RSM333H1S ‐ Introduction to Corporate Finance COURSE OUTLINE Summer 2008 Instructor: William Huggins: 647‐289‐9240 RSM333H1S Email: email@example.com or firstname.lastname@example.org Section L0101: Mondays and Wednesdays: Office Hours: by appointment 2:00PM‐4:00PM or after class Section L5101: Mondays and Wednesdays: 6:00PM‐8:00PM Webpage: TBA Course Scope and Mission This is an introductory course in Corporate Finance. It provides a framework for analysing financial decisions made by corporation. Lectures and readings will provide an introduction to capital budgeting, working capital management, dividend decisions, capital structure and the use of derivatives for risk management. Required Readings The required textbook for the course is: L. Booth, W.S. Cleary, Introduction to Corporate Finance, 1st edition, John Wiley & Sons Canada, 2007 (B‐C, ISBN: 978‐0‐470‐83780‐1) Evaluation and Grades There will be two assignments worth 5% each, a 35% midterm exam, and a 55% final exam. Note 1: For the examinations, you are allowed to bring in a calculator and an 8½" X 11" single‐sided “crib" sheet on which you may write down whatever you wish. Note 2: Assignments are due at the beginning of class and late assignments will not be accepted. Note 3: If the midterm or assignment due dates are missed for legitimate (documented) reasons, the weight of missed material will be transferred to the final exam. Conduct of Class The scheduled class time will be used to lectures, and discussion based on the material in the textbook. Discussions will however, include additional extra‐curricular material to better help orient theoretical concepts in the wider body of financial knowledge and the actual conditions faced by market participants. Students should come to class having read the assigned material beforehand so that they are better able to participate in classroom discussion. The course website will be the centre for communication from the instructor to the students. Students are urged to complete the recommended problems from the textbook through the course. Solutions to these problems will be posted to the course web‐site. The tentative lecture schedule for the course is: TOPIC (chapters and sections) DATE Financial Analysis and Forecasting Overview of financial ratios ‐ Sustainable growth – External Financing requirements July 2nd (Ch.4) Capital Expenditures and Cash Flow Estimation Investment Alternatives – Value Creation – Project Evaluation July 7th (Ch.13, Ch.14) Cash Flow Estimation – Leasing Guidelines – Sensitivity Analysis – Scenario Analysis – Leasing vs Buying July 9th (Ch.14, Ch.16) Working Capital Management – Leasing decision Liquidity Issues ‐ Optimal cash Balance July14th (Ch.23, Ch.24) Dividend Policy ‐ Mergers and Acquisitions Modigliani Miller Dividend Irrelevance Theorem – Dividend Policy in Practice – July 16th Repurchase of Shares – Growth through Acquisitions (Ch.22, Ch.15) Assignment #1 due in class Mid‐Term Exam July 21st Financial Instruments ‐ Cost of Capital Weighted Average Cost of Capital – Target Capital Structure July 23th (Ch.18, Ch. 19.1‐3 Ch.20) Capital Structure Choices Modigliani Miller Irrelevance Theory, Agency costs, Static Trade off Theory, Pecking July 28th Order Theory (Ch.21) Introduction to Hedging and Derivatives Forward Contracts – Futures – Swaps July 30th (Ch.11) Introduction to Options Call Options – Put Options –Put Call Parity – Option Pricing – Warrants and Convertibles Aug 4th (Ch.12, Ch 19.4‐5) Assignment #2 due in class Note: Final exam to be scheduled by the Faculty of Arts & Science.
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