Syllabus Principle of Finance Fall 20 PDF

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syllabus for 2020 fall...

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Syllabus Principle of Finance EN.660.200.02 Fall 2020 (3 credits, EQ)

Description This course covers central issues in financial management and corporate finance. Students will learn how financial managers make investment, financing and other decisions and what are the tools they use to reach such decisions. Topics covered include time value of money, risk, valuation, capital structure, capital budgeting, dividend policy and mean-variance portfolio selection. The course provides the analytical tools and the financial theories needed to implement sound financial decisions within a corporation (and outside of a corporation). Ideas are presented in a cohesive way within the framework of the no-arbitrage principle, the fundamental principle shaping all aspects of modern finance. Command of the subject is crucially important for anyone considering a career not only in investment banking, investment management or trading, but also in general management, corporate strategy, management consulting, entrepreneurship, and the non-profit world. Prerequisites EN.660.105 (Introduction to Business) OR AS.180.102 (Elements of Microeconomics) Instructor Professor Semih Üslü, [email protected] Office hours (Appointment needed): Monday 1.30-2.30pm and Thursday 2.45-3.45pm Teaching Assistant Qianyu Liu, [email protected] Required Textbook Title: Corporate Finance, Student Value Edition | Edition: 4 Author: Jonathan Berk, Peter DeMarzo Publisher: Prentice Hall ISBN: 9780134101446 Recommended Text(s) Suggested, non-mandatory, additional readings: •

“Corporate Finance” by Welch, 2013 (3rd Edition) Available at: book.ivo-welch.info This is a new textbook that covers in a modern and eloquent way the main concepts of corporate finance and some fundamentals of investments.

•

“Efficiently Inefficient” by Pedersen, 2015 (Princeton University Press - 1st Edition) This is a bedside-table, entertaining book which barely contains any formulae. It is a nice reading which helps understanding how smart money invests and market prices are determined.

Course Objectives By the end of this course, students will be able to: 1. 2. 3. 4. 5. 6.

Understand different types of financial markets and institutions. Describe the linkages between accounting and finance. Understand the concept of time value of money. Apply discounted cash flow techniques to the valuation of securities and firm as a whole. Evaluate projects using various decision criteria. !Explain the concepts of risk, return and cost of capital.

Student Responsibilities & Class Policies (1) Attendance on-time is proper etiquette and a minimal requirement for classroom participation. Being regularly late or leaving early or both is unprofessional. Although participation is not a part of the grading system of this course, poor attendance is not to your advantage. (2) No web browsing of course unrelated information or the use of the social media is allowed during the lecture time. (3) Students are expected to take all examinations and to complete all assignments on the required dates. Conflicts or other issues must be brought to the attention of the instructor before the scheduled test time. Make-up exams may be arranged only for an excuse considered valid by the School. Emergencies with proper documentation are valid. Religious holidays are valid reasons to be excused from class. Students who must miss an examination because of a religious holiday must inform the instructor as early in the semester as possible in order to make up any work that is missed. (4) This course is on Blackboard. The site will be used to special instructional information, course announcements, and other items of student interest. Please monitor the course site regularly. (5) A scientific or financial calculator is required for the exams. No cell phone will be allowed during the exams as calculator.

Course Expectations & Grading Assignment

Weight

2 homework assignments

20% (10% each)

2 mid-term exams

40% (20% each)

Final exam

40%

Total

100%

Homework: There will be homework assignments almost every week, starting with the third week of the class. You are required to hand 2 out of the 11 assignments, at the date specified in the detailed outline. Of course, even though only 2 assignments are graded, you should work on all of them! You will be rewarded full credit if you have made a good-faith effort to answer all of the questions and if you hand in the assignment on time. After the due date no points will be given for a homework. Answers to the homework problems must be your own although you are allowed to work on the problems in groups. You are encouraged to acknowledge any help you received on the front page of your problem set solution.

Mid-term exams: There will be two closed-book mid-term exams. Each is about 75 minutes long. They will be given on Blackboard. Formula sheet will be provided. No make-up exam will be given for mid-terms except for medical emergency related causes. Final exam score can be used to replace one of the lower midterm score. Final exam: Final will be comprehensive. It will be closed-book and about 2.5 hours long. It will be given on Blackboard. Formula sheet will be provided. Grading The grade of A is reserved for those who demonstrate extraordinarily excellent performance as determined by the instructor. The grade of A- is awarded only for excellent performance. The grades of B+, B, and Bare awarded for good performance. The grades of C+, C, and C- are awarded for standard performance. The grades of D+, D, and D- are for adequate but substandard performance. The grade of F indicates the student’s failure to satisfactorily complete the course work. Tentative Course Calendar* *The instructor reserves the right to alter course content and/or adjust the pace to accommodate class progress. Students are responsible for keeping up with all adjustments to the course calendar. Pre-course reading: Chapter 1 Class Number

Week 1 Week 2

Date

Topic

Chapter

08/31/2020

-

Introduction to financial markets and financial statement analysis

09/07/2020!

-

Time value of money

-

Valuation by arbitrage and the law of one price

Due on Thursday

Chapter 2 Chapters 3 & 4

Week 3

09/14/2020!

-

Interest rates

Chapter 5

HW 1

Week 4

09/21/2020!

-

Valuing stocks

Chapter 9

HW 2

Week 5

09/28/2020!

-

Chapter 10

HW 3

Week 6

10/05/2020!

Chapters 11 & 12

HW 4

Week 7

10/12/2020!

-

Optimal portfolio choice and the pricing of risk Mid-term 1 (covers Weeks 1-5) Capital asset pricing model (CAPM) CAPM (cont’d)

Chapters 11 & 12

HW 5 (graded)

Week 8

10/19/2020!

-

Week 9

10/26/2020!

-

Week 10

11/02/2020!

-

Week 11

11/09/2020!

-

Week 12

11/16/2020!

Investment decision rules and capital budgeting Valuing bonds Capital structure theory in a perfect world Mid-term 2 (covers Weeks 6-10)

-

Capital structure theory in an imperfect world

-

Capital budgeting with leverage

Chapters 7 and 8 Chapter 6

HW 6 HW 7

Chapter 14

HW 8

Chapter 15

HW 9

Chapter 18

HW 10 (graded)

Week 13

11/30/2020!

-

Financial options

Final Exam

TBD!

-

Final exam

Chapter 20 Comprehensive

Ethics The strength of the university depends on academic and personal integrity. In this course, you must be honest and truthful. Ethical violations include cheating on exams, plagiarism, reuse of assignments, improper use of the Internet and electronic devices, unauthorized collaboration, alteration of graded assignments, forgery and falsification, lying, facilitating academic dishonesty, and unfair competition. Report any violations you witness to the instructor. You can find more information about university misconduct policies on the web at these sites: • •

For undergraduates: http://e-catalog.jhu.edu/undergrad-students/student-life-policies/ For graduate students: http://e-catalog.jhu.edu/grad-students/graduate-specific-policies/

Students with Disabilities Any student with a disability who may need accommodations in this class must obtain an accommodation letter from Student Disability Services, 385 Garland, (410) 516-4720, [email protected] . ABET Outcomes • • • •

Understanding of professional and ethical responsibility (f). Ability to communicate effectively (g). Recognition of the need for and an ability to engage in life-long learning (i). Knowledge of contemporary issues (j).

HW 11...