SP \'22 Course Outline PDF

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Summary

Spring 2022 Syllabus and course review for AEM 2241...

Description

Cornell University

“Finance” AEM 2241 / AEM 5241 Spring 2022

Lecturer:

Rich Curtis 301F Warren Hall 255-3971

Administrative Assistant: Jen Williams

[email protected]

[email protected]

201 Warren Hall 255-5632

Teaching Assistants:

Ariana Warden Krishna Kandala Renqiu Chen Rob Li Sarah Ashtar Zenith Han

[email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

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Finance (AEM 2241 and AEM 5241)

Key Dates (Note: All Are Tentative And Subject To Change)

(Tuesday)

1st Day of Class!!

(Wednesday; 7:30 PM)

Finance Job Search Discussion

February 18, 2022

(Friday; 2 PM)

Info Sheet & Photo Deadlines

February 22, 2022

(Tuesday; 7:30 PM)

Exam #1

March

29, 2022

(Tuesday; 7:30 PM)

Exam #2

May

5, 2022

(Thursday; 7:30 PM)

Exam #3

May

10, 2022

(Tuesday)

Last Class!!

May

14-21, 2022

January

25, 2022

February

2, 2022

TBA

Exam #4

AEM 2241 and AEM 5241 Spring 2022 Course Outline

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Tentative Lecture Schedule

Date

Coverage

Assignment

#1: #2:

1-25-22 1-27-22

Time Value of Money Time Value of Money

RWJ: Chapters 5 & 6 RWJ: Chapters 1 & 2

#3: #4:

2- 1-22 2- 3-22

Time Value of Money Bonds

Section #1 RWJ: Chapter 7

#5: #6:

2- 8-22 2-10-22

Bonds Bonds

#7: #8:

2-15-22 2-17-22

Stock Valuation Stock Valuation

RWJ: Chapter 8 Malkiel: Chapter 5 (optional)

#9: #10:

2-22-22 2-24-22

EXAM #1 Stock Valuation

7:30 PM Section #3

#11:

3- 1-22 3- 3-22

February Break Market Indices

#12:

3- 8-22

Capital Budgeting

#13:

3-10-22

Capital Budgeting

#14: #15:

3-15-22 3-17-22

Portfolio Theory Portfolio Theory

Section #2

RWJ: Chapters 9, 10 (pp. 318-322 and 328-330) & 11 RWJ: Chapter 24 (pp. 815-820 only) RWJ: Chapters 12-13

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Finance (AEM 2241 and AEM 5241)

Date

#16: #17:

3-22-22 3-24-22

Coverage

Portfolio Theory Debt Financing

Assignment

Equity Financing

RWJ: Chapters 2 (pp. 24-37), 14, 15 & 27 (pp. 900-905) RWJ: Chapters 2 (pp. 24-37), 14 & 15

#18: #19:

3-29-22 3-31-22

EXAM #2 Capital Structure

7:30 PM RWJ: Chapter 16

#20: #21:

4-12-22 4-14-22

Capital Structure Capital Structure

Section #4: Bullseye Case

#22:

4-19-22

Mergers & Acquisitions

#23:

4-21-22

Options

#24: #25:

4-26-22 4-28-22

Options Personal Finance

#26: #27:

5- 3-22 5- 5-22

Personal Finance EXAM #3

#28:

5-10-22

Course Wrap-Up

5-14-22 to 5-21-22 (Day TBA)

EXAM #4

RWJ: Chapter 26 Sections #5a and #5b RWJ: Chapter 24 and Chapter 25 (pp. 835-853 required and pp. 854-861 optional)

Section #6

7:30 PM

Day & Time TBA

AEM 2241 and AEM 5241 Spring 2022 Course Outline

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Course Content and Objectives This course focuses on basic managerial financial and economic decisions, corporate financial policy, risk management, investments, and personal financial decisions. The classes dealing with the mathematics of finance will focus on the time value of money and the incredible variety of real-world problems for which this concept is relevant. The lectures on valuation will serve to introduce tools which can be used to value securities such as bonds and stocks. Topics in corporate financial policy will be surveyed with the goal of making you aware of the financial policy alternatives available to management and the risks inherent in some of those policy alternatives. The capital budgeting lectures and case discussions will introduce the economic and financial concepts which can be brought to bear on problems involving estimation of relevant project costs and benefits and the timing of those costs and benefits. Particular attention is paid to capital budgeting decisions such as whether to buy a new machine, build a new plant, and introduce a new product. Modern portfolio theory is introduced and applied to the problem of estimating the riskiness and expected return of individual securities, portfolios, and projects. We will then focus on financing alternatives, the cost of capital and the capital structure decision, distribution policy, and mergers and acquisitions. Lectures dealing with options, forward, and futures contracts will lead to a discussion of their use as instruments of speculation or risk reduction. One goal is to make you aware of some possibilities for utilizing these securities to manage risk. We will conclude the course with a consideration of a few personal financial decisions.

What This Course Is Not 1. An Investments Course 2. A Personal Finance Course 3. A Financial Markets and Institutions Course 4. A Small Business Finance Course, A Privately-Held Corporation Finance Course, A Public Finance Course, or an Agricultural Finance Course; the focus is instead on large publicly-traded companies, although many of the prescriptions translate to other organizations. 5. A Current Events Course—If That’s What You Want, Please Get A Subscription To The Wall Street Journal.

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Finance (AEM 2241 and AEM 5241)

Learning Outcomes I view my goals in this course as: 1. To expose students to a full range of issues in finance, including: a. Valuation of bonds, common stocks, and firms b. Evaluation of projects and the defining efficient deployment of investors’ capital in the context of making Accept/Reject decisions (“Capital Budgeting”) c. Understanding basics of modern portfolio and the definition and quantification of risk, with applications to investing and capital budgeting decisions d. Familiarity with various sources of debt and equity financing e. Knowledge of “Capital Structure” theory and its application to decisions regarding proportions of debt and equity employed in financing the firm’s assets. Understanding how appropriate amounts of debt financing can potentially create value for the firm’s stockholders. f.

Awareness of factors impacting the decision to retain capital internal to the firm or pay it out in the form of cash dividends or share repurchases.

g. Analysis of Mergers & Acquisitions and estimating value enhancement or destruction for shareholders of both the acquirer and the target. h. Options, Convertible Securities, Forward Contracts, Futures Contracts, and Swaps, with particular emphasis on use of those tools to manage risk. i.

Major personal financial issues and investment vehicles: Roth IRA’s, 401(k)’s, mutual funds, exchange-traded funds, asset allocation, tax considerations, etc.

AEM 2241 and AEM 5241 Spring 2022 Course Outline

2. To have students develop an understanding of the above issues on both an economic, mathematical, and intuitive level

3. To put students in a position where they are prepared for elective courses in finance

4. Put students in a position where they are prepared for internships and full–time jobs in finance and consulting

5. Put students in a position where they have a head start on preparing for the finance component of CFA, CFP, CPA, and actuarial exams, should they try to get those certifications in the future.

6. At a minimum, put students (especially those not concentrating in finance) in a position where they can understand newspaper and magazine financial articles, follow television and radio discussions, and converse intelligently at interviews and with future colleagues

7. Show students how the tools and theories they become comfortable with can be applied to real managerial and personal decisions.

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Finance (AEM 2241 and AEM 5241)

Eligibility and Prerequisites The prerequisites are AEM 2100 (“Introductory Statistics”), and AEM 2210 (“Financial Accounting”), or equivalents. Financial Accounting is a PRE-requisite, while the statistics course may be taken concurrently with finance. Anyone in class who I discover has not had the clearly-stated prereqs is subject to an administrative drop at any time, right up until the final exam. And please don’t try to tell me that you’re “self-taught”. A certain level of mathematical competence is also presumed, including a facility with arithmetic, algebra, and exponents. Anyone interested in this course should check with the instructor if they are concerned about their math background. If you somehow get in this class without the clearly stated prerequisites, note that you’re on your own … neither me nor my TA’s will teach remedial accounting or statistics. Given that this is an introductory class, students who have taken or are taking other courses in finance (such as AEM 2240, AEM 3240, ECON 4220, HADM 2222, HADM 2250, or NCC 5560) will not be eligible to take this course without the explicit permission of the instructor. If you are unsure whether you are eligible, PLEASE see the instructor during the first week of classes. If it comes to his attention later in the semester that you have prior or concurrent coursework in finance, you will be dropped from the class unless the instructor gave you explicit permission to register during the first week.

Schedule Lectures:

Office Hours:

Tuesdays and Thursdays AEM 2241: 1 PM – 2:15 PM AEM 2241: 2:45 PM – 4 PM AEM 5241: 4:45 PM – 6 PM

(Warren 151) (Warren 151) (Warren 151)

To be posted to the Canvas Course Web Site Announcement

AEM 2241 and AEM 5241 Spring 2022 Course Outline

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Lecture Expectations Please arrive on time and having done all assigned readings. Please be rested and ready to focus for the duration of the lectures. I will cover a lot of material fast. PLEASE only come to the lecture which you are registered for! Unless I explicitly give you permission (e.g. for a doctor’s appointment), attending a lecture you’re not registered for may with a high probability result in a severe penalty.

AEM 2241 / AEM 5241 Canvas Web Site There is an AEM 2241 / AEM 5241 Web Site on Cornell’s Canvas Learning System. If you are registered for the class you should be automatically enrolled. http://canvas.cornell.edu Please check the web site daily. Thanks!

Teaching Methods The presentations will be made up of lectures.

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Finance (AEM 2241 and AEM 5241)

Required Materials

The textbook I have chosen is Fundamentals Of Corporate Finance, by Stephen A. Ross, Randolph W. Westerfield, and Bradford D. Jordan (Irwin/McGraw-Hill, 13th Edition, 2022). In addition, a Course Packet with lecture notes, case materials, and section problems is required. (See the next section of this outline for more on the course packet.) In order to provide you with quality course materials at the best possible price, the text for this course will be delivered through The Cornell Store’s Instant Access Program. Please keep an eye out for emails from The Cornell Store, which will include instructions for accessing the materials through Canvas. Your bursar account will be charged for the materials after the course add period. If you don’t want to keep these digital materials, please refer to The Cornell Store’s e-mails, which will include instructions for opting out of Instant Access. However, you need to be able to access McGraw-Hill’s Connect system to take the onlilne exams. The Course Packet will be available through the Campus Store. If you are not Ithaca this semester you should contact the Campus Store to order a copy to be sent to you. A calculator will be necessary for many of the problems which will be analyzed. Any calculator with a yx key will be sufficient. PLEASE NOTE, however, that for examination purposes you will NOT be allowed to use a graphing calculator or any other calculator with text storage capabilities unless I explicitly say that those devices are allowable. If I find out that you ignore this restriction you will receive a severe penalty on the test. “Rich Curtis’ Finance Review Manual” was customized for this course by the professor. It will be made available through the Cornell Campus Store. Its use is optional, but highly recommended. If you are not in Ithaca, you may be able to buy this manual from the Campus Store or the printer. Contact me if in doubt.

AEM 2241 and AEM 5241 Spring 2022 Course Outline

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The Course Packet

A course packet will be made available for your purchase at the Campus Store for $50-$75. It contains lecture notes, section practice materials (in pink), and a sample formula sheet for the exams. My lecture notes are not a text, but a detailed outline which is the basis for some of the lecture coverage. One reason to make the lecture notes available is so that you can spend less time in lecture taking notes and more time listening. However, having said that, you will need to supplement the outline with your own explanations. TakeNote is not available for this course. Please note that not all of the lecture material is in the packet. You are responsible for taking your own notes on that material. Also, much of the material in my course packet lecture notes will not be covered in lecture. You are responsible for going over that material on your own. Please familiarize yourself with the organization of my lecture notes before class because I will jump around during lecture and you will need to move quickly to keep up. Do Not expect me to go page-by-page through the lecture notes during lecture. I will bounce around, hitting some combination of the more important and/or more difficult topics.

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Finance (AEM 2241 and AEM 5241)

Supplemental Reading and Viewing Magazines, Newspapers, and Journals: Barron’s Financial Management (an academic and practitioner-oriented journal) Financial Times Forbes Fortune Investor’s Business Daily Kiplinger’s Money Smart Money The Wall Street Journal Worth Books: Against The Gods: The Remarkable Story of Risk by Peter L. Bernstein Barbarians At The Gate: The Fall Of RJR Nabisco by Bryan Burrough and John Helyar Beating the Market by Peter Lynch Capital Ideas by Peter L. Bernstein Finding the Next Starbucks by Michael Moe How To Buy Stocks by Louis Engel If It’s Raining In Brazil, Buy Starbucks by Peter Navarro Irrational Exuberance by Robert Shiller Learn To Earn by Peter Lynch and John Rothchild Liar’s Poker: Rising Through the Wreckage on Wall Street by Michael Lewis Monkey Business by John Rolfe and Peter Troob One Up On Wall Street by Peter Lynch Predator’s Ball, The, by Connie Bruck Security Analysis by Benjamin Graham and David Dodd Stock Market Wizards: Interviews With America’s Top Stock Traders by Jack D. Schwager Stocks For The Long Run by Jeremy Siegel The Five Rules For Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market” by Pat Dorsey The Intelligent Investor: The Classic Text on Value Investing, by Benjamin Graham The Neatest Little Guide to Stock Market Investing by Jason Kelly Toward Rational Exuberance: The Evolution Of The Modern Stock Market by B. Mark Smith Wall Street Meat by Andy Kessler What Works On Wall Street by James P. O’Shaughnessy When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein Winner’s Curse, The, by Richard H. Thaler

AEM 2241 and AEM 5241 Spring 2022 Course Outline

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Movies: “Barbarians At The Gate” “Boiler Room” “Other People’s Money” “Rogue Trader” “Trading Places” “Wall Street”

Relevant Financial Web Sites

Barron’s Online CBS Marketwatch CNBC Chicago Board of Trade Chicago Board Options Exchange Chicago Mercantile Exchange EDGAR Federal Reserve Bank of St. Louis Fidelity (Mutual Fund Family) Individual Investor Online Internal Revenue Service Investools Investopedia.Com Money Magazine Motley Fool NASDAQ/AMEX New York Stock Exchange Parker Center (Cornell) Quicken Securities & Exchange Commission Smart Money Magazine T. Rowe Price (Mutual Fund Family) USA Today Money Section Vanguard (Mutual Fund Family) Wall Street Journal Interactive Edition Wall Street Net Yahoo Finance

http://www.barrons.com http://www.cbsmarketwatch.com http://www.cnbc.com http://www.cbot.com http://www.cboe.com http://www.cme.com http://www.edgar-online.com http://www.stls.frb.org http://www.fidelity.com http://www.iionline.com http://www.irs.ustreas.gov http://www.investools.com http://www.investopedia.com http://www.money.com http://www.fool.com http://www.nasdaq.com http://www.nyse.com http://parkercenter.johnson.cornell.edu http://www.quicken.com http://www.sec.gov http://www.smartmoney.com http://www.troweprice.com http://www.usatoday.com/money/ http://www.vanguard.com http://www.wsj.com http://www.netresource.com/wsn http://quote.yahoo.com

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Finance (AEM 2241 and AEM 5241)

Examinations

There are four examinations, three during the semester and one during the December final exam period: Exam #1

Tuesday, February 22, 2022, 7:30 PM

Exam #2

Tuesday, March 29, 2022,

Exam #3

Thursday, May 5, 2022,

Exam #4

Date TBA (May 14th-21st, 2022)

7:30 PM

7:30 PM

There are no prelim makeup exams for ANY reason. In this regard, please see the grading scheme later in this document. No exams are given early! The exams most likely will be given online, but you must take them in a campus classroom which will be assigned. Therefore, you need to bring in a laptop or tablet to take the tests with. If you do not own a laptop or tablet and cannot borrow one, you will need to take the exam in a campus computer lab. Note that on the Cornell Registrar final exam web page it is stated: “It is the student’s responsibility to enroll in courses that will not create a conflict in the student’s examination schedule. If for any reason a student must create such a conflict, the student must first obtain permission from one of the instructors involved and resolve the issues of when and how a makeup examination will be administered.”

AEM 2241 and AEM 5241 Spring 2022 Course Outline

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In the event of serious illness or a family emergency, I will consider a request for a make-up final examination (Exam #4). If you do not have my permission in advance, you will not be allowed to take a make-up exam. Please contact me as soon as possible. Except in the case of an emergency, requests made less than 1 week in advance will not be accepted. A request for a medical postponement must be supported by a note from a doctor or other health care professional. If you miss both the final exam and a make-up final exam for an unacceptable reason, you will get a zero on that test. If you miss both the regular final exam and the make-up final exam for reasons which in my opinion are reasonable, I will consider an INCOMPLETE in the course. T...