FINE 443 Course Outline PDF

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McGill University Desautels Faculty of Management

Applied Corporate Finance FINE 443 001-002-003 Winter 2019

Professor Office Telephone: E-mail: Office Hours

Larbi Hammami Bronfman 468 514-398 4023 [email protected] Monday Wednesday 10am-11:30am or by appointment

Secretary Telephone E-mail

Karen Robertson 398-8144 karen.robertson @mcgill.ca

Course Objectives: The objective of this course is to study the major corporate financial decisions related to investment and financing and will attempt to develop decision-making ability in these areas. The concept map below illustrates the conceptual linkages among the various topics covered in the course

Concept Map Maximize the Value of the Firm

Corporate Financial Decisions

NWC

Capital Budgeting

LT Financing

DebtEquity Mix

Dividend Policy

M&A

Leasing

Grade 1. Class participation 2. Assignment 2. Class presentation 3. Written case analysis 4. Final Exam

10% 5% 5% 35% 45%

Reference textbooks   

Ross S, Westerfield R, Jaffee J and Roberts G, Corporate Finance, McGraw-HillRyerson Titman S., Martin J.D., Valuation, Pearson Damodaran A, Applied Corporate Finance, Wiley http://www.stern.nyu.edu/~adamodar

Cases are available at Dave’s. Academic Integrity McGill University values academic integrity. All students must therefore understand the meaning and consequences of cheating, plagiarism and other academic offences under the Code of Student Conduct and Disciplinary Procedures (see www.mcgill.ca/integrity for more information).

OUTLINE TOPIC

CHAPTER(S)

Introduction

RWJR 1

Financial Perspective of Accounting Statements

RWJR 2

Projected Financial Statements and External Financing RWJR 3 Managing Net working Capital

Capital Budgeting & Real Options Forecasting Cash Flows Project Analysis

RWJR 27, 29 Case : Gi l b e r t L u mb e rCompa n y RWJR 7,8,9,23,24 Ca s e: Su p e rPr o j e c t

L o n gT e r mF i n a n c i ng&Co r po r a t eV a l u a t i o n The Initial Public Offering DCF Valuation : FCFF, FCFE, APV Relative Valuation

RWJR 15,20,21 Ca s e: Ne t s c a p e ’ sI n i t i a P l u b l i cOffe r i n g s

Capital Structure and Cost of Capital Optimal Capital Structure Wacc Calculations

RWJR 16,17 Case : Debt Policy at UST Inc Case : Marriott Corporation

Dividend Policy

RWJR 19 Case : Dividend Policy at FPL

Leasing

RWJR 22 Case : Burlington North Railroad

Mergers , Acquisitions & Leverage Buyout

RWJR 30 Case : Cooper Industries

FINAL EXAM

SPECIMEN (Case Report) Memo From:

M. Jones

Subject:

XYZ Company

Problem

XYZ must make a decision as to whether it should purchase four new type A machines or five new type C machines in order to meet growth in demand.

0ptions

1. Purchase four type a machines. 2. Purchase five type C machines. 3. Do nothing.

Recommendation

Given available data, the firm should not invest in either type of machine at this time.

Analysis

The net present value of option 1. is - 5570, hence clear.; undesirable. The net present value of option 2, is +5 (see Annex B). However, the discount rate arbitrarily chosen by XYZ is, by any objective standard, too low. Using a more appropriate discount rate of 15: (see Annex C), the net present value of option 2 is - $250, hence the purchase of five type C machines is not economically worthwhile. (See Annex D.)

Annexes

Submission Deadlines Written case analyses are due at the start of class on assigned dates. Case Presentations On day when cases are due, there will be one student PowerPoint presentation of the case with a detailed analysis (no page limit). What Are the “Right Answers” to Cases? It should be noted that there are usually no absolute right solutions for case studies. However, there are good arguments and bad arguments. You will be graded based on the consistency of your arguments.

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Applied Corporate Finance on Mycourses The following tools can be selected by double clicking: 

Class Notes

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Additional Lecture notes (Summary of the Topics)

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Answers to End of Chapter Questions and Problems

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Course Outline

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Exams...