FIN 3104 CORPORATE FINANCE Course Description and Outline for Spring 2003 Class Meetings: 6:00 – 8:50 p.m. Tuesday McBryde 100 Instructor: Professor Keown Phone: 231-8647 (O) 951-8676 (H) – Phone hours 8:00 a.m. – 9:00 p.m. Office hours: 12:15 – 1:30 p.m., Tuesday Office: Pamplin 2114 Required Materials: • Financial Management (FM), 9th Edition, by Keown et. al., (Prentice-Hall, 2002). • Course Pack for FIN 3104 (CP) (available at A-1 Copies in the University Mall) - Includes homework solutions, write up on core investments, and koofers. • Ability to access internet. Specifically, you will be asked to access Current Events Articles on the myPhlip Companion Website (myPHLIP) at: http://www.prenhall.com/myphlip Once you get there register, then select the book, select the chapter, then select current events to take you to the appropriate reading, read the lead story and talking it over and thinking it through section. Check out the study guide, internet exercises, and the rest of the site. • Ability to access the Personal Finance Navigator (PFN) on the internet. You will be asked to do several assignments from this web site. It is located at: http://www.cob.vt.edu/finance/Faculty/ajk/pfm/seconded Recommended and Required Materials: You should be reading either the Wall Street Journal, Fortune, Barron’s or Business Week (you can sign up in class). You are required to purchase a financial calculator. It is something you will find useful your entire life. I recommend the Texas Instruments BAII-Plus. Class Policies: 1. Incomplete grades are only given if requested by Dean Spencer or the Dean of the college in which you are enrolled. 2. Each student is responsible for class attendance and preparation for class. Homework will be randomly collected and given full credit if an effort has been made. If you have to miss class for a school related reason, please notify me beforehand. If you are ill and can’t make class, drop the assignment by Pamplin 1016 before class. If not, you will not receive credit if there is an attendance quiz or homework collection. A note from Student Health Services is also required. No exceptions (really - no exceptions). 3. The timing of the collection of homework and the material to be covered may be changed at any time with notice during the class prior to the collection of the homework. Toward the end of the term this often happens. 4. There will also be attendance quizzes randomly given. As such, you are responsible for attending all classes. Grading: Danforth and Donnally (in course pack) 2 points Homework, Attendance Quizzes, & Ethics Cases (randomly collected) 8 points Exam I 30 points Exam II 30 points Final Exam 30 points Total 100 points My goal is to see you learn. Grades are a carrot that encourage learning. While I will not hesitate to give a poor grade when your performance indicates that you have not learned the material, I want to see everyone do well. Thus, I will do my best to help you understand the topics and to do well on the exams. I realize that you have a busy schedule and often face difficulty in getting in enough time to study. This makes it all the more important to come to class. This course covers a lot of material, so if you don't keep up, you may be overwhelmed at test time. In the past I have found that students in my courses experience unpleasant surprises on tests because they mistake my easy-going personality for an easy-going tester. I don't want this to happen to you, so for your sake put in the time that you need to really know the material. More than anything, this means coming to class and doing the homework problems. Class Topic of Lecture Required Homework Meeting Reading Due 1/14 Course Introduction and FM-1 --- The Finance Function myPHLIP Current Events Reading (Chapter 1) (simply read the Lead Story & Digging Deeper): Efficiency Deficiency, Is Greed Good?, Executive Cash Machine: How a Pliable System Inflates Pay Levels, and The Drawbacks of Stock Option Fever, New Dot-Com Mantra: ‘Just Pay Me in Cash, Please’ 1/21 Legal Form and Taxes FM-1, FM-2 2-3A, 4A pages 36-38 (i.e., Chap. 2 prob. 3A, Chap. 2 prob. 4A, etc.) Financial Markets and “Core Investments” 6-1A, 6-2A Interest Rates (from the coursepack) FM-6, pages 169-173 FM-14 myPHLIP Current Events Reading (Chapter 2) (simply read the Lead Story & Digging Deeper): It Sure Looks Like Insider Trading, The U.S. Stock Market Goes Decimal, Goodbye Fractions, Hello Pennies: The Fade of the Bid-ask Spread, and Bond Trades Head Online in New Plan 1/28 Financial Markets and Interest Rates (continued) Financial Statements FM-2, pages 27-36 3-5A, 6A (part a only) & Ratios FM-3 ROI John Manville Case, page 24-26 of FM myPHLIP Current Events Reading Chapter 3 (simply read the Lead Story & Digging Deeper): 10 Ways Earnings Lie, and A Good Resolution Would Be to Cut Debt 2/4 Time Value of Money-I FM-5 5-1A, 2A, 3A, 4A Time Value of Money-II 5-5A, 6A, 8A, 13A, 15A, 21A, 22A, 23A, 26A, 38A, 39A, 41A Personal Finance Navigator: Chapter 3, Chapter Interactive Exercise 3.4: Financial Calculators, Pick one financial calculator that you find to be the most useful, write it’s name and address on a piece of paper (this is what I will collect if I collect this homework). Class Topic of Lecture Required Homework Meeting Reading Due 2/4 (Cont’d) myPHLIP Current Events Reading Chapter 5 (simply read the Lead Story & Digging Deeper): Zen Banking: Some Interest Rates in Japan Drop Below Zero, Quick Riches: How Major Players Turn Lottery Jackpots Into a Guaranteed Bet, No Excuse for Not Retiring Rich, That Nest Egg May Have Hidden Cracks, and Checking the Concepts of Time Value of Money 2/11 Catch-Up and Review 2/18 Exam I (Exam grades will be posted by 2/20/03 on my office door. The last day to drop without penalty is Friday, 2/21/03.) 2/25 Return Exam Introduction to Risk FM-6 and Return myPHLIP Current Events Reading Chapter 6 (simply read the Lead Story & Digging Deeper): Jungle Fever: The Bre-X Saga Is The Greatest Gold Scam Ever, Diversifying the Green Party’s Green, or How Ralph Nader Could Get Richer, and It’s a Bird, It’s a Plane, It’s an Index, It’s a Stock, Sizing Up the Historical Equity Risk Premium, International Diversification: Harder than it Sounds, A Board of Directors says NO Personal Finance Navigator: Chapter 11, Chapter Interactive Exercise 11.1: Determine Your Risk Tolerance. (Print out your results). 3/4 No Class – Spring Break 3/11 More Risk and Return 6-6A, 7A, 8A, 9A, 13A Valuation FM-7, & FM-8 7-1A, 2A, 7A, 8-1A, 3A, 8A, 11A, 14A Personal Finance Navigator: Chapter 11, Chapter Interactive Exercise 11.5: Developing Realistic Expectations Personal Finance Navigator: Chapter 12, Chapter Interactive Exercise 12.5 Stock Data for NYSE stocks, Exercise 12.6: Analysts Recommendations, & Exercise 12.7: Using Motley Fool. (print out results) Personal Finance Navigator: Chapter 14 Exercise 14.6: Determine How a Rate Changes Will Affect Your Bond's Current Value? (print out results) myPHLIP Current Events Reading Chapter 7 (simply read the Lead Story & Digging Deeper): Bowie Bonds Purchased By Prudential Insurance, Cash Flow? We Don’t Need No Stinkin Cash Flow, and Bonds-R-Us? Class Topic of Lecture Required Homework Meeting Reading Due 3/11 (Cont’d) myPHLIP Current Events Reading Chapter 8 (simply read the Lead Story & Digging Deeper): Net Stock Rules, What Bull Market?, and Value Judgment: Getting a Handle on Stocks’ Worth, Stock Plunges on Internet Hoax 3/18 Capital Budgeting FM-9 9-1A, 2A, 4A, 6A myPHLIP Current Events Reading Chapter 9 (simply read the Lead Story & Digging Deeper): On-line Auctions and the …, Michael Crichton: A Capital Budgeting Decision? Catch-Up and Review 3/25 Exam II 4/1 Return Exam Cash Flows and Capital FM-10, pages 10-3A, 4A, 5A, 6A Budgeting 310-324 Ford Pinto Case, pages 306-307 of FM myPHLIP Current Events Reading Chapter 10 (simply read the Lead Story & Digging Deeper): Amazon.com: The Wild World of E-commerce, GM Hopes to Rev Up Sales With a New Cadillac 4/8 Danforth & Donnally Case: Danforth & Donnally, located in your course pack around page 34 or so (answer 1 through 5 at the end of the case) Project Ranking and FM-10, pages 10-10A, 11A, 12A (parts a-d Capital Budgeting 324-333 & only the replacement chain on part e) 4/15 Capital Budgeting Under FM-11 11-1A, 3A, 5A Uncertainty myPHLIP Current Events Reading Chapter 11 (simply read the Lead Story & Digging Deeper): Exploiting Uncertainty: The “Real-Options” Revolution in Decision-Making, Saving a Company by Bankrupting it? Cost of Capital I FM-12 Dumping Case from 378-379 of FM myPHLIP Current Events Reading Chapter 12 (simply read the Lead Story & Digging Deeper): Soaring Rates: Do They Threaten Growth? A Less Exuberant Wall Street Isn’t All That Bad Class Topic of Lecture Required Homework Meeting Reading Due 4/22 Cost of Capital II FM-13, 412-416, 421 12-1A, 2A, 3A, 4A, 7A, 8A Integrative Problem (page 406 Leverage and Optimal FM-13 15-5A, 11A, 20A Capital Structure 4/29 Catch Up Review and Questions Go Over Koofers Class Final: 7:00 p.m.- 9:00 p.m., Saturday, May 3, 2003 Final – You MUST Bring a Picture I.D. to the Final. Cover material since second exam in addition to the 11 ratios and time value of money.