FINM3005 Course Outline - Sem 1, 2018 PDF

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course outline for finm3005 semester 1 2018 ...

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FINM3005

Corporate Valuation Course Description Corporate Valuation is a "capstone" finance course that draws on core corporate finance principles, theories and methods previously studied. Students will work in teams to value an existing company, present their analysis and investment recommendation. The techniques covered include discounted cash flow, multiple-based and asset-based valuations. Because of the richness of the approach, most of the focus will be on discounted cash flow analysis. While this entails more work and requires significant student initiative, this type of ‘learning by doing' should provide a lasting framework. Semester and Year Course URL Mode of Delivery Prerequisites Incompatible Courses Course Convener

S1 2018 http://programsandcourses.anu.edu.au/course/FINM3005 On campus As listed in Programs and Courses As listed in Programs and Courses Dr Jo Drienko

Office Location: Phone: Email: Consultation hours: Research interests Student Administrators

Room 4.05, CBE Building 26C (02) 6125 7298 [email protected] Monday, 1pm – 3pm, Room 4.05 Analyst forecasting, asset pricing, market efficiency School (RSFAS) Administration Office Level 4, ANU CBE Building 26C [email protected]

SEMESTER 1 2018

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COURSE OVERVIEW Course Learning Outcomes Upon successful completion of the requirements for this course, students will be able to: • Understand and apply techniques for company valuation; • Appreciate how to apply theories and concepts learned in other courses; • Become more effective at working in teams. Assessment Summary Assessment Task

Value

Due Date

1. Assignment 1

25%

April 16

Date for Return of Assessment April 27

2. Assignment 2

15% 20% (or 0% if not attempted/redeemed) 40% (or 60% if MidSemester Exam not attempted/redeemed)

May 11

May 18

Week 7

N/A

TBA

N/A

3. Mid-Semester Exam 4. Final Exam

Research-Led Teaching Students undertaking this course will be imparted with the necessary skills for industrybased research. This will include involving students in critical analysis of industry-based problems such as valuation, capital budgeting and risk assessment. Feedback Staff Feedback Students will be given feedback in the following forms in this course: • Written comments • Verbal comments • Feedback to the whole class • Feedback to groups Student Feedback ANU is committed to the demonstration of educational excellence and regularly seeks feedback from students. One of the key formal ways students have to provide feedback is through Student Experience of Learning Support (SELS) surveys. The feedback given in these surveys is anonymous and provides the Colleges, University Education Committee and Academic Board with opportunities to recognise excellent teaching, and opportunities for improvement. For more information on student surveys at ANU and reports on the feedback provided on ANU courses, go to http://unistats.anu.edu.au/surveys/selt/students/ and http://unistats.anu.edu.au/surveys/selt/results/learning/ Continuous Improvement We use feedback from students, professional bodies and staff to make regular improvements to the course. In response to this feedback, design improvements from the previous version of the course include: • Weekly tutorials throughout the semester • A reduction in the number of assignments

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•

Additional practice questions for the final examination

Policies ANU has educational policies, procedures and guidelines, which are designed to ensure that staff and students are aware of the University’s academic standards, and implement them. You can find the University’s education policies and an explanatory glossary at: http://policies.anu.edu.au/ Students are expected to have read the Academic Misconduct Rules 2014 before the commencement of their course. Other key policies include: • Student Assessment (Coursework) • Student Surveys and Evaluations Technology employed Microsoft Excel Examination equipment A non-programmable calculator READING LISTS Prescribed Text (available as an eBook via the ANU Library) Koller, T., Goedhart, M. and Wessels, D., Valuation: Measuring and Managing the Value of Companies, 6th Edition, Mc Kinsey & Co (John Wiley and Sons), 2015. [denoted ‘KGW’] CFA Institute Code of Ethics and Standards of Professional Conduct http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2014.n6.1 CFA Institute Standards of Practice Handbook (Standard V) (SPH) http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2014.n4.1 Other Reading Damodaran A., Investment Valuation, 3rd Edition, University Edition (John Wiley and Sons), 2012. Additional materials will be made available on Wattle, including supplementary course notes, selected analyst reports, CFA readings, example worksheets, and other relevant items. COURSE SCHEDULE Week

Summary of Activities

Required Reading

1

Lecture 1

KGW Ch 1; Ch 2; Ch 3

2

Lecture 2, Workshop 1, Tutorial 1

KGW Ch 9

3

Lecture 3, Workshop 2, Tutorial 2

4

Lecture 4, Workshop 3, Tutorial 3

KGW Ch 6; Ch 10; Ch 11 KGW Ch 13 Course Note #1

5

Lecture 5, Workshop 4, Tutorial 4

KGW Ch 8; Ch 12; Ch 14

6

Lecture 6, Workshop 5, Tutorial 5

KGW Ch 16; Ch 17 Course Note #2, pp 1-6

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Assessment

7

Lecture 7, Tutorial 6

Damodaran Ch 19; Ch 25 Assignment #1 due KGW Ch 34 2.00pm, Monday, April 16 Course Note #2, pp 7-10

8

Lecture 8, Tutorial 7

KGW Ch 7; Ch 27

9

Lecture 9, Tutorial 8

Damodaran Ch 33 KGW Ch 15

10

Lecture 10, Tutorial 9

KGW Ch 4; Ch 5

11

Lecture 11, Tutorial 10

KGW Ch 23; Ch 29; Ch 32

12

Lecture 12, Tutorial 11, Workshop 6

Practice Exam

Assignment #2 due 2.00pm, Friday, May 11

COURSE ASSESSMENT Item

Title

Value

Due Date

Assignment Company model and DCF valuation #1

25%

2.00pm, Monday, April 16

Assignment #2

Multiple and asset-based valuation

15%

2.00pm, Friday, May 11

Mid-Semester Examination

1-Hour Online (Wattle) Exam

20% or 0%

Week 7

End of Semester Examination

Refer to ANU Timetabling 3-Hour (Closed-Book) Final Exam 40% or 60% towards the end of the semester

Assessment Task 1: Assignment One and Two Details of task: See file “FINM3005 Assignment Guidelines” for details on assignments, including objectives, requirements, guidance and marking criteria. Team Formation Allowable team sizes will be between 4 and 6 students (5 preferred). It is important that teams are formed quickly so that the work can start. The team formation process will be as follows: 1. Students will be permitted to initially form their own teams. All students MUST advise the lecturer of their team status via email by 5.00pm Thursday, March 1. Fully formed teams should send a list of student names and student (uni ID) numbers, with all members cc’d using university email accounts. Partially formed teams should also advise of their situation and indicate a desire to find more team members. 2. The lecturer will then post a list of students looking for a team on Wattle. These students

will have until 5.00pm Tuesday, March 6 to form teams and advise the lecturer by email. 3. Remaining students will be placed in a team by the lecturer, through either joining

partially formed teams or assigning individual students to teams on a random basis. The intention is to post the final team list on Wattle by COB Wednesday, March 7. (Note: It is requested that any students intending to drop out of the course make their decision prior to team formation.)

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Company Selection There is only one candidate company for analysis in the assignment: • Dulux Group (ASX: DLX). Workshops Commencing week 2, the lecturer will conduct a workshop of one hour per week. The week 2 workshop will introduce the “KGW model” template, and offer general advice on modelling in Microsoft Excel. From week 3, general guidance will be given on how to complete analysis for your company, including discussing methods and addressing any common problems or matters raised by students. At least one member from each team MUST attend, although all should attend with prepared questions. Assignment Submission Online Submission: In cases where assessment material is digitally produced, the default form of submission should be online. Please keep a copy of the assignment for your records. The ANU is using Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. For additional information regarding Turnitin please visit ANU Online. Extensions and Penalties No submission of assessment tasks without an extension after the due date will be permitted. If an assessment task is not submitted by the due date, a mark of 0 will be awarded. Returning Assignments Students will have their assignments and marks (with comments) returned to them via email. Examinations Mid-Semester Examination – 1 hour duration (Week 7): Total weighting: 20% or 0% if the mid-semester exam is not attempted or redeemed This exam is optional and redeemable for students in this course. It is an online exam conducted via Wattle, consisting of multiple choice questions only. The questions will be of practical (numerical) nature and students will need to review and revise all material covered in lectures 1 to 6, inclusive, as well as the corresponding tutorial material. More details regarding the exam will be provided as the exam approaches. Note: No deferred mid-semester examinations will be offered, instead the weighting will be moved to the final exam. Final Examination – 3 hours duration (TBA): Total weighting: 40% or 60% if the mid-semester exam is not attempted or redeemed This is a closed book exam but students are allowed to bring one A4 sheet of paper with notes on both sides. A mixture of theory and practical (numerical) questions will be asked. Students will need to review and revise all material (weeks 1-11) pertaining to the course. Students will be provided with further details regarding the exam as it approaches. The marking criteria will be based on model solutions and answers prepared by the lecturer. The final exam is designed to: (i) test the student’s understanding and comprehension of the course material; (ii) ensure they have obtained the learning objectives of the course.

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Referencing Requirements Referencing is essential to demonstrate that you have read thoroughly, and acknowledges the ideas and materials of other authors in your work. Refer to the College referencing guide for further details (http://cbe.anu.edu.au/students/student-information/examinations-assessment/). Scaling Your final mark for the course will be based on the raw marks allocated for each of your assessment items. However, your final mark may not be the same number as produced by that formula, as marks may be scaled. Any scaling applied will preserve the rank order of raw marks (i.e. if your raw mark exceeds that of another student, then your scaled mark will exceed the scaled mark of that student), and may be either up or down. Privacy Notice The ANU has made a number of third party, online, databases available for students to use. Use of each online database is conditional on student end users first agreeing to the database licensor’s terms of service and/or privacy policy. Students should read these carefully. In some cases student end users will be required to register an account with the database licensor and submit personal information, including their: first name; last name; ANU email address; and other information. In cases where student end users are asked to submit ‘content’ to a database, such as an assignment or short answers, the database licensor may only use the student’s ‘content’ in accordance with the terms of service – including any (copyright) licence the student grants to the database licensor. Any personal information or content a student submits may be stored by the licensor, potentially offshore, and will be used to process the database service in accordance with the licensors terms of service and/or privacy policy. If any student chooses not to agree to the database licensor’s terms of service or privacy policy, the student will not be able to access and use the database. In these circumstances students should contact their lecturer to enquire about alternative arrangements that are available. Tutorial Seminar Registration Tutorial signup for this course will be done via Wattle. Detailed information about signup times will be provided on Wattle or during your first lecture. When tutorials are available for enrolment, follow these steps: 1. Log on to Wattle, and go to the course site 2. Click on the link “Tutorial enrolment” 3. On the right of the screen, click on the tab “Become Member of…..” for the tutorial class you wish to enter 4. Confirm your choice If you need to change your enrolment, you will be able to do so by clicking on the tab “Leave group….” and then re-enrol in another group. You will not be able to enrol in groups that have reached their maximum number. Please note that enrolment in ISIS must be finalised for you to have access to Wattle. SUPPORT FOR STUDENTS The University offers a number of support services for students. Information on these is available online from http://students.anu.edu.au/studentlife/

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Detailed Study Schedule Week beginning (Week 1)

Theme / Topic / Module

Activity

Required student preparation / related references

Course overview Valuation in context

Lecture 1

KGW Ch 1; Ch 2; Ch 3

Building a company model

Lecture 2 Workshop 1 Tutorial 1

KGW Ch 9

Form teams; advise lecturer by 5.00pm, Thursday, March 1

Forecasting and model integrity

Lecture 3 Workshop 2 Tutorial 2

KGW Ch 6; Ch 10; Ch 11

Finalise teams (by lecturer) by 5.00pm, Wednesday, March 7

Cost of capital

Lecture 4 Workshop 3 Tutorial 3

KGW Ch 13 Course Note 1

DCF valuation

Lecture 5 Workshop 4 Tutorial 4

KGW Ch 8; Ch 12; Ch 14

Multiple-based valuations: − Price/Earnings ratios

Lecture 6 Workshop 5 Tutorial 5

KGW Ch 16; Ch 17 Course Note 2, pp 1-6

(Week 2)

(Week 3)

(Week 4)

(Week 5)

(Week 6)

− Enterprise value − Other: cash flow multiples, dividend yield, price/sales

Mid-semester break

Deadlines

No consultations during this period

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Week beginning

(Week 7)

Theme / Topic / Module

Activity

Required student preparation / related references

Asset-based valuations: − Price/Book − Sum-of-the-Parts − Takeover valuation

Lecture 7 Tutorial 6

Damodaran Ch 19; Ch 25 KGW Ch 34 Course Note 2, pp 7-10

Incorporating growth potential

Lecture 8 Tutorial 7

KGW Ch 7; Ch 27

Sensitivity and scenario analysis

Lecture 9 Tutorial 8

Damodaran Ch 33 KGW Ch 15

The investment decision (forming a recommendation)

Lecture 10 Tutorial 9

KGW Ch 4; Ch 5

Special issues: − Cross-border valuation − Valuing high growth firms − Evaluating management − WACC as a value-driver

Lecture 11 Tutorial 10

KGW Ch 23; Ch 29; Ch 32 CFA Code of Ethics; Standard of Practice Handbook, Part V (pp 127147)

Lecture on employment in the financial industry, review of past exam questions, exam hints

Lecture 12 Workshop 6 Tutorial 11

Practice Exam

(Week 8)

(Week 9)

(Week 10)

(Week 11)

(Week 12)

Deadlines Assignment #1 due 2.00pm, Monday, April 16 Mid-Semester Examination (via Wattle)

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Assignment #2 due 2.00pm, Friday, May 11...