Prin­ciples of Cor­por­ate Fin­ance

Course content

This course is an overview of the principles of corporate finance and is designed for undergraduate students who have no prior knowledge of corporate finance. We place importance on techniques related to investment decisions and financial decisions made by companies. Financial managers in corporations work with other managers to identify investment opportunities, analyze and value the opportunities, and to decide whether and how much to invest, as well as decide how to raise the money to finance the corporation’s investments.

Therefore, we start with an introduction to what corporate finance is and describe the role of a corporation’s financial manager. We then proceed with how to measure corporate performance (value-added, efficiency, profitability, etc), since the main goal of corporations is maximizing the current market value.

Since companies invest in a lot of things such as tangible or intangible assets, the decision on capital outlays is among the most significant a firm will have to make. In introducing decision-making on capital expenditure, first, the students will be exposed to “time value of money” calculations and then proceed to the fundamentals of valuation of bonds and stocks, emphasizing present value techniques. These techniques will be also useful during capital budgeting decisions, which involve comparing the different investment criteria in the presence of capital shortage. After careful grounding in valuation practice and theory, the concepts of the cost of capital and capital structure will be examined, covering risk-return analysis in capital budgeting. In the end, the students will get an additional overview of more advanced financial instruments such as options.