corporate finance - aalto .why “corporate” finance? • most corporate finance textbooks are

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  • 1

    CORPORATE FINANCE

    Fall 2015 Period I

    Lecturer: Bnyamin Ben nal

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    Course objective Purpose of the course

    Provide a basic understanding of the financial decisions anybusiness enterprise faces

    Key financial decisions: Investment decisions

    Capital budgeting M&A

    Financing decisions Capital structure Securities offerings Financial planning Credit management

    Payout decisions Dividends, Stock repurchases

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    Why corporate finance? Most corporate finance textbooks are intended for

    publicly traded (large) corporations In financial theory, (public) financial markets have an

    important role in corporate decision making Most small firms do not operate on financial markets (i.e., not

    listed on stock exchanges and have no bond issues) However, the underlying principles generally apply to

    smaller firms too Financial markets have a less important role in e.g.

    financial planning, credit and cash management Theories related to these issues are directly applicable to

    smaller companies

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    What this course requires Good command of the material covered in the Introduction to

    Finance (Rahoituksen perusteet, 28A00110) course / Chapters1-13 of Brealey-Myers-Allen textbook 11th edition

    No additional math skills required Good work ethics

    Large sample evidence (own questionnaire, response rate 90%) Statistics on hours worked on this course:

    Mean: 130-160 hours Median: 120-130 hours

    Other same level courses with same number of credit units: Mean: 80-90 hours Median: 70-80 hours

    Small sample evidence (official questionnaire, response rate 10%) Amount of effort spent relative to 160 hours

    Much more effort: 28%; somewhat more effort: 48%; effort equals 160 hours:16%; somewhat less effort: 8%; much less effort: 0%

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    Readings / class material

    Brealey-Myers-Allen, Principles of Corporate Finance,6th, 7th, 8th, 9th,10th or 11th edition McGraw-Hill 11th edition, chapters 14-19, 25, 28-33

    (students are required to be familiar with chapters 1-13) Lecture notes Guest lecture slides Exercises Any other material posted on course webpage

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    12 Lectures: time, topic and materialTime and topic

    08.09. Introduction: Overview ofcorporate finance

    10.09. How corporations issue securities15.09. Payout policy17.09. Guest lecture on IPOs

    22.09. Capital structure24.09. Capital structure and valuation29.09. Leasing

    Textbook chapters / Other

    Ch. 14

    Ch. 15 Ch. 16 Material provided by Antti Niini

    (Goldman Sachs) Ch. 17 Ch. 18-19 Ch. 25

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    Lectures: time, topic and materialTime and topic

    01.10. Financial planning06.10. Working capital management08.10. Mergers and acquisitions13.10. Guest lecture on M&As

    15.10. Control, governance, andcorporate restructuring

    Textbook chapters / Other

    Ch. 28 and 29 Ch. 30 Ch. 31 Material provided by Timo

    Pohjakallio (Bain & Company) Ch. 32-33

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    Exercises: practicalities

    Exercises should be done in groups consisting of nomore than three (3) students

    Co-operation among groups or individuals belongingto different groups is prohibited

    To help preserve your privacy, include a personal aliasalong with your name and student number in eachexercise report Alias must not be confused with a student number and

    should not consist solely of numbers

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    Exercises: Deadlines

    Exercises are due at the following times: Tuesday 12:00 (sharp!) in the week the exercise is due Deadlines are the same for both groups

    Exercises should be placed on instructors desk at U2 If none of the group members cannot make the class that

    day, you can also drop it into the course box in Chydenia, by10:00 (Sharp!)

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    Accessing course material

    Textbook: Amazon / bookstore or library The graphs in the lecture notes where source is not

    mentioned are obtained from the course book check thesources there if you are interested

    Lecture notes, exercises and results: course web site Course home page can be accessed via the MyCourses

    portal: https://mycourses.aalto.fi/ You need to log in to access exercises, lectures, grading and

    possible other materials Let me know if you do not have personal login for the

    network

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    Grade Part I. Exam: 60%

    Closed-book exam; two make-up exams 5 True-False questions; 10 points 5 problems; 50 points Problems also have verbal parts; overall 15-20% verbal

    Part II. Exercises: 40% 4 Exercise sets; points are not evenly distributed

    Minimum requirement for a passing grade: 40% ofpoints on each part Must score at least 16 points on the exercises Must score at least 24 points on the exam

  • Scholastic honesty and academicintegrity

    We expect adherence to highest standards of scholastic honesty

    Examples of scholastic dishonesty are:- sharing exercise answers between groups- presenting answers as own work without proper citation tothe sources (plagiarism)- sharing answers during the final exam

    All classwork must be done by the students that return the work,co-operation in preparing answers to the exercises betweengroups (i.e., any individuals not belonging to the same group) isstrictly prohibited

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  • Scholastic honesty and academicintegrity

    However, you are allowed to discuss the exercise problems withfellow students in general terms: the definition of terms andconcepts in the questions, and what issues are central to aparticular question. Every group should proceed on their ownfrom there

    Failure to adhere to these guidelines is subject to disciplinaryaction, varying from receiving no points on the particular exerciseor exam to complete removal from the course. Turning in classassignments is considered acknowledgement of these guidelines

    For more information, consult the section Academic Integrity andHandling Violations Thereof at Into for Aalto Students

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    FAQs related to exam

    Do we need to memorize the formulas for the exam? You are expected to know the basic formulas by heart, e.g., value of a

    right, WACC, etc. But you do NOT need to know the derivation of the formulas Complex formulas or schedules such as MACRS depreciation schedules

    will be provided to you if a related problem appears in the exam, no needto memorize those

    Do we need to memorize verbal concepts for the exam? You are expected to know the basic concepts by heart, for ex. winners

    curse, pecking order theory, etc. But you do NOT need to know exact definitions or memorize long lists I will never ask you questions such as Define winners curse, List four

    cases when potential gains to leasing are highest

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    FAQs related to course administration

    Why don't you post model answers to exercises on the web? Supply of high quality questions is limited Giving out model answers in electronic format would, in the long run,

    probably lead to a situation where there would be a full menu of modelanswers that could be applied without much thought to whatever questiontype we have in mind

    The learning experience, aggregated over all students, and taking intoaccount future students, would probably not improve from what it ispresently

    Do I need to register separately for the exam? Yes! Via WebOodi as usual Exam registration on WebOodi closes always 7 days before the exam!

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    FAQs related to course administration

    What is the idea behind closed-door policy? Experience has shown that without the policy, many students

    will arrive to the class late, one by one, mostly during thefirst 15 minutesThis is highly disturbing both to the instructor and manystudents

    Assuming that there are 200 students in the class and that10% of them arrive late within the first 15 minutes, thepolicy will waste on average 7.5 minutes of 20 students timewhile guaranteeing an uninterrupted learning experience forthe remaining 180 students

  • Course messengers

    As in all courses, I am going to collect student evaluationsduring the last lecture

    In addition, KY Finance has launched the messenger studentschannel for selected Bachelors level courses

    Two students will gather feedback from students during thecourse and provide it to the professors

    Corporate Finance is one of the selected courses Your suggestions (especially those that are easy to implement

    during the course) are welcome

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  • Course messengers

    Juha Vnttinen & Risto Pitknen Facebook group: Corporate finance fall 2015 28C00100

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  • Logistical and contact information Lectures (see syllabus for details)

    Tuesdays 12:15-13:45 at U2 Thursdays 12:15-13:45 at U2

    Exercises (four demo and four exercise sessions; see the detailedschedule on the syllabus) and course administration Demos: Thursdays 14:15-15:45 at U2 Exercises: Tuesdays 14:15-15:45 or 16:15-17:45 at U2

    Regular Office hours: Tue and Thu, 30 minutes followingthe sessions of the day. In addition:

    E-mail: bunyamin.onal@aalto.fi (for quick questions) Office phone: 050 410 5011 By appointment

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    A detour: B.Sc. thesis seminarThe seminar is going to be the most important and educational finance classyou've taken so far Student comment

    This course can help you find a good research idea for yourthesis. Some examples from previous years thesis titles:

    Top-tier Investment Banks and Bidders Announcement Returns: Evidencefrom European Mergers and Acquisitions

    Rationale for LBOs: Empirical Evidence from Eur