School of Accounting and Finance

AFM 274: Introduction to Corporate Finance

Course Syllabus

Course Instructors:
Sections 001, 002, 004
Name: Tu Nguyen
Office Location: HH 386D
Email: tu.nguyen@uwaterloo.ca
Office Hours:* Tuesday & Thursday 11:30am-12:30pm in HH 3158

Sections 003, 005, 006

Name: Benjamin Loewen
Office Location: TBD
Email: b2loewen@uwaterloo.ca
Office Hours:* Tuesday & Thursday 1:30pm-2:30pm in HH 3158

* Everyone is welcome during office hours. The instructors and TA’s will be there to help.

Course TA’s:
Lead TA: Alexander Kastoris (akastoris@uwaterloo.ca)

Participation trackers:

Secti Time TA name TA email

001 8:30am – 9:50am Brandyn Tan b28tan@uwaterloo.ca
002 10am – 11:20am Alan Mak a23mak@uaterloo.ca
003 11:30pm – 12:50pm Joanne Sze j2sze@uwaterloo.ca
004 1:00pm – 2:20pm Taylon Tsai t5tsai@uwaterloo.ca
005 2:30pm – 3:50pm ChuQiao Sun c95sun@uwaterloo.ca
006 5:30pm – 6:50pm Lily Huang l252huang@uwaterloo

Lecture Schedule:
Section Days of the week Time Room
001 Tuesday & Thursday 8:30am – 9:50am HH 1102
002 Tuesday & Thursday 10am – 11:20am HH 1102
003 Tuesday & Thursday 11:30pm – 12:50pm HH 1102
004 Tuesday & Thursday 1:00pm – 2:20pm HH 1102
005 Tuesday & Thursday 2:30pm – 3:50pm HH 1102
006 Tuesday & Thursday 5:30pm – 6:50pm HH 1104

1
Course Description:
This course is a continuation of AFM 273. This course begins with the topic of capital structure—how firms
should engage in long term financing of their operations (text chapters 17, 18, 19). At this stage, the material
is somewhat theoretical in nature, focusing more on general ideas and concepts instead of particular details.
The next topic is payout policy, which addresses the issue of how firms should distribute cash to shareholders
(text chapter 20). The course then deals with capital budgeting and valuation with leverage, i.e. interactions
between a firm’s financing and investment decisions. This extends the capital budgeting material covered in
AFM 273 to situations where the firm finances its investments at least partially using debt (text chapter 21).
The course then moves to long term financing, covering details such as how firms sell equity to the public
(text chapter 23), and details of debt contracts (text chapter 24). Short term finance and working capital
management are the final topic (text chapters 26-27).

Prerequisite: AFM 273

Antirequisite: AFM 371, ACTSC 372, ACTSC391/AFM 37

BAFM Program Level Learning Outcomes

Each of the School of Accounting and

Finance’s 16 Program Level learning
outcomes identifies a knowledge, skill
or value of a financial professional.
These outcomes are organized into
seven areas as reflected in the graphic.
The puzzle pieces reflect the integration
of all areas. All outcomes are
developed through experiential learning.

2
 Course Learning Outcomes:
This course’s learning outcomes map to the Program Level learning outcomes as follows:
Intended Learning Outcomes Knowledge Communication Problem- Fluency in the Ethical Leadership Attributes /
Base for a Capabilities Solving Languages of Conduct and and Qualities of a
Financial Capabilities Business, Social Collaboration Financial
Professional Entrepreneurship Responsibility Professional
By the end of the course you and Technology
will be able to:

1. Analyze the impact on the

value of a firm of a change in its X X X X X
capital structure

2. Analyze the impact on the

value of a firm of a change in its X X X X X
payout policy

3. Estimate project and firm

values using free cash flow
X X X X
forecasts (i) under all-equity
financing and (ii) with leverage

4. Explain how private and

public firms raise capital (equity X X X X X X
and debt) in practice

5. Discuss a firm’s working

capital management and describe X X X X X X X
how to estimate a firm’s short-
term financing needs

Intended Learning Outcomes Learning Assessments Learning Activities

1. Analyze the impact on the value of a firm of Midterms, final exam, in-class participation Text reading, interactive lecture, problem
a change in its capital structure sets, discussion board

2. Analyze the impact on the value of a firm of Midterms, final exam, in-class participation Text reading, interactive lecture, problem
a change in its payout policy sets, discussion board

3. Estimate project and firm values using free Midterms, final exam, in-class participation Text reading, interactive lecture, problem
cash flow forecasts (i) under all-equity sets, discussion board
financing and (ii) with leverage

4. Explain how private and public firms raise Midterms, final exam, in-class participation Text reading, interactive lecture, problem
capital (equity and debt) in practice sets, discussion board

5. Discuss a firm’s working capital Midterms, final exam, in-class participation Text reading, interactive lecture, problem
management and describe how to estimate a sets, discussion board
firm’s short-term financing needs

Course Resources:
Textbook: J. Berk, P. DeMarzo, and D. Stangeland, Corporate Finance (Fifth Canadian Edition), Pearson
Canada, Toronto.
(Note: MyLab is good practice for learning the course material, but not required.)

3
Course Evaluations:

Assessment Method Date Percent of

Total
Grade
Classroom Participation Throughout term 10%
Midterms 1 & 2 Friday, June 9th 4:30-6pm & Friday, July 14th 4:30-6pm 60%
Final Exam TBA Registrar’s Office 30%
Total 100%

Final mark % = max {0.25 * midterm 1 % + 0.35 * midterm 2 %, 0.35 * midterm 1 % + 0.25 * midterm 2 %}
+ 0.30 * final exam % + 0.10 * classroom participation %

Therefore, the weights for midterm 1 and midterm 2 will be assigned by whatever works to your
advantage. For example, if you had an off day when you wrote midterm 1 and you did better on midterm
2, then midterm 1 will be worth 25% and midterm 2 will be worth 35%. The final exam will be worth
30% while classroom contribution will be worth 10%.

Classroom participation:
Your classroom participation accounts for 10% of your final grade. Roughly 50% of your participation
will be attributed to your attendance, and the rest will be attributed to your in-class contribution.
In-class contribution involves making a meaningful contribution to the learning of the class. This can be
achieved in many ways, including: i) answering direct questions posed to the class; ii) participating in
class discussions on issues we are addressing; iii) raising questions or comments that help the class better
understand the issues or gain a different perspective on material covered. Note that due do the class size,
everyone is not expected to participate every class (nor would this be possible).
Emphasis will be placed on the quality of contribution. The following will negatively affect your
contribution grade: In-class internet/email usage (unless we are all visiting a specific website for
pedagogic purposes), instant messaging, texting, gaming etc. Turn off all mobile phones during class.
These things are a distraction not just for yourself, but for those around you. Every year we have at least
one student email us complaining that those around them are distracting. Do not let that distracting student
be you.
With the help of a teaching assistant, we will keep records of each student’s class contribution. To
facilitate this we use a seating chart. In order for you to gain any credit for classroom contribution you
must i) sit in the same seat every class ii) display every class (visibly to me) a large, clear name tag.

Note that the use of generative AI tools (including but not limited to ChatGPT) is not acceptable in any
evaluation element within this course.

Attendance & Punctuality:

Given the very big class sizes, you are required to come to your registered section. You should NOT come
to a different section even if it is taught by the same instructor, or come to the other instructor's class,
since your attendance and participation will NOT be recorded and rewarded.

4
You are responsible for catching up on missed material (you are strongly advised to find a trusted
colleague who will help you understand what was covered in class) if you miss a class. Repeated absences
will have a negative impact on your class contribution grade.

Class Preparation:
You are expected to arrive in class having already read any assigned materials, attempted any questions
assigned, and prepared with your own questions.
Assigned chapter readings from the textbook will reinforce the material covered in class. The most
difficult and important topics will be covered in class, but time constraints do not permit coverage of all
topics at the same level of detail. However, you are responsible for all assigned chapter readings
regardless of whether the material has been covered in class. Note that some selected topics may be
covered either in more detail or at a more advanced level in class than in the textbook.
Several practice problem sets will be distributed throughout the term. These problem sets will not be
graded but your success in the course will depend on your ability to do questions similar to those
assigned. Note that doing the questions from these practice problem sets at your own pace while
consulting your course notes may not constitute good preparation for doing similar questions under the
time pressure of an exam.

Exam Preparation:
Exam coverage is listed in the course schedule on the last page of this syllabus.

You are expected to stay up to date with the course schedule and have read any assigned textbook
materials and slide decks, attempted any problems assigned, and prepared your own questions for posting
on Piazza. All students will be enrolled in Piazza
(http://piazza.com/uwaterloo.ca/spring2023/afm274afm275). When asking questions on Piazza, please be
as specific as possible. Avoid asking questions like: “I don’t understand this question. Can you explain?”
Instead, ask questions like: “I arrived at the following answer by doing this *include an explanation of
how you approached the problem* but the solution did the following *include an explanation of the part
of the solution you did not understand*. Can you explain?” Do not ask questions like: “How long is the
exam? What will be covered in the exam?” since exam information is provided in course syllabus/Learn
announcements.

Close to each exam, tutorials will be hosted by the TAs. Dates and times for the tutorials will be
announced. Students will be required to submit their questions the day before the tutorial. Additional
questions may be addressed during tutorials if time allows.

Accommodations for Missed Assessments:

Students are expected to complete all course assessments and write examinations as scheduled; however,
there may be circumstances where accommodating a missed assessment is approved. Accommodation is
not automatic upon the presentation of documentation. Instructors will use the documentation along with
all information available to them, when determining whether accommodation is warranted. If an
accommodation for a missed course assessment is approved the instructor will determine the appropriate
accommodation.

5
To ensure fairness to all students, if you miss one exam (exam 1, for example) and are allowed to transfer
the weight of the missed exam to another exam (exam 2, for example), exam 2 will also include the
materials that are supposed to be tested in exam 1.

Note that if you miss both midterms, you may not transfer their weights and content to the final exam.

If an accommodation is approved regarding a missed final exam, you will be required to write the exam the
next time the course is offered. At the end of the current term you will receive an INC course grade. When
you have written the final exam, a grade revision will be submitted based on the results of the final exam
and your other course work. Failure to write the final exam the next time the course is offered will result in
a course grade based on the elements of the course that you completed.

Calculator:
In AFM 274 we will require the use of a calculator. All students must write course examinations with a
calculator that is non-programmable and non-communicating. A specific financial calculator is not
required, but it is essential that the student’s calculator be able to handle exponents. The ability to store
the results of calculations in the calculator’s memory is highly desirable.

Re-grade Requests:
Written requests for in-term tests should be made within one week after the later of either the
examination/assignment return day or the day a response guide/rubric is made available. You must use
the Application for Regrade form (to be available in LEARN). The written request must clearly indicate
which questions and sections you believe were improperly graded, with detailed reasons. Re-grading
requests without detailing question and section specifics or reasons will not be considered. No late
requests will be considered. The instructor reserves the right to re-grade the entire exam and raise or
lower the grades originally assigned.

Submission Times:
Please be aware that the University of Waterloo is located in the Eastern Time Zone (GMT or UTC-5
during standard time and UTC-4 during daylight saving time) and, as such, the time for your activities
and/or assignments are due is based on this zone. If you are outside of the Eastern Time Zone and require
assistance converting your time, please try the Ontario, Canada Time Converter.

6
UNIVERSITY OF WATERLOO AND SCHOOL OF ACCOUNTING & FINANCE
POLICIES:

Details regarding School of Accounting and Finance (SAF) policies and University of Waterloo policies can
be found on the SAF LEARN site “My SAF Community” at:
https://learn.uwaterloo.ca/d2l/le/content/66209/Home?returnPoint=1&ou=66209 within the Learn – SAF
Course Syllabus – Policies for Students folder.

These policies are an integral part of this course syllabus. They have been posted on the SAF LEARN site as
they are not course specific but are common for all SAF program courses. Please ensure that each term you
are informed regarding these policies. They include:

School of Accounting and Finance Policies:

· Accommodations for missed assessments

· SAF Process for Requesting Accommodation for Missed Assessments

· Recording of Lectures

· Textbooks and Intellectual Property Rights

· Attendance at the Registered Section

University of Waterloo Policies:

· Academic Integrity

· Grievance

· Discipline

· Appeals

· Academic Offenses and Implications

· Accommodation for Students with Disabilities

· I-clickers

· Mental Health Support

· Territorial Acknowledgement

· Chosen/Preferred First Name

7
 Course Schedule:

Date Topic Text Readings

May 9, May 11 Introduction - Review - Risk and Return No Text Readings

May 16, May 18 Capital Structure in Perfect Capital Markets Chapter 17
NO CLASS – VICTORIA DAY MADE UP
May 23
DAY
May 25, May 30 Debt and Taxes Chapter 18
Financial Distress, Managerial Incentives, and
June 1, June 6 Chapter 19
Information
June 8 NO CLASS – EXAM PREPARATION
June 9 MIDTERM 1 (4:30pm-6pm) Covers Chapters 17, 18, 19

June 13, June 15, June 20 Payout Policy Chapter 20

June 22, June 27, June 29 Capital Budgeting and Valuation with Leverage Chapter 21

July 4, July 6 Equity Financing Chapter 23

July 11 Debt Financing Chapter 24
July 13 NO CLASS – EXAM PREPARATION
July 14 MIDTERM 2 (4:30pm-6pm) Covers Chapters 20, 21, 23
July 18 Debt Financing Chapter 24
July 20 Working Capital Management Chapter 26
July 25, July 27 Short Term Financial Planning Chapter 27

August 1 Final Exam Review No Text Readings

TBA FINAL EXAM Covers Chapters 24, 26, 27