SYLLABUS FOR FIN475 - FALL 2008
Professor: Dr. Terry D. Nixon
Office: Upham 111C
Office Hours: TR, 8:30 - 10:45 a.m. and by appointment
Class Times: TR, 11:00 a.m. - 12:15 p.m.
Course Home Page: (http://www.sba.muohio.edu/nixontd/)
Phone: (513) 529-6503
1. Objective of the Course
Description: Advanced treatment of corporate financial management. Covers all major areas of corporate
financial decisions: capital budgeting, dividends, capital structure, cash flow projections, mergers and
I. Capital budgeting
A. With and without capital rationing
B. Projects with unequal lives
C. Replacement decisions
D. Dealing with uncertainty (sensitivity analysis, simulation, decision trees)
E. Project and asset betas
F. Projects with option-like features
G. Characteristics of positive NPV projects
A. Stylized facts about dividend policies
B. Types of dividends, tax treatments
C. Modigliani and Miller irrelevance
D. Miller "Debt and Taxes"
E. Dividends as a signal
F. Dividends as a solution to agency problems
G. Evidence: market reactions to dividends
III. Capital structure
A. Use of leverage in practice
B. Types of debt or quasi-debt instruments
C. Agency costs (free cash flow, disciplinary role of debt, stockholder/manager/bondholder
IV. Financial analysis/projections
A. Ratio analysis
B. Pro forma financial statements to predict financing needs
C. Cash budgets
D. Accounting vs. economic profit
V. Corporate restructuring
C. Market responses
D. Defensive tactics
2. Course Outline
NOTE: All dates are tentative. The assigned dates are just to give the student an idea of the
approximate time spent on each area. Some topics may take more class time than initially assigned and
some make take less. The instructor reserves the right to add items or change the dates on this syllabus
8/26 T Introduction Chapters 3, 4 and 5 (review)
General Frameworks in Finance
Review (NPV, annuities, perpetuities, valuing
8/28 R Case Discussion – Individual (no write-up) Warren Buffett, 2005
Review of Financial Statement Analysis
9/2 T Capital Budgeting and Strategy Chapter 6
Principals and Techniques
9/4 R Estimating Cash Flows Chapter 7
Investments of Unequal Lives
9/9 T Forecasting Free Cash Flows Chapter 11 pp. 268-278
Sensitivity, Scenario, and Break-even Analysis
9/11 R Risk and Capital Budgeting Chapter 10
9/16 T Scott Bingham - FTI http://www.fticonsulting.com
9/18 R Case Discussion - Groups Aurora Textile Company
9/23 T Embedded Options Reading 1
9/25 R Case Discussion - Individual Teletech Corporation, 2005
9/30 T Sources of Long-term Financing Chapters 15 and 16
10/2 R MIDTERM I
10/7 T Costs and Benefits of Debt Chapters 18 and 19
10/9 R Dividend Policy Chapter 17
10/14 T Case Discussion - Group Mead Corporation: Cost of
10/16 R Financial Statement Analysis Chapter 29
10/21 T Case Discussion - Individual Rosario Acero S.A.
10/23 R Putting it all together Chapter 29 and 31
* Financial Planning
10/28 T Valuing Companies I Chapter 20
10/30 R Case Discussion - Individual Brown-Forman Distillers
11/4 T Valuing Companies II Chapter 28
11/6 R MIDTERM II
11/11 T Valuing Companies III
11/13 R Corporate Restructuring Chapter 32 and 33
11/18 T Case Discussion - Group Takeover of the Norton Co.
11/20 R Corporate Restructuring (continued)
11/25 T Case Discussion - Individual Jet Blue Airways IPO
11/27 R Thanksgiving Holiday – NO CLASS
12/2 T Executive Compensation Chapter 13 pp. 331-333
12/4 R Case Discussion – Group To Be Announced
12/9 T Corporate Governance Chapter 34
12/11 R Clean-up of any unfinished business
3. Key Dates
8/28 Case Discussion: Warren Buffett, 2005 - No Write-up
9/18 Case Write-up: Aurora Textile Company Group
9/25 Case Write-up: Teletech Corporation, 2005 Individual
10/2 MIDTERM I
10/14 Case Write-up: Mead Corporation: Cost of Capital Group
10/23 Case Write-up: Rosario Acero S.A. Individual
10/30 Case Write-up: Brown-Forman Distillers Corporation Individual
11/6 MIDTERM II
11/18 Case Write-up: Takeover of the Norton Co. Group
11/25 Case Write-up: Jet Blue Airways IPO Valuation Individual
12/4 Case Write-up: To Be Announced Group
12/16 @ 5:30p.m. FINAL (as listed in the Schedule of Classes)
4. Assignments and Groups
We will discuss approximately 8 cases during the semester . Four of the cases include a written group
assignment. For the remaining cases, you are required to turn in a short write-up (one page or less)
briefly discussing the major issues in the case. This write-up is due at the start of class on the date the
case is discussed. All students are expected to prepare all cases for in-class discussion (as this will
greatly impact your ability to gain participation points).
Assignments are due at the start of class. The assignments will be discussed in class on their due date so
no credit can be given for late assignments. All assignments should be typed (word-processed) on 8 1/2"
by 11" paper. Please staple multiple page assignments and your presentation of the material will be taken
into account when grading.
Group size will be dependent upon the final enrollment in this class and will be announced by the
instructor after the start of class. You may either choose your group members or request that I assign you
to a group. If you form a group on your own, you must report that to me by September 2. After
September 2, I will assign groups for students who have not previously contacted me. You are assigned
to a group for the entire semester.
Grading is done on a relative (not absolute) basis.
1. Group Case write-ups (4 assignments, 8% each) 32%
2. Class Participation and Individual Write-ups* 8%
1. MIDTERM I 20%
2. MIDTERM II 20%
3. FINAL 20%
*Class participation grades depend on both the frequency and quality of a student's contribution to class
discussions. You must earn it by answering questions, asking "good" questions, and contributing in other
ways to the overall learning experience of the class. Attendance, by itself, is not sufficient to earn
6. FIN475 homepage
FIN475 has a home page at the web address: http://www.sba.muohio.edu/nixontd
From the FIN475 home page, you will be able to:
1. download instructions for the team projects, and connections to web sites that will help you do
research for these projects,
2. download practice exams,
3. download teaching notes,
4. download the entire syllabus, and
5. check for current announcements.
Principles of Corporate Finance, Sixth, Seventh, Eighth, or Ninth Edition
by Brealey and Myers (or Brealey, Myers and Allen)
Online casebook (more information to follow)
8. FIN475 Policies
1. Bring a calculator to every class session. It will be useful when we do live group exercises in class.
2. Make-up exams will only be given for family or medical emergencies. Prior notice and hard
evidence is required.
3. It is the student’s responsibility to alert the professor a week prior to any evening exam of conflicts
with other courses. The student must schedule a make-up exam upon informing the professor of the
conflict and the make-up exam must be held no later than 2 days after the scheduled date of the
examination. If this does not occur, the student will receive a grade of zero for that exam.
4. The projects are due on the due date. No project will be accepted later.
5. Class attendance is strongly encouraged. We fully appreciate that job interviews will occasionally
conflict with class periods, but your efforts to minimize this conflict are greatly appreciated.
6. We will try to stick to the course outline schedule; however, it may be necessary to sometimes make
7. Exams are closed-book and closed-notes. Calculators are allowed. Formula sheets will be provided
by the instructor.
9. Business School Program Objectives
This course helps you to achieve learning objectives that have been set for the school wide program.
1. Group Work -- A major element of the coursework is three team projects.
2. Presentations -- Students are expected to actively participate in the class, especially during the case
discussions. Additionally the negotiation exercise will entail a presentation by each team of its
findings to an opposing team.
3. Ethics -- Agency problems of contracting will be addressed.
4. International -- The course will cover international valuation issues within the lecture environment
and also through the casework. Differences in corporate governance are also addressed.
5. Computer Applications -- Good spreadsheet based skills are a must in this course. They will be
frequently used to complete case analyses.
10. Academic Honesty
Students are expected to adhere to the Student Honor Code. The attempt of any student to present the
work of another as his or her own, or to present any work not honestly performed, or to pass any
examination by improper means is a most serious offense and will be treated with extreme prejudice.
Using homework assignment solutions from a previous semester is a clear case of academic dishonesty.
The aiding and abetting of a student in any dishonesty is likewise held to be a great breach of discipline.