BRANDEIS INTERNATIONAL BUSINESS SCHOOL FIN 202A INTERNATIONAL CORPORATE FINANCE SPRING 2016 SYLLABUS

Transcription

1 BRANDEIS INTERNATIONAL BUSINESS SCHOOL FIN 202A INTERNATIONAL CORPORATE FINANCE SPRING 2016 SYLLABUS Instructor: Elif Sisli-Ciamarra Office: Lemberg, 130-D Phone: (781) Class Hours: T,Th 11:00 12:20 Office Hours: M 10:00 AM 12:00 PM and by appointment Teaching Assistants: Maria Vishniakova (mvishnia@brandeis.edu) Jose Martinez Morazan (jadres@brandeis.edu ) Mengnan Zhu (cliffzhu@brandeis.edu ) COURSE DESCRIPTION This course covers the fundamental concepts in corporate finance from the perspective of financial managers who are responsible for making significant investment and financing decisions. The course will provide the students with the tools that are used to make capital budgeting decisions, to determine cost of capital, capital structure and corporate payouts. We will learn how corporations raise equity and debt capital. We will also discuss how the agency problems between firms stakeholders may impact the financial policies. Learning Goals Incremental Cash Flows from a Project Capital Budgeting Rules (Net present value, internal rate of return, payback period) Discount Rate for a Project (Cost of equity, cost of debt, weighted average cost of capital) Optimal Capital Structure (tax benefit of debt, financial distress cost of debt) Corporate Payouts (dividends and share repurchases) Working effectively in teams PREREQUISITES FIN201a (Investments) and FIN212a (Accounting and Financial Analysis). Students must also understand basic Statistics such as mean, variance, simple regressions. 1

2 TEXTS (RWJ) Ross, Westerfield and Jaffe, Corporate Finance, 10 th Edition, McGraw-Hill. Cases from Harvard Business School and University of Virginia Publication Websites (Detailed instructions on how to access the case studies will be available on Latte). As appropriate, additional readings will be assigned from relevant media such as the Economist, the Wall Street Journal (WSJ) and the Financial Times (FT). Ideally, you will read these papers daily to familiarize yourself with the intricacies of corporate finance. Exam questions may be based on recent news articles. CLASS SESSIONS Copies of the basic slides used in the class sessions will be distributed at the beginning of the discussion of each topic. I strongly suggest that you read the assigned reading before the class discussion of the topic. In the class discussions, I will usually cover the concepts and issues that are most challenging, reinforcing and extending what is in the required reading. I suggest that after the class session you review the assigned reading to solidify your understanding. ONLINE COURSE MATERIALS This course will rely heavily on the new LATTE platform the web site will include downloadable files with the class handouts, copies of problem sets and suggested answers. You will need your UNet username and password to log on to the system at It is your responsibility to check this site, and your regularly for the course announcements. OFFICE HOURS AND COMMUNICATION I will usually be available for quick questions in the classroom during the several minutes before and after the class session begins. My office hours are on Tuesdays, between 10 AM and 12 PM. I strongly prefer that you come to my office hours, but if you cannot make it, I will arrange an alternative time to meet. I usually respond quickly to messages, so this is an excellent way to contact me if you need to set an appointment. Also, please check your s frequently for course announcements. TA SESSIONS AND TA OFFICE HOURS Your TAs will be holding review sessions or office hours daily. I try to make sure that you have access to me or one of your TAs whenever you need, so please take advantage. Please see the course page on LATTE for weekly schedules. TA sessions are optional, but highly recommended, and are provided to give you an additional resource to gain the ability to use and apply the concepts and tools developed in the course. These sessions will give you a chance to ask questions about the material that has been covered in class, and solve additional practice questions assigned at the end of class sessions. 2

3 USE OF LAPTOP COMPUTERS AND CELL PHONES IN CLASS All cell phones must be turned off during lectures. Laptops and tablets may be used but only to take notes, I will not tolerate other uses since it significantly diminishes the quality of in-class learning. Laptop computers, tablets and cell phones are not allowed during exams. ONE-MINUTE MEMOS As part of your class participation, you will be asked to complete a one-minute memo at the end of every class. The purpose of the 1-minute memo is to establish a direct line of communication from you to me so that I can assess your grasp of the main topics of the day, identify unclear points, and address other concerns. I want students to feel that they can be open and honest in these memos, so your grade is not affected by what you communicate to me on these memos. If you are not present, there will be no oneminute memo from you, and an absence will be recorded. After each class I will return to my office to digest your memos. I will then discuss the major questions that were raised during the following class session. In this manner you can get replies to your questions and learn from all the questions your classmates have raised as well. COURSE REQUIREMENTS AND EVALUATION Your grade will be based on in-class review problems (short quizzes), case reports, equity analyst reports, the midterm, final presentations and the final exam. In-Class Quizzes (10%) We will have 6 short in-class review quizzes. These are short quizzes covering the material from the last 1 or 2 weeks. Studying for them will give you a chance to review the most recent material and you will be able to check whether or not you are comfortable with it. You are permitted to bring one sheet of paper (8½ by 11 inches) with notes on one side, to refer to during the quizzes. The quizzes will take about minutes to complete at the beginning of class, so please do not be late! I will remind you about an upcoming short quiz during the previous class. I will count 5 of the quizzes with highest grades towards your final grade. There will be no rescheduling of the missed quizzes. Case Study Reports (10%) GROUP WORK There will be 2 required case studies and one optional case study. The optional case study that will be assigned during the final exam period is to give you an opportunity to make-up if you have not performed as high as you wanted in the two required case studies. We will use the cases to examine the decision making process of managers and to review the mechanics of corporate finance. Each group (4 students) is required to 3

4 submit a two three page write-up analyzing each case. Detailed instructions for the case study reports will be posted on Latte. Equity Analyst Reports (15%) GROUP WORK You will prepare 3 Equity Analyst Reports. Each team is expected to select an industry and track one firm per member (4 firms for a 4 person team) from that industry. You will use these same firms in all three reports. These firms must be headquartered and incorporated in the U.S.. You will need to pick firms that have been publicly listed for a minimum of five continuous years. The listing requirements would therefore exclude the very young firms (e.g., Etsy), firms that have been privately owned in recent memory (e.g. Dunkin Donuts), gone through bankruptcy, or firms that have their primary listings in other countries (e.g., Cemex, British Petroleum, Baidu, etc.). Also, please exclude the firms in the financial services industry and utilities industry. In addition, the firms should have at least 5 years of financial data available on CRSP/Compustat database. Throughout the semester your group will analyze your chosen industry using the perspective of an analyst who is trying to understand a company s capital budgeting and financial management decisions. Detailed guidelines for each analyst report will be provided. Please see Teamwork section for additional details. Midterm Exam (25%) The midterm examination will be held on ***, Monday during regular class session. I will announce the location as we get closer to the exam date. You are permitted to bring one sheet of paper (8½ by 11 inches) with notes on one side, to refer to during the exam. Otherwise, the midterm exam is closed-book. Final Exam (30%) The final examination will be held during the final examination period, which will be announced later in the term by the Registrar. It will cover material from the entire class with an emphasis on the part of the course after the midterm. You are permitted to bring one sheet of paper (8½ by 11 inches) with notes on both sides, to refer to during the exam. Otherwise, the final exam is closed-book. You will need a calculator during the exams (quizzes, midterm and final examination). On the structure of the exams, 80 % of it will be pulled out directly from the previous examples from class, lecture presentations, assignments, quizzes, or suggested exercises. The other 20 % will be used to see if you can apply the course concepts to more advanced problems. All exams are closed book. You can bring one page (singleside) cheat sheet for the first midterm and one page (double-sided) cheat sheet for the final exam. Final Presentation (10%) GROUP WORK 4

5 At the end of the semester your team will give an in-class presentation. The content of the presentation will be drawn out of the equity analyst reports that you will be preparing. I will announce the specific presentation topic after the midterm exam. The presentation should not exceed 10 minutes; questions will last up to 5 minutes. Each member of the group must share roughly equally in presentation time. The final presentation grade depends not only on content but also on presentation values. The overall grade depends in part on your contributions as a teammate. Your team s grade for the final presentation depends 50% percent on content and 50% percent on presentation values. I decide the content grade. Another IBS professional will observe your presentation and determine your grade for presentation values. Criteria for that portion of your grade are listed in the Presentation Performance Appraisal Form (available on Latte under Presentations ). Shortly after the presentation, that same IBS professional will meet with your group to review the presentation s strengths and weaknesses and give you general feedback on your presentation skills. Teamwork The final grade for any student who does not contribute to her team equitably will not exceed a B-. One of the objectives of this course is to help students develop essential teamwork skills. All of the assignments in this course will be done in teams, and our overall grade will depend in part on your performance as a teammate. Your team will participate in a structured program of meetings and team activities, step-by-step instructions for which are provided in MANAGING TEAM PERFORMANCE (MTP). You should have a hard copy of this; and it is also available on Latte under Team Work. MTP also provides succinct advice for each critical teamwork skill: for example, is lists six keys to running an effective meeting and gives a script for providing constructive feedback. Your contribution to your team will be determined according to criteria described in Managing Team Performance (page 8). By the end of the final exam period each of your teammates will submit a Teamwork Performance Appraisal Form rating your (individual) contributions. To understand what is expected from you as a team member, please refer to the Teamwork Performance Appraisal Form directly. To learn more about how you will evaluate each other, please refer to Section II.A, Observing Peer Performance, and Section II.B, "Peer Evaluation." COURSE POLICIES Attendance Attendance is required. Records of attendance will be kept for each class. Please notify me in advance when you are unable to make it to class. 5

6 Assignments and Exams NO LATE SUBMISSIONS ARE ACCEPTED. THERE WILL BE NO MAKE-UP EXAMS. There will be absolutely no opportunity to assign the weight of a missed case-study report or exam to another assignment or exam. If you miss an exam or do not submit the case study analysis on time, you will receive a grade of zero. Therefore, please make every effort in advance to insure that you will be in attendance on the exam dates shown on the syllabus. If you get sick on the day of the exam, I need to see the doctor s report to verify your condition. In that case, I will work out an alternative arrangement with you. Calculator You can use any calculator you would like when solving problems on the problem sets, including scientific, programmable, graphing, financial, or software (such as Excel). However, on the exams (i.e. quiz, midterm, and final) you will be allowed to only use scientific calculators. Students with Disabilities If you are a student with a documented disability on record at Brandeis University and wish to have a reasonable accommodation made for you in this class, please see me immediately. For more information go to: Academic Integrity You are expected to be honest in all of your academic work. Please consult Brandeis University Rights and Responsibilities for all policies and procedures related to academic integrity. Consistent with Brandeis University s honor code, your exams and assignments must be solely your own work. The use of another s material without permission and without recognition is cheating. This applies to textbooks, solution manuals, study guides, a friend's assignment, past assignments, internet resources or any other material irrespective of the source. Students may be required to submit work to TurnItIn.com software to verify originality. Allegations of alleged academic dishonesty will be forwarded to the Director of Academic Integrity. Sanctions for academic dishonesty can include failing grades and/or suspension from the university. Citation and research assistance can be found at LTS - Library guides. Any attempt to represent the work of others as your own will be considered plagiarism and will be referred to the Office of Campus Life. Potential sanctions include failure in the course and suspension from the University. For more information, please see the Chapter 4 of Brandeis University Rights and Responsibilities. ( 6

7 Course Schedule Date Topic Readings Deliverables 14-Jan Overview of the Firm (The goal of financial management, Stakeholders of the firm, Agency problems) RWJ: Chapter 1 Review on your own: The Value of Common Stocks and Bonds (Chapter 8, Chapter 9. These chapters are covered in Investments, FIN201) 19-Jan Incremental Cash Flows RWJ: Chapter 6 Teamwork: Submit the names of team members, your industry, companies. Schedule a time with me to go over your firms. 21-Jan 26-Jan Incremental Cash Flows Discounted Cash Flow Analysis Incremental Cash Flows Discounted Cash Flow Analysis Sensitivity Analysis RWJ: Chapter 6 RWJ: Chapters 6, 7 Quiz 1 (Overview of the firm) Review on your own: Discounted Cash Flow Valuation (Chapter 4. These chapters were covered in Investments) 28-Jan Capital Budgeting Rules RWJ: Chapter 5 Equity Analyst Report I: Getting to know your companies (due on Feb 1) 6 January The schedule is subject to change. Please follow Latte for Updates to the Schedule throughout the semester. 7

8 Date Topic Readings Deliverables 2-Feb Capital Budgeting Rules (cont d) RWJ: Chapter 5 Quiz 2 (incremental cash flows) 4-Feb Cost of Equity Capital RWJ: Chapters 9, 11, 13 Case I: TBA (due on Feb. 8) 9-Feb Cost of Equity Capital (cont d) RWJ: Chapters 9, 11, 13 Review on your own: Risk, Return, CAPM (Chapters 10, 11, 12. These chapters were covered in Investments) 11-Feb Cost of Debt RWJ: Chapters 8, 13 Quiz 3 (capital budgeting rules) 23-Feb Weighted Average Cost of Capital RWJ: Chapters Feb Case on WACC: TBA 1-Mar Long Term Financing RWJ: Chapters 15, 16 Capital Structure: Modigliani-Miller Theorems 3-Mar Capital Structure: Modigliani-Miller RWJ: Chapters 16, 17 Theorems, Pecking Order Theorem 8-Mar Capital Structure (cont d) 10-Mar Midterm Exam 15-Mar Financial Distress (cont d) RWJ: Chapters 17, Mar 22-Mar 24-Mar Financial Distress (cont d) Valuation and Capital Budgeting for the Levered Firm Raising Long Term Capital Initial Public Offerings (IPOs) Seasoned Equity Offerings (SEOs) RWJ: Chapter 18 RWJ: Chapter 20 Quiz 4 (cost of capital) Equity Analyst Report II: Calculating the Cost of Capital (due on March 7) Quiz 5 (capital structure) 6 January The schedule is subject to change. Please follow Latte for Updates to the Schedule throughout the semester. 8

9 Date Topic Readings Deliverables 29-Mar Raising Long Term Capital (cont d) RWJ: Chapter 20 Case II (Capital Structure): TBA 31-Mar Payout Policy: Dividends RWJ: Chapter 18 5-Apr Payout Policy: Stock Repurchases RWJ: Chapter 18 7-Apr Special Topic (TBA) Equity Analyst Report III: Payout Policy Teamwork: Submit planning grid, agenda and meeting evaluation. 12-Apr Special Topic (TBA) Quiz 6 (IPOs and Payout Policy) 14-Apr Presentations Presentations Presentations 19-Apr Presentations Presentations Presentations TBA FINAL EXAM FINAL EXAM FINAL EXAM 6 January The schedule is subject to change. Please follow Latte for Updates to the Schedule throughout the semester. 9