, graded by internal examiner on the 7-point scale. The make-up and re-examination takes place according to the same rules as the regular examination

Students are allowed to bring textbooks, lecture notes and dictionaries. Electronic devices (Laptop and Personal Computers etc.) are not allowed except for non-programmable calculators.

Recommended literature

Brealey, Myers and Marcus, Fundamentals of Corporate Finance, Sixth edition, (Mc Graw Hill International Edition).

Other readings will be made available on Sitescape (www.e-cbs.dk). These readings will probably at least include:

Bechmann, K. L. (2009): Lecture Notes: Important Functions and Tools in Excel.
- “In their own words… Samuel Weaver on Cost of Capital and Hurdle Rates at Hershey Foods Corporations”
- Stulz, R. (1995), “The cost of capital in internationally integrated markets: The case of Nestlé”, European Financial Management, Vol. 1, pp. 11-22.
- Dixit, A. K. and R. S. Pindyck (1995), “The Options Approach to Capital Investments”, Harvard Business Review, May-June, pp. 105-115.
- Bechmann, K. L. and P. L. Jørgensen (2004), “The Value and Incentives of Option-Based Compensation in Danish Listed Companies”, Journal of Derivatives Accounting, Vol. 1, pp. 91-109.
- Hall, B. J. and K. J. Murphy. “The Trouble With Stock Options”, Journal of Economic Perspectives, 2003, Vol. 17(3), pp. 49-70.
- A. P. Moller – Maersk (2009), Extract on Risk Management, Accounting Report, 2009.