F302 FINANCIAL DECISION MAKING COURSE OUTLINE FOR FALL 2008 (Class #20398 Tu, Th 4:00-5:15 p.m. KO 110)
  INSTRUCTOR: Dianne Roden, PhD Office: KO 174G, phone 455-9470, fax 455-9348 Office hours: Tu, Th  2:30-4:00  and 5:30-7:00 p.m. or by appointment
WEB PAGE: Roden's Home Page EMAIL: droden@iuk.edu

 TEXTBOOK:   text website:        Ross, Westerfield & Jaffe, Corporate Finance , 7th edition 
 Includes chapter summaries and on-line quizzes.

OPTIONAL: Student Problem Manual for Corporate Finance. This book will be on reserve in the library.
A calculator is necessary to do the assignments and exams. A financial calculator is recommended, but is not required.

PREREQUISITE: F301

EXAMS: There will be three exams, two during the semester and one during the final exam period.

first midterm	Sept 30	in class
second midterm	Nov 4	in class
Final exam	Dec 16	4:00-6:00 p.m.

There will also be a project which involves analyzing a publicly traded company. This project is described more fully at the end of this syllabus.  (Description of Project)

Your grade will be determined based on the following weights:

first midterm	25%	75 points
second midterm	25%	75 points
Project	20%	60 points
Final Exam	30%	90 points
TOTAL	100%	300 points

Exam format will contain some multiple choice, some short answer, and a number of problems similar to the ones assigned in class.

GRADES: A 90-100, B 80-89, C 70-79, D 60-69, F < 60
(plus and minus grades will be given in the high & low range of each group)
Grades will be posted on Oncourse at:      http://oncourse.iu.edu

GOALS:
This course covers application of financial theory and techniques in the search of optimal solutions to financial management problems. The course expands upon and extends the topics introduced in Financial Management F301. In addition, the student will be exposed to specialized topics including options, hedging, futures, mergers, and international finance.

OBJECTIVES:

• Demonstrate proficiency in the application of discounted cash flows in a capital budgeting setting. Advanced topics in capital budgeting will be addressed.
   
• Use and understand mean/variance analysis to facilitate work in an environment where risk and return are related. Students will be familiar with applications of the Capital Asset Pricing Model.
   
• Learn strategies for successful short-term financial planning. Be able to calculate the optimal level of cash balances.
   
• Use the Black-Scholes model to value and understand options.
   
• Understand the use of forward and future contracts to hedge against risk.
   
• Comprehend the possible motivations for mergers and acquisitions. Be able to value an acquisition target.
   
• Be familiar with the special issues in international finance including the relationship among foreign exchange, interest rates, and inflation.

 The structure of this class makes your individual study and preparation outside class extremely important. You will get much more from the lectures if you attempt the problems on your own and you come to class prepared.

LIBRARY RESOURCES:  Solutions to all problems will be put on reserve in the library after they are discussed in class. A Study Guide for Corporate Finance will also be on reserve. The IUK library offers a large variety of resources to supplement this course. Examples include current newspapers (Wall Street Journal), magazines (Business Week), databases (ABI Inform), and access to the Internet.

Mission Statement of the IUK School of Business: may be found at:   http://www.iuk.edu/~kobus/

Indiana University Kokomo provides equal access and support services to students with special needs. Students with documented disabilities should contact the University Division (455-9309) and discuss any necessary support services or accommodation with the instructor. 

 

WEEK	DATE	TEXT	TOPIC & ASSIGNMENT
1	Aug 26   Aug 28	intro  ch 7	introduction & overview  Net Present Value
2	Sept 2   Sept 4	HW  ch 8	ch7 #1,3,4,13,21,24,32,37  capital budgeting strategy
3	Sept 9   Sept 11	HW  ch 9	ch8 #1,2,7,8,11,12,15,19         investment idea  risk and return
4	Sept 16   Sept 18	HW  ch 10 & 12	ch9 #1,3,11,12,13,18,19       Ch10 #2,6,8,10  CAPM & cost of capital
5	Sept 23   Sept 25	HW  review	ch10 #17,22,23,26,30,33,34     Ch12 #1,3,10,12,13,14  review for first exam
6	Sept 30   Oct 2	EXAM I  ch 20	EXAM I  long-term debt
7	Oct 7   Oct 9	HW  ch 22	ch20 #1,2,4,6,9,14,15  options
8	Oct 14   Oct 16	HW  ch 23	ch22 #1,4,5,6,10,11,21,22  option applications
9	Oct 21   Oct 23	HW  ch 25	ch8#19   ch22#25    ch23#1,3,4 hedging & futures
10	Oct 28   Oct 30	HW  review	ch25 #2,3,5,10,11,13,14,18  review for second exam
11	Nov 4   Nov 6	EXAM II  ch 26	EXAM II  short-term finance
12	Nov 11   Nov 13	HW  ch 27	ch26 #2,3,6,8,9,14,16  cash management
13	Nov 18   Nov 20	HW ch 29	ch27 #2,4,6,8,9,10,11  mergers & acquisitions
14	Nov 25 Nov 27	projects no class	discuss projects Thanksgiving Break
15	Dec 2   Dec 4	HW  ch 31	ch29 #1,4,10,11,14       international finance
16	Dec 9   Dec 11	HW  review	ch31 #1,3,5,6,7          PROJECT DUE  review for final exam
17	Dec 16	FINAL  EXAM	FINAL EXAM

 
FINANCIAL DECISION MAKING PROJECT

The purpose of this project is to give you an opportunity to consider the topics covered in Financial Decision Making in a real world context and to familiarize you with sources of publicly available financial information found in the library and on the world wide web. This project will determine 20% of your final course grade. You may work alone or with one other person on this project.

The final typed report will be due in class on Dec 9. No late reports will be accepted. The reports may vary in length, depending on the company chosen. However, each report must include all seven sections described below.

Select a publicly traded company for analysis. The company may be traded on the New York Stock Exchange, the American Stock Exchange, or on NASDAQ. Information will be easiest to get for companies included in Market Insight (included with the text). It may be beneficial to select a company you are interested in for employment purposes, have worked for, have family ties with, or that you currently invest in.

Each report must contain a section devoted to the following topics:

1) Introduction: Why did you choose this firm? Describe the type of business, including major competitors and the overall industry outlook.

2) Financial Health: Report standard financial ratios for the last five years and identify and discuss financial strengths and weaknesses of your firm. Identify any trends and compare to industry or competitors' ratios.

3) Recent Events: Review public sources of your choice to find public announcements that have directly or indirectly affected the market value of the company. Discuss the events and the market response.

4) Market Risk: Collect stock price and dividend information and report the monthly rates of return for the stockholders over the last few years. Calculate beta for the firm's equity and compare it to a publicly available beta. Discuss possible sources of firm-specific risk.

5) Debt Policy: Collect information on the long-term debt that the company has outstanding. Compare the current yield to maturity on the debt relative to the yield for Treasury securities with similar maturity. What credit rating does the company's debt have?

6) Cost of Capital: Estimate the cost of capital the company should use for capital budgeting projects that expand capacity in its core business. Discuss recent capital budgeting decisions that the company may have made or may be considering.

7) Summary: Comment on the position of the company relative to its competitors. Put yourself in the position of an investor and evaluate the prospects of the company. Would you invest your money in this firm?
 

INTERESTING FINANCE WEB SITES
 

BIG CHARTS  historical stock quotes
CNN FINANCIAL  business news and stock quotes
YAHOO FINANCE a one-stop financial center
NUMA OPTION PRICING  calculates option values
WALL STREET JOURNAL  interactive version
MARKET INSIGHT financial data from S&P COMPUSTAT database
OTHER COOL WEB SITES  lots of interesting finance & econ web sites	FUN FINANCE SITES

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