Corporate Finance

Abstract

"Corporate Finance" is an introductory course that presents those fundamental principles of finance that find direct application in the financial decisions of modern corporations. The course is structured in three parts: (i) Corporate Finance and Corporate Governance, (ii) Investment Decisions/Valuation, (iii) Financial Policy.

Objective

Upon successful conclusion of the course, students will ... 1) know what corporate finance and corporate governance are about; 2) be able to price a wide array of corporate securities, assets, and projects, e.g., stocks, bonds, and options; 3) master three valuation approaches (discounted cash-flow valuation, relative valuation, and real-options valuation) and know about their applicability, their strengths, and their weaknesses; 4) know how to finance firms at different stages of their lifecycle; 5) be familiar with terms, acronyms, and concepts in the world of finance; 6) know how to relate real-world corporate events (past and current) to concepts learnt in class; 7) have increased their appeal as future manager, employee or entrepreneur by relevant knowledge in the field of finance in general and corporate finance in particular.

Content

"Corporate Finance" is an introductory course that presents those fundamental principles of finance that find direct application in the financial decisions of modern corporations. The course is structured in three parts: (i) Corporate Finance and Corporate Governance, (ii) Investment Decisions/Valuation, (iii) Financial Policy. In the following, for each of the three parts of the course, key aspects, are listed. Part I: Corporate Finance and Corporate Governance - Corporations and their characteristics (e.g., centralized management, limited liability, free transferability of economic claims, legal personality) - Corporate finance and its goals (e.g., shareholder-value approach vs. stakeholder-value approach) - Corporate governance problems and possible solutions (e.g., over-investment, under-investment, self-dealing, monetary incentives, board of directors, the market of corporate control, leverage, product-market competition) Part II: Investment Decisions/Valuation - Discounting and compounding - Present value tools (e.g., perepetuities, growing perpetuities, annuities, growing annuities) - Bond pricing and interest rates (e.g., types of bonds, term structure of interest rates, yield-to-maturity, duration concepts, forward rates, "riding the yield curve") - Risk and return (e.g., moments of stock returns, modern portfolio theory, capital market line, systematic risk vs. unsystematic risk) - CAPM in practice (e.g., computation of the risk free interest rate, beta, and the market risk premium; security market line) - DCF Analysis: Cost of capital and cash flow estimation - Relative valuation (e.g., earnings multiples, book multiples, sales multiples, fundamental drivers of multiples) - Real options (e.g., option to abandon, option to delay, option to expand) Part III: Financial Policy - Corporate financing (e.g., instruments, internal vs. external financing, equity financiang vs. debt financing, crowdfunding, M&M and beyond) - Payout policy (e.g., dividends, par value reductions, share buybacks, M&M and beyond)

Resources