Finance 5405: Business Financial Management

Warrington College of Business

University of Florida

Professor Joel F. Houston REVISED 1/23/2020_____

Instructor:

Joel F. Houston
303D Stuzin Hall
352-392-7546 (Direct line to office)
352-392-0153 (Department office)
352-392-0301 (Fax)
Email: joel.houston@warrington.ufl.edu

Teaching Assistant:

Dana Clark
Email: dana.clark@warrington.ufl.edu

Course Objectives:

This course is designed for the general business student, not just the finance
specialist. Since this is a survey course, we will cover many topics. We will begin
with a general overview and then go into more detail on several concepts, financial
instruments, and techniques used in financial decision-making. More specifically, by
the end of this course, I hope that you are able to:

1. Conduct a detailed financial analysis of a company using its key financial

statements.
2. Understand the institutional features of the bond market and be able to
value different types of bonds.
3. Recognize how to value a common stock. We will discuss how to
evaluate a company’s future prospects and how to use this information to
decide if a stock is under- or over-valued.
4. Calculate a company’s cost of capital.
5. Estimate the cash flows and risk of corporate projects and use this
information to decide whether the project enhances shareholder value.

Beyond these specific objectives, I also hope by the end of this course that:

1. You will have a solid understanding of basic financial concepts, such as

the time value of money, asset valuation, and risk and return.
2. You will understand the basic quantitative tools for analyzing financial
problems.
 3. You will have a grasp of basic finance principles and that you will have
gone beyond just memorizing facts and formulas. This will enable you to
better understand current events in finance and will provide a solid
framework for any subsequent courses you may take in finance.

As the course teaching assistant, Dana will be available if you have questions about
the course material or any concerns/questions about your grade in the class.

Course Outline and Topics Covered:

I have broken down the online course into five modules. Here’s a brief description
of the modules along with the corresponding topics:

Module 1: Fundamental Concepts in Financial Management (Chapters 1-4)

 Financial Markets and Institutions
 Financial Statement Analysis

Module 2: Time Value of Money (Chapter 5)

 Time Value Basics

 Interest Rate Conversion
 Amortization

Module 3: Interest Rates and Bonds (Chapters 6-7)

 Interest Rate Determination
 Bond Valuation

Module 4: Risk, Return and Stock Valuation (Chapters 8-9)

 Risk and Return

 Stock Valuation

Module 5: Capital Budgeting and Project Valuation (Chapters 10-13)

 Cost of Capital
 Capital Budgeting
 Real Options

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Course Materials:

 Textbook: E. Brigham and J. Houston, Fundamentals of Financial Management:

15th Edition. This textbook is required. However, you may use an older edition
of this textbook, but realize that end-of-chapter problems may be different. The
book is also going to be a recommended text for the Corporate Finance class,
which is offered later in the program. You may also select a digital version of the
text – but if you do so, you may want to set it up so that your access to the
course extends through the time period of the Corporate Finance course.
 Course packet that includes PowerPoint slides and quizzes.
 Pre-recorded lectures. I have provided on the course web page a series of
lectures that closely follow the materials covered in the text. The accompanying
Power Point presentation is also available. I recommend that you read the
background reading before watching the lecture.
 Spreadsheet Models. I have included a copy of the models on the course web
page. These models are designed to make the materials clearer, and to provide
you with some basic insights into the various ways that you can use
spreadsheets to solve financial problems. You are strongly encouraged to
review these spreadsheet models as you work your way through the chapters.
Hopefully, you will find that these models enhance your understanding of the
concepts covered in the lectures, and that the models impart on you a sense of
the methodology used to solve financial problems in the corporate setting.
Finally, these models will in some cases help you answer some of the questions
on your class assignments.
 Throughout this course, I will periodically post class notes and other information
on the class website.

Many of you will find it helpful to have a financial calculator, so you have been
provided with an HP-10BII+ calculator. Keep in mind that all the problems can be
solved with financial spreadsheets, but you still might find a calculator handy in
those cases when you don’t want to go through the trouble of loading up a
spreadsheet. If you own a different calculator, you may use it for the course as
long as it does the basic time value of money functions and the cash-flow (NPV,
IRR etc.) functions. You will find some calculator tutorials on the class web page
for four of the more widely used models (HP-10BII+, HP-17BII, HP-12C, and TI – BA II
PLUS).

Additional Resources:

Review problems and their solutions can be found in the course packet. In addition,
you can view me working the solutions for each review problem. Each taped
problem review can be found after the lecture on the relevant finance topic.

If you are looking for some extra practice with some of the quantitative topics, we
have provided practice problems (from textbook end-of-chapter materials) and
solutions on the course e-Learning site. If you want to work additional end-of-

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chapter materials, you should know that Appendix A in your textbook provides
worked-out solutions to end-of-chapter Self-Test Problems and Appendix B provides
the numerical solutions for even-numbered end-of-chapter problems.

Discussion Boards:

We have established discussion boards to encourage classroom participation and

discussion of the key topics. There will be two separate discussion boards: a
Finance Concepts Discussion Board and a Current Events Discussion Board. On
the Finance Concepts Board, you can post questions about the course material and
general clarifying questions about assignments, while questions relating to issues
that arise in the real world should be posted on the Current Events Discussion
Board. Specific questions concerning your own assignment should be posted via
email or phone. Participation on the discussion boards is strongly encouraged, but it
is not required.

Course Requirements and Grading:

Your final course grade will be based on the following components:

 5 Individual Quizzes 30 points or 30%

 Group Problem Set 20 points or 20%
 Final Examination 50 points or 50%

Here is some additional detail regarding each of the components:

Individual Quizzes

Each quiz is to be done individually. The quiz files are on your course web
page. You are to work through the questions offline before you go online to
take the quiz, so you are not limited in the amount of time spent working on
the quiz. However, you must submit your answers online by 11:59 p.m. on
the due date. Once a quiz is open, it may be taken as early as possible.
Please note that the quiz can be taken only once—so make sure you’ve
worked the entire quiz offline before going online to submit your answers.
You will receive your grade and a solution file will be posted online after each
quiz deadline has passed. Please do not discuss the quiz with your fellow
classmates until the deadline has passed. Quizzes must be taken by the due
date. No late quizzes will be accepted, absolutely no exceptions! If you have
any trouble taking the Quiz through the online submission, e-mail the Quiz to
Dana at dana.clark@warrington.ufl.edu before 11:59 p.m. on the due date.

Each quiz counts 7.5% of your final course grade. However, I realize that
situations may arise due to work deadlines or personal circumstances that
impact a quiz score or even a quiz submission. Consequently, I will drop your
lowest quiz score, so only 4 of the 5 quiz scores will count toward your course

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grade. Similarly, if during the course you miss a quiz, you may assume that
this zero score will be dropped. This will eliminate the need for e-mails
requesting exceptions to the “no late quizzes” rule and will allow Dana to
release quiz scores and solution files immediately after quiz deadlines have
passed.

Group Problem Set

The problem set is posted on the course e-Learning site. It will cover topics
contained in the modules, as well as more advanced topics related to the
modules. The problem set is designed to illustrate how spreadsheets can be
used to solve problems. The group problem set represents 20% of your final
course grade. The Group Problem Set will be due Sunday, March 22nd.

At the end of the course you will have an opportunity to fill out a peer
evaluation form. In some cases, grades on the group assignment may be
reduced if the student receives a poor evaluation from his/her peers.

Final Exam

There will be a comprehensive final exam. The exam will cover assigned
readings, video lectures, quizzes, and the group problem set. Most of the
questions will be numerical problems but there will be some conceptual
questions. The final exam will constitute 50% of your final course grade. The
final exam will be closed book. However, you are allowed a one-page cheat
sheet (you may use both sides and it may be handwritten or typed) and you
may use a BLANK Excel worksheet to work through the various problems.

All students will take the exam online through ProctorU. To take the exam,
you must show photo identification. The exam will open on Friday, April 3rd
at 8:00 a.m. and will close Saturday, April 4th at 8 p.m. You will have 2
hours to complete the exam. At the end of 2 hours, the exam will close. Only
answers selected prior to the exam closing will be graded.

Students requesting classroom accommodation must first register with the

Dean of Students Office. The Dean of Students Office will provide
documentation to the student who must then provide this documentation to
the Instructor when requesting accommodation.

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Grading Distribution for Quizzes and Group Problem Set:
Quizzes and the group problem set will be graded using the following scale:
93 -100% A
90-92.99% A-
87-89.99% B+
83-86.99% B
80-82.99% B-
77-79.99% C+
73-76.99% C
70-72.99% C-
67-69.99% D+
63-66.99% D
60-62.99% D-
< 60% E

Grading Distribution for the Final Examination:

The scale for the final exam is not pre-set. Instead, the final exam will be
curved to ensure that the overall class GPA is roughly within the target GPA
for the class (3.2-3.5).
Please note that both plus and minus grades may be assigned. The following
website summarizes the current UF grading policies for assigning grade
points:

https://catalog.ufl.edu/ugrad/current/regulations/info/grades.aspx

Critical Dates:
Assignment Deadline
Quiz 1 2/2/20 (Sunday)
Quiz 2 2/16/20 (Sunday)
Quiz 3 3/1/20 (Sunday)
Quiz 4 3/15/20 (Sunday)
Group Problem Set 3/22/20 (Sunday)
Quiz 5 4/2/20 (Thursday)
Final Exam 4/3/20-4/4/20 (Friday or Saturday)