San José State University School: Lucas Graduate School of Business Department: Accounting and Finance Course Number: BUS 270 Title: Financial Management Section: 1 Semester: Spring Year: 2015 Instructor: Office Location: BT 859 Dr. Marco Pagani Office Phone: (408) 924-3477 Email: Office Hours: marco.pagani@sjsu.edu MW 1:30-2:30PM (BT 859) or by appointment Class Day/Time: Tuesdays: 3/3, 3/10, 3/24, 3/31, 4/7, 4/14, and 4/21-6:00-10:00PM Classroom: Prerequisites: BUS 220 Saturdays: 3/7 and 3/14 10:00AM-2:00PM Lucas Business Complex Course Description The course provides students with the analytical techniques underpinning the two most important decisions taken by financial managers in order to maximize the value of a business entity: the investment decision and the financing decision. The investment decision includes cash flow estimation, asset pricing and risk analysis in capital budgeting. The financing decision focuses on optimal capital structure and the cost of capital. Course Content Learning Outcomes Upon successful completion of this course, students will be able to: LO1 Demonstrate understanding of time value of money concepts by computing present values and future values of different series of cash flows. (MBA program goals #2) LO2 Understand the return/risk measures of financial assets. (MBA program goal #1) LO3 Compute the required returns of securities using the Capital Asset Pricing Model (CAPM) and other multi-factor asset pricing models. (MBA program goals #1 & #2)
LO4 Compute the price of fixed-income securities and measure price and interest risks. (MBA program goals #2) LO5 Compute the price of equity securities and understand how to perform corporate valuation. (MBA program goals #1 and #2) LO6 Understand the structure of financial statements and how to compute the components of the firm s cash flows. (MBA program goals #1 and #2) LO7 Understand how to evaluate financial/accounting ratios, perform financial analysis and analyze the drivers of value using the DuPont equation. (MBA program goals #1 and #2) LO8 Understand financial planning, construct Pro-Forma financial statements and forecast additional financial needs. (MBA program goals #1 and #2) LO9 Understand how to determine the cost of capital sources and the WACC. (MBA program goal #1) LO10 Understand how to perform capital budgeting and interpret the outcomes of the following methodologies: Net Present Value, Internal Rate of Return, Profitability Index, Payback Period and Discounted Payback Period. (MBA program goal #1) LO11 Understand how to compute the firm s cash flows for capital budgeting purposes. (MBA program goal #1) LO12 Understand how to measure the business and operating risk of a firm. (MBA program goal #1) LO13 Understand the determinants of capital structure policies. Understand the impact on a firm s capital structure of corporate taxes, personal taxes, bankruptcy costs, agency costs, asymmetry of information and capital constraints. Understand the trade-off and pecking order theories. (MBA program goals #1 and #2) Required Texts/Readings (1) Textbook: Brigham E. and Daves P. (BD) Intermediate Financial Management, 11th edition, Cengage Learning. ISBN10: 1-111-53026-2 ISBN13: 978-1-111-53026-6 See more at: http://www.cengagebrain.com/shop/isbn/9781111530266
(2) Harvard Business Publishing Coursepack https://cb.hbsp.harvard.edu/cbmp/access/35227404 a. Do You Know Your Cost of Capital? Michael T. Jacobs; Anil Shivdasani Product #: R1207L-PDF-ENG; Price $3.95. This article is used for class discussion during the lecture about Cost of Capital-WACC (Chapter 10). b. Hola-Kola The Capital Budgeting Decision, Lena Booth; Product #:TB0343-PDF-ENG; Price: $3.95 This case is used for class discussion during the lecture about Capital Budgeting (Chapter 13). c. Hansson Private Label, Inc.: Evaluating an Investment in Expansion Erik Stafford; Joel L. Heilprin; Jeffrey DeVolder. Product #: 4021-PDF-ENG; Price: $3.95 This case is used for the Team Assignment about Capital Budgeting. d. Midland Energy Resources, Inc.: Cost of Capital, Timothy A. Luehrman; Joel L. Heilprin; Product #:4129-PDF-ENG; Price: $3.95 Do NOT purchase this case until it is confirmed by the instructor. This case may be used for the Team Assignment about Cost of Capital - WACC. Other Readings Class handouts, to be distributed via CANVAS. Other equipment / material requirements It is necessary that you have a financial calculator to use throughout the course. Bring your calculator to each class! Many textbook problems require complex arithmetic operations, and a financial calculator is necessary to solve these problems efficiently. This is especially true for exams! Students can elect any financial calculator for the class; nevertheless, I personally recommend you use the Texas Instrument BA II Plus Classroom Protocol Attendance is not mandatory. Nevertheless, each student is expected to attend all scheduled class meetings for the entire duration of the class meeting. An attendance sign-up sheet may be circulated each class period but not for grade. A consistent attendance is essential for your performance in this course. Many students find finance concepts difficult to grasp. Missing classes will only make the process of absorbing this material more difficult. I also present material in class that may not be found in the text. If you find yourself falling behind or you are having problems with the material, I encourage you to come to see me during my office hours. In addition, remember that your classmates can be a very valuable resource. Ask them questions, share your thoughts and doubts, study with them, and collaborate with them when solving the problems at the end of the chapters in the textbook. Cell phone use: Students will turn their cell phones off or put them on vibrate mode while in class. They will not answer their phones in class. Students whose phones disrupt the course and do not
stop when requested by the instructor will be referred to the Judicial Affairs Officer of the University. Computer use: in the classroom, faculty members allow students to use computers only for classrelated activities. These include activities such as taking notes on the lecture underway, following the lecture on Web-based PowerPoint slides that the instructor has posted, and finding Web sites to which the instructor directs students at the time of the lecture. Students who use their computers for other activities or who abuse the equipment in any way, at a minimum, will be asked to leave the class and, at a maximum, will be referred to the Judicial Affairs Officer of the University for disrupting the course. (Such referral can lead to suspension from the University.) Students are urged to report to their instructors computer use that they regard as inappropriate (i.e., used for activities that are not class related). Dropping and Adding Students are responsible for understanding the policies and procedures about add/drops, academic renewal, etc. Information on add/drops are available at http://www.sjsu.edu/advising/faq/index.htm#add Information about late drop is available at http://www.sjsu.edu/aars/policies/latedrops/. Students should be aware of the current deadlines and penalties for adding and dropping classes. Assignments and Grading Policy There will be two exams given during the semester: one Mid-Term exam and one Final exam. In addition to these written exams, there will be team assignments. The exams (Mid-Term and Final) are based on assigned readings, lectures, cases and homework-problems as indicated in the sessions. A Financial Calculator is necessary during examinations. Each team must be composed of 3 students (NO exceptions unless there is an insufficient number of students, in which case at most two teams will have 2 students). The teams must be formed and a team s name must be chosen before the end of the third class (Tuesday, March 10). The assignments will involve mostly empirical work and case study. Each team will be required to submit the assignments online according to the procedure specified by the instructor on the due date listed in the syllabus. All the assignments must be typed. The Grade weights will be: -Mid-Term Exam 35% -Final Exam 35% -Team Assignments 30% There will be no possible make-up exam for the Mid-Term Exam. If you miss the scheduled Mid-Term exam, you must notify the instructor as soon as possible, and provide a documented reason for your absence. If the instructor deems that your reason is sufficient to warrant an absence from the exam, the weight of the missed Mid-Term exam will be added to the Final exam (thus, your final exam score will count toward 70% of your total course grade average). If the instructor does
not consider your excuse sufficient to warrant an absence from the exam, you will be assigned a grade of zero if you fail to take the exam. Your final grade for the course is based on the distribution below and follows a standard 100 percent scale. A+ (98-100), A (92-97), A- (89-91), B+ (86-88), B (82-85), B- (79-81), C+ (76-78), C (69-75), D (60-68), and F (below 60). Bonus Points: The Lucas College and Graduate School of Business is currently subscribing to 12 Bloomberg Terminals. The Bloomberg Terminal is a computer system provided by Bloomberg L.P. that enables professionals in finance and other industries to access the Bloomberg Professional service through which users can monitor and analyze real-time financial market data. The system also provides news, price quotes, and messaging across its proprietary secure network. Most large financial firms have subscriptions to the Bloomberg Professional service. Two Bloomberg Terminals are located in the College Computer Lab (front row) in BBC 301 and available to all students during the semester as following: MTWR 7:00AM - 10:00PM F 7:00AM - 5:00PM Sat 8:00AM - 5:00PM Sun 12:00PM - 5:00PM The remaining Bloomberg Terminals are located in a dedicated room, BBC 302D, which can be accessed through BBC 304. The Terminals in this room are available to students as following: MW 9:00AM 1:00PM TR 4:30PM 7:30PM Bloomberg Essentials (BESS) is often referred to as a Bloomberg Certification. Bloomberg has enabled students to demonstrate their knowledge and skill when it comes to the product by offering training and proof through its 'certification' program. After completing certain training and exam requirements, Bloomberg will issue a Certificate that will provide evidence of the accomplishment. Requirements for Certification: Students must set up a Bloomberg Professional account (free of charge) and can access the Bloomberg training videos and certification exams (<BESS> function). In order to be awarded a Certificate a student must (1) watch all four core videos (15-30 min. each) and pass the core exam and (2) watch one of the Market sector videos (20-30 min. each) and pass the corresponding exam. The minimum passing score for the exam is 75% and a failed exam can only be repeated once. To each Market Sector Video corresponds one Bloomberg Certificate. Hence, students can achieve four certifications (Equity, Fixed-Income, Commodities and Foreign Exchange). After passing each Market sector Exam, students can request a copy of their certificate which is sent by email usually within 5 minutes. *4 Core Videos are required and then you can select one other Market Sector Video Core Videos (all 4 required) Market Sector Videos (select one) Getting Started Equity Essentials Bloomberg News Fixed-Income Essentials Market Monitors and Launchpad Foreign Exchange (FX) Essentials API Commodity Essentials
Each student submitting a proof of his/her Bloomberg Certificate will receive 2 BONUS points that will be added to the average grade in the Team Assignments. A maximum of 4 bonus points will be granted by submitting any two of the four Market Sector Bloomberg Certificates. Hence, whether you submit two, three or four Bloomberg Market Sector Certificates you will receive the same amount of bonus points (4). I suggest you focus on the Equity and Fixed Income Certificates. University Policies Academic integrity Students should know the University s Academic Integrity Policy that is available at http://www.sjsu.edu/studentconduct/students/student_academic_integrity_process/ Your own commitment to learning, as evidenced by your enrollment at San Jose State University and the University s integrity policy, require you to be honest in all your academic course work. Faculty members are required to report all infractions to the office of Student Conduct and Ethical Development. The website for Student Conduct and Ethical Development is available at http://www.sa.sjsu.edu/judicial_affairs/index.html Instances of academic dishonesty will not be tolerated. Cheating on exams or plagiarism (presenting the work of another as your own, or the use of another person s ideas without giving proper credit) will result in a failing grade and sanctions by the University. For this class, all assignments are to be completed by the individual student unless otherwise specified. If you would like to include in your assignment any material you have submitted, or plan to submit for another class, please note that SJSU s Academic Policy F06-1 requires approval of instructors. Campus Policy in Compliance with the American Disabilities Act If you need course adaptations or accommodations because of a disability, or if you need to make special arrangements in case the building must be evacuated, please make an appointment with me as soon as possible, or see me during office hours. Presidential Directive 97-03 requires that students with disabilities requesting accommodations must register with the DRC (Disability Resource Center) to establish a record of their disability. MBA Program Goals: (Not all program learning goals are covered in every course) 1. Conceptual grounding in business theory and practice 2. Analytic and decision-making skills 3. Cultural and ethical awareness 4. Ability to interact effectively with teams as both leader and member 5. Ability to understand and adapt to global market changes and industry dynamics 6. Effective oral and written communication and presentation techniques
BUS 270 Financial Management Tentative Schedule The course schedule provides a general plan for the course, deviations may be necessary. Class Dates BD Chapters 3/3 1 An Overview of Financial Management and the Financial Environment 28 Time Value of Money (Web Chapter) 3/7 2 Risk and Return: Part I 3 Risk and Return: Part II (omit Section 3.7) 3/10 4 Bond Valuation 7 Accounting for Financial Management (omit Section 7.9) 3/14 7 Accounting for Financial Management (omit Section 7.9) 8 Analysis of Financial Statements 3/24 9 Financial Planning and Forecasting Financial Statements 5 Basic Stock Valuation 11 Corporate Valuation and Value-Based Management (omit Sections 11.4, 11.5 and 11.6) Suggested Homework and Team Assignment Deadlines Questions: 1-4 Problems: 1-35 Problems: 1-14 Problems: 1-9 Problems: 1-24 Problems: 3-6; 10-12; 14-15 Problems: 3-6; 10-12; 14-15 Problems: 1-12; 14-15 Problems: 1-10 Problems: 1-20 Problems: 1-10 3/28 Mid-Term Exam Team Assignment #1 due by 9:00AM 3/28 11 Corporate Valuation and Value-Based Problems: 1-10 Management (omit Sections 11.4, 11.5 and 11.6) 3/31 10 Determining the Cost of Capital 12 Capital Budgeting: Decision Criteria Problems: 1-18 Problems: 1-16; 21-23 4/7 12 Capital Budgeting: Decision Criteria 13 Capital Budgeting: Estimating Cash Flows and Analyzing Risk (omit Sections 13.7, 13.10 and 13.11 ) Problems: 1-16; 21-23 Problems: 1-6; 9-10; 11 and 13 4/14 Team Assignment #2 (Hansson Private Label, Inc.: Evaluating an Investment in Expansion) due by 6:00PM 4/14 15 Capital Structure Decisions: Part I 16 Capital Structure Decisions: Part II (omit Sections 16.1c, 16.1d, 16.5 and 16.6) Problems: 1-11 Problems: 1-9 4/21 Final Exam Team Assignment s#3 (#4) (Midland Energy Resources, Inc.: Cost of Capital and/or other assignment) due by 10:00AM BUS 270 Financial management - Spring 2015