BRANDEIS INTERNATIONAL BUSINESS SCHOOL BUS 71 A: INTRODUCTION TO FINANCE REVISED 13/1/2016 SUBJECT TO SOME REVISIONS Professor: Hamza Abdurezak, PhD., FRM Office: Email: Sachar International Center, 124B abdurez@brandeis.edu Tel. 617-851-8406 Professor Office Hours: Thursdays from 3:00-5:00PM Class Meeting Days & Times: Thursdays 6:30PM-9:20PM Class Meets: TBA Teaching Assistants: Nihar Shendye: nihars@brandeis.edu Yvonne Cao: yvcao@brandeis.edu COURSE OBJECTIVES The primary objective of this course is to develop the financial skills and thought processes necessary to make and implement business decisions in a global environment. Upon successful completion of this course, students will have developed an understanding of key concepts of the financial environment within which management must operate, the processes of financial analysis, the time value of money, methods of stock and bond valuation and the relationship of valuation to risk and return. 1
SPECIFIC LEARNING GOALS: Develop fundamental understanding of o The functions that financial market provide in the economy, o How firms deal & use financial market to raise funds for their investments o How investors and firms approach financial decisions o Time value of money o How firms make capital budgeting decisions o Ethical Awareness in business decisions Gain understanding and develop basic skill sets on o how to value bonds and stocks o Risk and return o How companies raise capital and make capital structure and dividend policy We will analyze how managers make financing and investment decisions within a framework which emphasizes the time value of money and the relationship between expected return and risk and examine alternative investment decision methods that financial managers use to evaluate feasibility of undertaking new projects (i.e., capital budgeting) Prerequisites: Bus 6a or equivalent. This course may not be taken for credit by students who have previously taken Econ 171a. This course cannot be counted as an elective towards the economics minor or major. The Teaching Methods: The teaching methods will involve combinations of class lectures and problem solving exercises to digest concepts presented in the lecture and readings. This course is fast paced, reasonably technical in nature, and it requires each student to do considerable out-of-class work. There is assigned homework required for nearly every class session. Problem solving is very important in this course and I encourage participation from all my students in this activity throughout the term. This will be accomplished through assigned weekly problem sets on Connect, an online platform that comes with the textbook with instant feedback. You should read the assigned book chapters prior to coming to class. The material will mean a great deal more to you, and you will understand and retain much more of it, especially when you review the class notes and problems prior to an exam. 2
COURSE REQUIREMENTS Course materials Primary Textbook::Essentials of Corporate Finance, 8th Edition, Ross, Westerfeld, Jordan, (henceforth RWJ) McGraw-Hill, 2013. ONLINE EDITION IS REQUIRED! We will use CONNECT, an online platform that comes with book to do assigned problem set and exercises. The online edition and CONNET platform are bundled together are cheaper than buying the hard copy of the book and separately buying CONNECT. Additional course materials will be posted on LATTE and/or distributed in class. Regular readings of financial and business press such as Financial Times, Barron s, and the Economist may help students appreciate the applications of the principles developed throughout the semester. A very important benefit of keeping up with current business events is that it may provide students some ammunition with which you can impress career job interviewers, From time to time, I will comment on relevant topics that appear on financial press. Workload expectation As BUS 71a is a four-credit course, you are expected to spend a minimum of 9 hours of study time per week in preparation for class (readings, problems sets, discussion sections, preparation for exams, case studies, etc.). Homework Problem Sets: The best way to learn finance is by doing series of problem sets to digest the concepts developed in class lectures and textbook readings. I will assign practice problem sets throughout the semester. Homework is generally submitted electronically via the CONNECT electronic interface with the electronic textbook. In all sections of BUS 71a we will follow the following homework grading procedure for consistency across sections. Check plus: flawless/near-flawless 3
Check / Check plus: most work done correctly, but 1-2 significant errors Check: Student showed effort, but made several significant errors Check minus: not turned in, turned in with significant help from another student (e.g., cheating ) or no meaningful effort made. It is absolutely critical that you work on these problem sets by yourself to gain the benefit of their intended objectives of digesting the concepts and principles. In addition, these problem sets are study tools for the midterm and final exams since the exam questions are closely modelled around those questions although I will not repeat the same questions for the exams except the concept covered by those questions. Students who consistently do well on these problem sets tend to do well on the exams as well.. Therefore, the most important and most helpful suggestion I can give you for doing well in this course is to do all the assigned questions and problems and then review them so that you are able to do them on the exam. The surest way to do poorly in this course is to not carefully work on these homework assignments. If you have any difficulty in solving the problems, please contact me and my TAs assigned for this course. Financial Calculator: Students will be REQUIRED to use a TI BAII Plus financial calculator. NO OTHER FINANCIAL CALCULATOR IS TO BE USED! Please read pages 103-104 and 620-622 in the text book if you need help with a financial calculator. You should bring the calculator to every class. I am fine with you using Excel as a tool for homework, but you will not have it available to you during exams, so it s important to be very familiar with the financial calculator functions. Class Participation: I expect you to actively participate in class discussion and problem solving throughout the semester, We will take class attendance every class. Class participation grade will be on a similar scale to homework grades: Check-plus: 2 or more contributions (questions or responses) to a given class session s discussion Check/Check-plus: 1 contribution to a given class session s discussion Check: attendance, but no contribution Check minus: unexcused absence. I will provide excused absences to varsity athletes for scheduled competitions. Those must be arranged in advance. I allow students one 4
unexcused absence per term without penalty. Additional absences will deduct from your class participation score. To facilitate participation, I will ask all students to place a name card on their desks, and that they sit in the same seat every class. Perfect attendance but no participation receives a grade of B- towards the overall grade. Each unexcused absence results in a reduction in this grading element. It is your responsibility to ensure that you take an active role in the class. If this is a problem for you, I urge you to talk to me to discuss ways you can make a contribution. Grading Class Participation 15% Assignments ( Connect Problem Sets) 25% Midterm Exam 20% Final Exam 40% The midterm will be for the full class duration, and the final will be a 3 hour exam. The final exam is comprehensive and cumulative. There will be no makeup exam for the midterm. Students with an excused absence from the midterm will split its weight equally between homework assignments and the final exam. You cannot skip the final exam if you do you will get zero for the final the weight from the final will not be moved to the other components. The final exam is available only during the specified exam schedule time, time to be determined by registrar. Both the midterm and final exams are closed books and closed notes. However, you may bring one crib sheet to the midterm exam and two crib sheets to the final exam. A crib sheet is an ordinary (A4 or 8 ½ x 11 ) piece of paper, on which you may write, type, print or copy formulas ONLY- no definitions or any other text will be allowed. Writing should be in 10 point font or hand-written equivalent and you may use both sides of the paper. You may not staple or tape any extensions or booklets onto the crib sheet. Do not abuse this privilege if you do there will be severe penalties on your final grade. 5
Academic honesty: 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. 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 Special Accommodation. If you are a student with a documented disability on record at Brandeis and wish to have a reasonable accommodation made for you in this class, please see me immediately. Please keep in mind that reasonable accommodations are not provided retroactively. Use of Laptop Computers and Cell Phones in Class: Cell phones and PDA.s (i.e., Blackberrys, iphones, etc.) must be turned off during lectures. Laptops may be used only to take notes. Regular class attendance is mandatory and strongly advised if you want to do well in the course. I stick quite closely to my slides and what I discuss in class when setting exam questions. Laptop computers and cellphones may not be used during exams. Course Calendar & Outline Date Topics Assigned Readings RWJ 1/14 Course Overview and Introduction Introduction to Financial Management Financial Statements and Cash Flow 1/21 Working with Financial Statements Chapter 1 Chapter 2 Chapter 3 1/28 Time Value of Money Chapter 4 6
2/4 Discounted Cash Flow Valuation Chapters 5 2/11 Interest Rates and Bond Valuation Chapter 6 Monday, Feb. 15 Friday, Feb. 19 Midterm Recess: No university exercises. 2/25 Equity Markets and Stock Valuation Chapter 7 3/3 MIDTERM EXAM 3/10 Net Present Value and Other alternative Investment Decision Methods Chapter 8 3/17 Project Cash Flow Analysis & Making Investment Decisions Chapter 9 3/24 Some Lessons from Capital History Introduction to Risk & Return 3/31 Risk & Return Diversification, systematic and unsystematic risk 4/7 Cost of Capital Estimation Leverage and Capital Structure Chapter 10 Chapter 11 Chapter 12 Chapter 13 7
4/14 Dividend Policy- First half class Course Review & Summary- Second half class Chapter 14 4/21 No Class- Brandeis Friday Class Meets on this day Friday, April 22 Friday, Apr. 29 From May 5 Through May 12 Passover & Spring Recess: No university exercises Exam Period Exam Date will be according to the registrar s schedule Note: I reserves the right to add and remove readings from the course and to alter or modify the lecture schedule as required. I will give you advance notice of any such changes or modifications. 8