FINA 60013: Management of Financial Resources, Fall 2009 M. J. Neeley School of Business, Texas Christian University

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1 FINA 60013: Management of Financial Resources, Fall 2009 M. J. Neeley School of Business, Texas Christian University Smith Entrepreneurial Hall 201 Mondays and Wednesdays, 9:00 10:20 and 10:30 11:50 Instructor: Vassil T. Mihov Office: Tandy 384 Office Phone: (817) Office Hours: Mondays and Wednesday, 1-2 p.m. Course Outline Management of Financial Resources is the core MBA course in finance. The objective for this course is to provide you with the knowledge and skills to understand the problems facing a financial manager. You will appreciate the real-world value of those skills as early as your summer internship interviews. The fundamental question in finance is how to determine value. To answer this question, we will focus on two major types of decisions that financial managers make: investment decisions (in what projects to invest), and financing decisions (how to finance investments). The course topics will include cash flow valuation, bond and stock valuation, capital budgeting and project evaluation, risk and return in capital markets, long-term financial decisions and the capital structure of the firm, and corporate governance and control. Required text Berk and DeMarzo, Corporate Finance, First Edition, Pearson. Computing You will need tools to assist you with the quantitative aspects of this course. We will use Excel quite extensively in calculations of time-value of money, cash flows, etc., so it will help to refresh you spreadsheet skills. I also strongly recommend the following two basic financial calculators: Texas Instruments BAII Plus or Hewlett-Packard HP 10B. Those of you who may consider a further specialization in finance may acquire a more advanced programmable financial calculator such as HP 17B or HP 19B instead. You will be responsible to read the owner's manual and learn how to use the calculator Grades Your grade will be based on homework assignments and projects, participation, and examinations. The weight for each of these is the following: Participation Projects, Homework Assignments, and Presentations Midterm Exam (Oct. 14) Final Exam Integrative Project 15% (150 points) 10% (100 points)

2 Your final letter grade will be determined by your individual performance as well as the performance of the class as a whole, based on the assumption that the overall scores are approximately normally distributed. Individual exams or assignments will not be "curved." For those amongst you who will not participate in the IP the final grade will be determined by the first four components only. Attendance, Preparation, and Participation Participation is an integral part of the learning process in the MBA setting, and will provide you with an opportunity to contribute to the quality of the course. You will be expected to come prepared for class, and actively discuss the issues and topics covered. Note that merely being present but unprepared will be no different in terms of participation than being absent. I expect all of you to engage in the learning process. I am a lot more interested in the quality rather than the quantity of your contribution to class discussions, so that participation results in real contribution rather than merely simulating activity. Frequency of participation may not necessarily mean better contribution. I fully recognize that every student will not be able to participate actively in every class session (and do not expect that) but I will make notes of any significant contribution, positive or negative, than you make. I will cold call on you if I notice lack of participation. Any activity that your classmates or I may find disruptive would be considered grounds for no participation credit and/or asking you to leave the classroom. This is especially true for inappropriate use of computers and other electronic devices in class. Just like you would not talk on the phone, read paper mail or read a newspaper in class, you will not surf the internet, check your or send or receive instant messages. I will consider such behavior disrespectful to your peers and in violation of the MBA honor code. Projects and Homework Assignments You will complete four written projects and assignments, worth 20% of your grade. Some of the assignments will be problem-oriented; others will be small projects that require using actual financial statements, financial news sources, and databases. All assignments aim to develop further your understanding of the concepts of financial management by applying it to real-world type of situations. Each assignment should be turned in no later than the beginning of the class period of the respective due date. A late assignment will be given half of the credit that it would have earned otherwise. No credit will be given for assignments turned in after the solutions are posted on the web. You will work in your assigned teams to complete the assignments, and will submit only one copy with the names of all authors. In addition, I will post recommended practice problems from each chapter. Presentations Each team will present one of the projects in class. We will determine the presentation schedule during our first class. I ask you to schedule an appointment with the CPC to obtain presentation advice and training. The presentation will be worth 5% of your grade. Exams

3 All exams are "closed book." You are allowed to use a calculator, financial tables, and two-pages (both sides of one sheet) of original notes. Laptops or other electronic devices are not allowed during exams. The focus of the exams will be material covered in class. The exams will typically include a combination of problems to solve, essay questions, and short cases. The final exam is comprehensive. Make-ups and Appeals No make-up tests will be given without university excused absences. All make-up tests must be scheduled at least two weeks in advance. If you wish to appeal your score on an exam or assignment, you should submit a short written request within one week from the day the contested work is returned graded. I reserve the right to re-grade all questions. Integrity Students are expected to act in accordance to the MBA honor code. You should signify your acceptance of the honor code on all assignments by including the following signed statement on the document: I have neither given nor received unauthorized aid on this assignment. All University and School of Business policies on academic honesty will be strictly enforced. The usual consequences of academic dishonesty are (a) referral of the charge to the MBA Honor Code Committee who will investigate the charges and recommend to the Associate Dean for Graduate Programs whether or not sanctions should be given; (b) sanctions may include community service, a zero on the compromised assignment, a grade of failure in the course, suspension from the Neeley School of Business, dismissal from the Neeley School of Business, or other sanctions; (c) the Associate Dean will then decide whether or not to uphold the Honor Code Committee s verdict; and (d) the student can appeal the verdict in a written letter to the Chancellor of the University. The complete MBA Student Honor Code can be found at the following address: Disabilities Statement Texas Christian University complies with the Americans with Disabilities Act and Section 504 of the Rehabilitation Act of 1973 regarding students with disabilities. If you require accommodations for a disability, please contact the Coordinator for Students with Disabilities in the Center for Academic Services, located in Sadler Hall 11. Further information can be obtained from the Center for Academic Services, TCU Box , Fort Worth, TX 76129, or at Adequate time must be allowed to arrange accommodations and accommodations are not retroactive; therefore, students should contact the Coordinator as soon as possible in the academic term for which they are seeking accommodations. Each eligible student is responsible for presenting relevant, verifiable, professional documentation and/or assessment reports to the Coordinator. Guidelines for documentation may be found at Students with emergency medical information or needing special arrangements in case a building must be evacuated should discuss this information with their instructor/professor as soon as possible.

4 Tentative Schedule of Classes This schedule is intended as a guideline and is subject to change. In addition to, or instead of, the outlined topics, as time permits, I reserve the right to include some contemporary issues in finance. Class Topic Assigned Reading Practice Problems Assignments Due Mon., Aug. 24 Introduction to Finance Chapter 1 Wed., Aug. 26 Introduction to Financial Statements Mon., Aug. 31 Financial Ratio Analysis; Chapter 2; Case Study: How to Go 4,7,8,13,17 Broke While Making a Profit Chapter 2; Case Study: Bay Area Corrugated Pipe Data case, part 3 (ratios) Wed., Sep. 2 The Time Value of Money Chapter 4 1, 3, 4, 6 Mon., Sep. 7 No Class, Labor Day Wed., Sep. 9 Exercises in Time Value of Money Chapter 4 8, 10, 11, 20, 21 Mon., Sep. 14 Interest Rates and Valuation Chapter 5 2, 6, 8, 9 Wed., Sep. 16 Investment Decision Rules Chapter 6; Graham and Harvey 2, 3, 4, 14 Graded HW 1 due article Mon., Sep. 21 Fundamentals of Capital Budgeting Chapter 7 1, 2, 4, 9 Wed., Sep. 23 Exercises in Capital Budgeting Chapter 7 12, 13, 14 Mon., Sep. 28 Valuing Bonds Chapter 8 1, 2, 4, 9, 12 Wed., Sep. 30 Valuing Stocks Chapter 9 1, 2, 5, 7, 9, 12 Mon., Oct. 5 Valuation and Risk handouts Graded HW2 due; teams 1,2,3 and 4. Wed., Oct. 7 Review for Exam 1 old exam old exam Mon., Oct. 12 No Class, Fall break Wed., Oct. 14 Midterm Exam Mon., Oct. 19 Review of Exam 1; Introduction to Risk and return Chapter 10 and notes 1, 2, 4, 6 Wed., Oct. 21 Capital Markets and the Pricing Chapter 10 10, 11, 12, 16 of Risk Mon., Oct. 26 Optimal Portfolio Choice Chapter 11 4, 5, 7, 9

5 Class Topic Wed., Oct. 28 The Capital Asset Pricing Model Assigned Practice Reading Problems Chapter 12 1, 2, 5, 6, 11 Assignments Due Mon., Nov. 2 Financial Markets, Part I Chapters 23 and 24 23/1, 2, 5, 9, 10 Graded HW3 due; teams 5,6,7 and 8. Wed., Nov. 4 Financial Markets, Part II Chapters 23 and 24 24/ 1, 2, 3, 9, 10 Mon., Nov. 9 Guest Speaker (date subject to change) Wed., Nov. 11 Capital Structure in a Perfect Chapter 14 1, 3, 4, 5, 7, 8 Market Mon., Nov. 16 Debt and Taxes Chapter 15 1, 3, 4, 7, 8, 12 Wed., Nov. 18 Financial Distress Chapter 16 1, 2, 8, 11, 15 Graded HW4 due; teams 9,10,11 and 12. Mon., Nov. 23 Capital structure and cost of Divisional cost of capital minicase capital. Review Wed., Nov. 25 No Class, Thanksgiving Break