Post-Graduate Diploma in Management

BUSINESS & CORPORATE FINANCE

[TERM-II, 2021-22]

(3-Credit)

Course Description:

Course Background

Corporate finance is important for all companies as it deals with supervision of funds and
maximising wealth. Study of corporate finance is crucial as it teaches about handling of
investment, dividend and financing decisions. Corporate finance is important in all sorts
of economic condition. This course focuses on theory and practice of corporate finance.
The course starts with an introduction to corporate finance. It moves forward to time value
of money, valuation of bonds and stocks. It proceeds to creation of balanced capital
structure by raising long term finance and creation of liquidity by giving an overview of
working capital management. The course also introduces risk and return, discusses the
techniques of capital budgeting decisions such as purchase and replacement of capital
assets. This course would help develop an understanding of the financial issues faced by
companies. The course will equip students with knowledge and skills to evaluate
alternative financial strategies with the objective of creating value for the shareholders
and other stakeholders. This course would be taught in 20 sessions of 90 minutes each.
Learning Objectives

The course should enable the students to

a. Discuss the objectives of corporate finance and the key drivers of shareholders’
value.
b. Learn to use present value technique and value bonds
c. Acquire basic knowledge of risk and return and capital asset pricing model
d. Learn the techniques of valuing stock.
e. Acquire in-depth knowledge of risk and cost implications of alternative sources
of funding f or calculating cost of capital
f. Perform financial appraisal of investment proposals
g. Introduce the operating cycle concept for efficient management of working
capital.

Learning Outcomes

On completion of the course, the students should be able to;

a. Demonstrate informed capabilities relating to performing time value of money

calculations for taking financial decisions
b. Have an overview of long term sources of finance
c. Apply skills in risk and return measurement
d. Describe basic portfolio theory and apply the Capital Asset Pricing Model (CAPM)
in estimating cost of equity
e. Estimate the cost of each source of capital and combine these costs into a weighted
average cost of capital for a company;
f. Critically apply skills in evaluating capital budgeting projects by using different
methods of project evaluation
g. Estimate working capital requirement

Pedagogy:

The pedagogy for this course will be a judicious mix of lectures, case discussions and
analysis. To apply the learning during this course, the student will be doing a group project.

Text Book:
 Ross, Westerfield, Jaffe, Kakani, Corporate Finance, Tata McGraw-Hill, Latest
Edition

Reference Books:

 Brealey, R., Myers, S., Allen, F., and Mohanty, P., Principles of Corporate Finance,
McGraw-Hill, 12th edition
 Van Horne, James C. Financial Management & Policy, Twelfth Edition, Prentice
Hall of India
  Lawrence J Gitman, Principles of Managerial Finance, Thirteenth Edition, Pearson,
 I.M. Pandey, Financial Management, Eleventh Edition, Vikas Publishing House,
 Prasanna Chandra, Financial Management, Ninth Edition, Tata McGraw-Hill,
 Brigham Eugene F., Houston Joel F., Fundamentals of Financial Management,
Eighth Edition Cengage Learning.

Newspapers

The Economic Times, The Mint, Business Standard

Assessment Methods:

Students will be evaluated on the basis of quizzes, end term exam, group
project/assignments, and class participation, as per the following weights:
Quiz : 30%

End Term Examination : 40%

Group Project : 20%

Class participation : 10%

Group Project/Assessment:

Group project/assignment is to be completed in groups formed by APO.

Alignment of evaluation process with Learning Outcomes: The course will aim at
achieving the above learning outcomes in alignment with the objectives of the PGDM
program at IMT, especially the following objectives:

Specific Assessment Intended learning objectives to be

Method Weight Assessed

1 2 3 4

Quiz 30% √  √  √ √
End Term Examination 40% √  √ *(1.1)  √ √
Group Project 20% √  √  √ √

Class participation 10% √  √  √ √

*AACSB AoL objective 1.1 “Demonstrate technical and analytical capabilities” is mapped
to learning objective 2 and will be assessed during the End Term Examination
SESSION PLAN

Session Topic Readings

No.

1 Introduction to Corporate Finance Ch. 1

 Corporate investment and financing decision: An overview

 Dividend decision: An overview
 Role of finance managers
 Wealth maximisation
 Agency problem
2-3 Time Value of Money Ch. 4

 Concept and calculation of Present and Future Values

 Present Values with Multiple Cash Flows
 Perpetuities and Annuities

4-5 Introduction and Valuation of Bonds Ch. 8

 Features and Types of bonds / Bond markets

 Market conventions
 Term structure of interest rates
 Calculation of value of bond, and yield to maturity

6 Valuation of Stocks Ch. 9

 Dividend discount model including two Stage Model

 Comparable method

7 Introduction to Risk and Return Ch. 10

 Understand the concept of risk: Variance and standard

deviation
 Expected return and risk: Incorporating probabilities in
estimates
 Beta estimation and Determinants of beta
 

8 Portfolio Theory and the CAPM Ch. 11

 Portfolio return and risk

 Risk diversification: Systematic and Unsystematic risk
 Capital Assets Pricing Model
 
  Relevance of Capital Assets Pricing Model
9-10 Cost of Capital Ch. 13

 Significance of cost of capital and the concept of

opportunity cost of capital
 Costs of debt, Preference capital and Equity
 Weighted average cost of capital
11-13 Capital Investment Decision Ch. 5, 6

 Estimation of cash flows

 Investment criteria - Payback, Discounted payback, NPV,
IRR and Profitability index
 Choosing capital investments when resources are limited
 Replacement of an old machine
14-15 Capital Structure Decision Ch. 16 and 17

 Capital structure defined

 Financial Leverage
 EBIT- EPS analysis
16 Dividend Decision

 Payout Decisions
 Concept of Bonus Shares, Right Shares and Buyback
Decisions

17-18 Working Capital Management Ch. 26, 27, 28

 Concept and estimation of Working Capital
 Operating cycle and cash cycle
 Computation of Working capital
 Sources of Short term financing
19-20 Project and/or Case Presentation

Note: Cases to be identified by the instructor