Course Outline Course Title: Instructor: E-Mail: CORPORATE FINANCE LIONEL ARANHA profaranha@outlook.

com

OBJECTIVES: To give the student the capacity to understand the theory and apply, in real world situations, the techniques that have been developed in Financial Management..

To give the student the big picture of Corporate Finance so that he/she can understand how things fit together. To show the student that Financial Management is fun.

METHODOLOGY: The course is taught with a mixture of lectures, presentations & cases. (The objective of the case method in finance is to use the logic of financial theory to arrive at coherent and defensible conclusions when faced with real world problems presented in cases. One should keep in mind that there is no right answer to a case; different assumptions may lead to different solutions and decisions. There are, however, good arguments and weak arguments. Furthermore, there is always a theoretically correct methodology and technique that are proper for the problems encountered in a case.) In every aspect of the course, students are required to adhere to high standards of conduct. Note that some of the cases and homework assignments used in this class may have been used before at other institutions. Students may not use material or solutions from other institutions (e.g. posted on the Internet), unless otherwise instructed in class for a particular assignment. SESSION PLAN: Session No. 1 Topic : Corporate Financial Management: Meaning, nature and scope of finance; Financial goal - profit vs. wealth maximization; Finance functions investment, financing and dividend decisions. : Visit www.ft.com (financial times) one of the best websites for international business information : Visit www.careers-in-business.com and page through the finance positions listed & understand the skills sets or job characteristics required. : The scope & objectives of Financial Management : Emerging Role of Finance Managers in India : Time Value of Money-Concepts of Present Value (PV), Future Value (FV), Annuities (Ordinary and Annuity Due) and Perpetuity;

Exercise Assignment Essential Readings Optional Readings Topic

Session No. 23

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Session No. 45

: Practical applications of the concepts of Time Value of Money Visit www.moneychimp.com & try the How Finance Works link to learn about many applaications of present & future value mathematics Visit www.financialplayerscenter.com this site provides helpful tutorials on time value of money : Kate Myers Case Quillici Family Case : Rationale of Time value of Money The techniques involved in Time value of Money : Amortisation of loans by banks & financial institutions : Camille Henley Case : Sources of long term funds. : Select a company of your choice and understand the various choice of long term financing that the company has opted for. What could have been the inherent advantages/disadvantages? : The KajunKorp Mini Case : The basic instruments of Long-term Financing The basic choices in Long-term Financing : Law & Finance The importance of corporate governance : Hasbro Case NetJ.com Case : Cost of capital basic concepts. Cost of debenture capital, cost of preferential capital, cost of term loans, and cost of equity capital, CAPM model, Cost of retained earnings. Determination of overall cost of capital (Weighted Average Cost of Capital WACC) : Practical application: From exercises at the end of the chapter in the prescribed text book Visit www.quicken.com contains information relevant to calculating the WACC, including Betas, total market value of equity, and debt/equity ratios : Student to select Indian company of his choice, locate the beta of the company, and analyse the position of the company vis--vis other companies in the sector & the market. : Components of Cost of Capital Weighted Average Cost of Capital WACC : Cost of capital and risk The Cost of Capital in India : Computrized Business Systems Case : Operating and Financial Leverage: Measurement of leverages; Effects of operating and financial leverage on profit; analyzing alternate financial

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Session No. 8-9

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plans; Combined financial and operating leverage, Financial Breakeven : Workout the exercises at the end of the chapter in the prescribed textbook for the purpose : Different kinds of cost; & the need to identify them as fixed & variable. Effect of Financial Leverage : The importance of Operating Leverage : Capital Structure, Cost of Capital & Valuation, Capital Structure theories, Designing Capital Structure : Summarizing the proof for Net Income Approach, Net Operating Income Approach, MM Approach & Traditional Approach : : Corporate Income Taxes & the cost of capital : Capital Structure Practices in India : Capital Budgeting: Nature of investment decisions; Investment evaluation criteria - net present value, internal rate of return, profitability index, payback period, accounting rate of return: NPV and IRR comparison; Modified IRR, Capital rationing. : Workout the exercises at the end of the chapter in the prescribed textbook Visit www.teachmefinance.com a site for definitions & examples of many finance concepts, including most of the capital budgeting tools discussed in this chapter. : Durango Cereal Company Mini Case Southwest Airlines Case Acclaim Entertainment Case Philips Morris Case Florida Power & Light Case : Capital budgeting Process & Techniques : Cash flow & Capital Budgeting : Financial analysis and planning Ratio analysis for performance evaluation and financial health, Application of Ratio Analysis in decision making; Analysis of Cash Flow Statement : Visit www.yahoo.com contains a link to Yahoo! Finance for retrieval of recent financial statements & a wide variety of financial information for many international firms. : Analysing the financial statement of a company of

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Session No. 1214

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Session No. 1518

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the students choice : Understand the four key financial statements: The Balance Sheet, The Income Statement, The Statement of Retained Earnings & The Statement of Cash Flows : The Dupont Analysis : Jeadan Industries Case : Dividend Decisions, Determinants of Dividend Policy : Workout the exercises at the end of the chapter in the prescribed text book relating to Walters & Gordons Models : Relevance of Dividends to a Company : Legal, Procedural & Tax aspects of Dividends : Introduction to Working Capital - Nature of working capital , Components of working capital, Tradeoff between profitability and risk, Determinants of working capital; operating cycle and cash cycle; Management of working capital; Financing of working capital and norms of bank finance, Management of Cash, receivables & Inventory : Workout the exercises at the end of the chapter in the prescribed textbook : Bracelet Blanks Inc Mini Case Foahs Design Mini Case : Effective Short-term Financial Management Short term lending norms of banks in India : Trade credit practices around the world Cash management services offered by banks : Anheuser-Busch Case Pepsi Case Inn-Room Safe Case Home Depot Case

Session No. 1920

Session No. 2124

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Text Book: M. Y. Khan & P. K. Jain Financial Management (TMH). Suggested Readings/ References:
1. Brigham & Houston Fundamentals of Financial Mgmt., Thomson Cengage

Learning.
2. Megginson/Smart/Gitman Corporate Finance., Thomson South Western

Learning
3. Stephen A. Ross, Wester Field, Jordan Fundamentals of Corporate Finance

(MacGraw Hill).

4. Vanhorne & Wachowicz, Fundamentals of Financial Management Pearson /

PHI.
5. Damodaran, Corporate Finance John wiley & Co. Gitman, Principles of

Managerial Finance, Pearson Education / PHI.

6. Vanhorne, Financial Management & Policy, Pearson/PHI. 7. Prasanna Chandra: Financial Management (TMH). 8. I.M. Pandey Financial Management (Vikas). 9. Brearley, Richard A and Steward C. Myers: Corporate Finance, McGraw Hill,

lnt. Ed., New York. Likely Evaluation Scheme: 1. 2. 3. 4. Class Participation: 10% Quizzes / Cases / Assignments: 30% Group Work / Project / Presentations: 20% End Term Exam: 40%

The likely scale for awarding marks for Component 1 and 3 (as above) will be as under: The Rating of the Likely Marks for componentLikely Marks for Component 1 component-3 (Out of 10) (Out of 20) Excellent 9-10 17-20 Very Good 7-8 14-16 Good 5-6 10-13 Fair 3-4 6-9 Not Satisfactory 0-2 0-5 Indicative Grading Scheme: It will be strictly as per standing policy of CIMP. However, an indicative grading scheme may be as under: Grad e Likel y Rang e A+ 80 and abov e A 7579 A7174 B+ 6770 B 6366 B5962 C+ 5558 C 5154 C4750 D+ 4346 D 3942 D3538 F Les s tha n 35

Important Notes: 1. Case assignments: Students will prepare cases in groups of 6 students (size is dependent on class enrollment). Case assignments and due dates will be

2.

3. 4. 5. 6. 7. 8. 9.

indicated in the class. Case assignments will be graded using the following criteria: a) Analyzing each question effectively 20% b) Identifying and evaluating alternative solutions 20% c) Linking the case to strategic issues 20% d) Organizing the case logically 20% e) Quality of the presentation 20%; Total 100% Class participation: Students are expected to read the material for class and to participate actively in every class. Class participation marks will be given on the quality of the comment, not the quantity and how these comments relate to the ongoing discussion. Students are expected to enter in to the class with full preparation and enthusiasm. There will be no reexamination for any missed evaluation component. Students are expected to be above reproach in all scholastic activities and disciplinary issues. Plagiarism of any kind will not be tolerated & will be dealt with strictly. Very Important Note: The instructor reserves all rights to fine-tune / modify the above mentioned session plan and the grading scheme as may be required. Mobile phones are banned Internet activity on laptop during the course of the lecture is prohibited.