FIN 301 Syllabus - Fall 2007

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FIN 301 Syllabus - Fall 2007 Powered By Docstoc
					Course Specific Required Texts and Related Materials

Finance FIN301

       Fundamentals of Financial Management Concise Fifth Edition, Brigham and Houston, Thomson
South-Western 2007.
       Notepacket (available at DuBois) or downloadable on my webpage

         The student must have a calculator that can calculate natural logarithms, roots, and powers. A
financial calculator is not required, but it is highly recommended. I have found that most students prefer
the TI BA II PLUS (however, I’m sure that others are acceptable).

Professor: Dr. Terry Nixon
Class Times: TR 2:00-3:15 p.m. and 3:30-4:45 p.m.
Office Hours and Access:
Office: Upham 111C               Phone: 529-6503               E-mail:
Office Hours: TR 8:30–10:45 a.m. and by appointment
Webpage: http://www.

Course Specific Grading Policies:

       Final rankings will be determined using the following weighting:

                                Exam 1                                  23%
                                Exam 2                                  23%
                                Exam 3                                  23%
                                Final Exam (Exam 4)                     23%
                                Homework                                 8%
                                  Total                                100%

Note: This class does have night exams. Each exam is held from 6-8 p.m. in 100 Art (with the exception
of the final) on the dates provided in the syllabus. On the day of the exam, no new material is presented in
class. I will be in the classroom during the regular hours but only to answer your questions pertaining to
the exam.

All exams (including the final) will consist of 30 multiple choice questions. Students who are absent from
any exam without prior permission will receive a score of zero for that particular exam. Requests for
permission to be absent from an exam will be considered only in cases of serious illness, family
emergencies, and university sponsored events.

Good preparation for exams consists of attending and comprehending the lectures, thoroughly reading the
assigned sections of the text, and working through as many of the suggested problems as possible.
Important Dates:
February 12:   Exam 1; 6-8 p.m. in 100 Art
February 19:   Mon/Tues Class Exchange Day (no Tuesday classes, Monday classes meet this day)
March 11:      Exam 2; 6-8 p.m. in 100 Art
March 18:      Spring Break (no classes)
March 20:      Spring Break (no classes)
March 24:      Last day to withdraw from a spring semester course with a grade of W.
April 10:      Exam 3; 6-8 p.m. in 100 Art
May 6:         Final Exam, 9:45 a.m. (Location: TBA)

Individual Course Objectives:

          The field of finance is very broad, covering investment concepts, corporate financial policy,
security markets, banking (and other intermediaries), the role of government and the international sector,
real estate and personal finance. Together these components make up the “financial system.” In FIN301,
we examine a few parts of the financial system. FIN301 is not a full survey course. Rather the course is
more a “skills” course in that it covers most of those major concepts and techniques likely to be used by a
non-finance corporate manager or a reasonably sophisticated individual investor. In finance, most ideas
and concepts are very intricately tied to one another. In FIN301, we’ll seek to gain a perspective on how
some of these concepts connect together. Once this perspective has started to develop in a student’s mind,
their progress in finance will usually jump significantly.

          We initially consider introductory material that will enhance the student’s understanding of the
more intricate matters discussed later in the course. Introductory topics discussed include an overview of
the important financial topics in the course, an introduction to the concepts and terminology of debt and
equity, a brief review of financial statements, and a brief discussion of interest rates and their

          The second (and perhaps most critical) section of the course focuses on the time value of money.
An understanding of this section of the course is critical to a student’s performance in FIN301 as well as
their future finance courses. Time value of money skills are used in tasks such a stock and bond valuation
as well as in the amortization of loans (car loans, mortgages, etc.).

        The third area we focus on is that of financial risk. We cover the basic idea and different
measurements (standard deviations and betas) of risk and then move on to some applications of the
management of risk including diversification of an individual’s stock portfolio. Lastly, we consider the
very important relationship between investment risk and investment return through the calculation of
weighted average and marginal costs of capital.

           The fourth area focuses on the corporation and its investment in projects and the machinery,
facilities and people needed to make these projects work. This is the topic of capital budgeting and it is the
area of corporate finance that most non-finance employees will be exposed to in their jobs. In this section,
cash flows are estimated, that in conjunction with costs of capital from the previous section, result in an
accept/reject decision for a firm’s potential projects. The goal of capital budgeting should be to maximize
shareholder wealth.
        Lastly, the course concludes with a discussion of several areas in finance including foreign
exchange rates, capital structure, dividend policy, and hybrid securities.

         This course is introductory in nature. From it, students should gain an initial appreciation of the
methods by which finance professionals evaluate and manage investment projects and financial securities.
For many topics, we will use mathematical techniques to solve problems. Both the uses of these methods
and the intuition behind them will be taught. My goal is for you to develop an intuitive understanding of
key financial concepts and to be able to apply practical methods to everyday business problems.

Other Information:

As noted above, a webpage does exist for this class. I have put together a packet of notes that can be
purchased at DuBois bookstore or you can download the notes from my webpage. It is your responsibility
to show up for each class with that day’s notes.

End-of-chapter solutions are available through the library’s electronic course reserve. Links and passwords
to these solutions can be found on my webpage. You will need adobe acrobat to view the solutions.

Practice questions for the exams and answer keys are available on the web. I will not go over these
questions in class. It is your responsibility to work through these questions and see me regarding any
problems. It is a good idea to have studied this material.

Once again, I highly recommend the purchase of a financial calculator. I do not teach with the financial
calculator in mind, so it is not required. However, it is likely to make your life much easier.

Help Sessions:
In addition to your use of office hours, weekly help sessions will be run by a student instructor (SI).
Sometime during the first week of courses, the SI (Tracey Niederhelman) will be introduced to the class.
Once Tracey has established regular meeting times, I will get the information on my webpage.

This course is part of the Financial Decisions in Corporations Thematic sequence under Miami University’s
Liberal Education Plan. The purpose of this sequence is to expose students to corporate financial theory
and aid the students in understanding contexts of finance’s application in modern commercial activities.
There is an emphasis on critical thinking leading to sound decisions that recognize the risk return trade-
offs in these decisions and the sometimes conflicting interests of corporate stakeholders. This sequence
will provide the student opportunities to engage with other learners as a vital part of the experience and to
reflect and act in their personal life.
                                             FIN 301 - Spring 2008                                   Dr. Terry D. Nixon
                                                                                                      Miami University
The course material will be covered in this approximate order. However, I reserve the right to make adjustments to the
material coverage during the semester.

Q = Questions            P = Problems
 Lecture                 TOPIC                        What is Covered?                    Textbook             Recommended
 Number                                                                                   Reading                Problems
    L1     Introduction and Course     Guiding Principles of Finance                Chapter 1                Chapter 1:
           Overview                    1. Wealth Maximization                                                Q: 11,13
                                       2. Time Value of Money
                                       3. Risk/Return Trade-off
                                       4. Leverage
                                       5. Diversification
    L2     Basic Financial Instruments Debt vs. Equity                              Chapter 7: pp.207-213,   Chapter 7:
                                                                                    228-236                  Q:12
                                                                                    Chapter 9: pp 289-292    Chapter 9:
                                                                                                             Q:1, 3
    L3     Review of Financial               Value: book, economic, and market      Chapter 3: pp.64-85      Chapter 3:
           Statements                        Analysis of annual reports                                      Q: 2, 4,5,7,8,10
                                                                                                             P: 1,3,8,10
    L4     Financial Statement Analysis Ratio Analysis: liquidity, asset            Chapter 4                Chapter 4:
                                             management, financial leverage, and                             Q: 4,6,8
                                             profitability ratios                                            P: 3,6,7
                                             DuPont identity
    L5     Financial Planning                Pro Forma Statements                Chapter 16: pp 538-545 Chapter 16:
                                                                                                             Q: 1,4
                                                                                                             P: 1,3,4,7,13a

    L6     Interest Rates in the             Consumption vs. savings                Chapter 6: pp 174-195    Chapter 6:
           Economy                           Nominal vs. Real                                                Q: 2
                                             Risk Premia                                                     P: 2,3,4,5
                                             Yield Curves
    L7     Time Value of Money I             Lump sum PV and FV                     Chapter 2:pp 24-35,50-51 Chapter 2:
                                             EAR and APR                                                     Q: 1,3,4,7
                                                                                                             P: 1-4,7,10,12abc,13,18

    L8     Time Value of Money – II          Annuities (simple and due)             Chapter 2: pp 36-50      Chapter 2:
                                             Perpetuities (constant growth;                                  Q: 5,6
                                             dividends)                                                      P: 6,14,15,16,19,21,25,
    L9     Time Value of Money – III         Amortizing Loans                       Chapter 2: pp 52-54      Chapter 2:
                                                                                                             Q: 8
                                                                                                             P: 22,34

   L10     Bond and Stock Valuation          Valuation of securities using TVM      Chapter 7: pp 213-       Chapter 7:
                                             principles                             216,218-227;             Q: 2,3,4
                                                                                    Chapter 9: pp 292-       P: 1,3,5,6a
                                                                                    304,310-317              Chapter 9:
                                                                                                             Q: 2,4,5
                                                                                                             P: 1,2,4,8,10,11,12,16,
   L11     Risk and Return – I               Expected returns                       Chapter 8: pp 244-257    Chapter 8:
                                             Historical returns                                              Q: 2
                                             Standard deviation                                              P: 1,6,18
L12   Risk and Return – II          Diversification (2 assets              Chapter 8: pp 257-263   Chapter 8:
                                    quantitatively)                                                Q:
                                    Diversification with many assets                               P: 20

L13   Risk and Return – III         CAPM                                   Chapter 8: pp 263-279   Chapter 8:
      CAPM                          ‘s                                                            Q: 5,6,7,8
                                                                                                   P: 2,3,5,10,
L14   Cost of Capital and Capital   Cost of debt (YTM for simple bonds) Chapter 7: pp 216-217;     Chapter 7:
      Structure – I                 Cost of Equity (DGM and CAPM)       Chapter 10:pp 332-339      Q: 4,7,
                                                                                                   P: 2bc,9,10a
                                                                                                   Chapter 10:
                                                                                                   Q: 2
                                                                                                   P: 1,2,3,6,16
L15   Cost of Capital and Capital   WACC                                   Chapter 10: pp 328-     Chapter 10:
      Structure – II                Optimal capital structure              332,343-349             Q: 3,4
                                                                                                   P: 8,11,12,18

L16   Capital Budgeting – I         Relevant cash flows                  Chapter 12: pp 387-       Chapter 12:
                                    Cash flows from asset sales          397,418-419               Q: 1,2,3,4,6
                                    Computing:      Initial cash flows                             P: 1,2,3,4,6,7
                                                    Operating cash flows
                                                    Terminal cash flows
L17   Capital Budgeting – II        The capital budgeting process        Chapter 11                Chapter 11:
                                    NPV, IRR, Payback period                                       Q: 2,4,5,6,8
                                                                                                   P: 1,2,3,4,6,7,10,12,13
                                                                                                   Chapter 12:
                                                                                                   P: 10a
L18   Capital Budgeting – III       Examples and applications

L19   Foreign Exchange              Spot and forward rates                 Chapter 17: pp 566-576 Chapter 17:
                                    Cross rates                                                   Q: 2,5
                                    Hedging                                                       P: 1,2,3,5,8,10,13
                                    PPP and IRP
L20   Leverage and Capital                                                 see note packet         see handouts (available
      Structure                                                                                    on webpage)
L21   Derivative Securities         Options                                see note packet         See handouts (available
                                    Warrants                                                       on webpage)
                                    Convertible Securities

L22   Dividend Policy                                                      Chapter 14: pp 464-465, Chapter 14:
                                                                           468-478,480-488         Q: 2,3,8
                                                                                                   P: 1,2,3,4,6