Professional Documents
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C O U R S E S Y L L A B U S
Course Description:
FMI is a required course for all first-year MBA students, not just the finance major. Thus, it will
cover a lot of topics in an introductory manner. The emphasis is breadth rather than depth. It is
assumed that a student interested in a career in finance will get the in-depth exposure in specific
areas of finance in the second year elective. It will begin with a general overview and then go into
some detail on basic financial concepts, financial tools and techniques, and financial instruments.
Objectives:
1. To introduce the students to the world of finance. Anyone involved in the management of a
business needs to have some minimal knowledge of business finance.
2. To introduce students to basic financial concepts such as the time value of money, risk and
return. How should the Enterprise finance its investments? Specifically, How should the
Enterprise structure and restructure its capital? And how should the Enterprise manage its
liabilities and cost of capital?
How should the enterprise distribute its wealth? Specifically, what should its dividend
policy be? And how should its executives, stockholders and employees be compensated?
Case discussions will dominate the course methodology. While there will be assigned readings
for every major topic, these will not be specifically discussed in class. Students are strongly
advised to read these readings before going to the actual session as several surprise quizzes based
on the readings will be given. There will be a midterm and final examination that will include
both multiple choice objective type questions as well as a case.
Course Outline:
Session 10 Midterms
Course Code: FM II
Faculty: Prof. E. B. Perez
Class: MBA 2007
Sessions: Second Semester: 20 sessions
Course Objective
The course objective is to develop the MBA student's familiarity and facility with corporate
finance, valuation, and investments. The focus will be on tools to use in decision-making.
Course Description
Financial Management is delivered from a corporate perspective of Finance.
The course is primarily case-driven with various assignments, lectures, and discussions woven
into the class sessions.
Basic Text
Corporate Finance, by Brealey, Myers, and Allen, 8th Edition (earlier editions are acceptable).
Additional readings are to be assigned if necessary.
Learning Teams
Class Activities
A group presentation every other session starting from session 2. Presentations no more than 40
minutes. There will be 3 examinations: Preliminary (10%), Midterm (10%) and Final (20%), of
3 hours each, extendible to 4 with open materials including web.
Course Outline:
Session # Topic / Cases / Readings
Abstract:
To assess whether a company should enter the household products market, Procter and
Gamble's weighted-average cost of capital is Computed. Clorox's cost of capital is also
computed as a check on the P&G estimate. The case emphasizes the conceptual as well
as mechanical aspects of computing cost of capital for a company with homogeneous
business risk and stable capital structure. A student lotus worksheet file is available on a
computer diskette for use with this case.
Abstract:
A Wall Street Journal article is quoted as stating, "At PepsiCo, Inc., cola was king, but it
is quietly being dethroned." PepsiCo is composed of three lines of business: softdrinks,
restaurants, and snack foods. Using data from comparable pure-play companies, the
student is asked to compute divisional costs of capital and see if they can be reconcilled
with the company's reported cost of capital of 11 percent.
Abstract:
Reviews changes in Du Pont debt policy from 1965 to 1982. This period ended with a
dramatic increase in Du Pont's debt level attendant upon the merger with Conoco.
STudents are asked to develop a new debt policy for Du Pont in the 1980s.
Abstract:
Involves a very rapidly growing retail chain that is financing itself in an unusual (and at
first glance) risky fashion.
Abstract:
Massey-Ferguson began fiscal year 1981 in default on $2.5 billion of outstanding debt.
The company's future depends on the ability of lenders, the governments of Canada and
Ontario, and management, to agree on a refinancing _lan. The case reviews Massey's
performance and position in the industry and raises questions about the company's ability
to compete in the long run. Provides information on the firm's claimants in order to focus
students on the issues of a refinancing.
Abstract:
This aggressive retailer is adding store space at the rate of 25 percent per year. The case
presents an external-financing requirement amounting to $1.4 billion over the next five
years. Students must decide how to meet this requirement wisely, acknowledging the
relationship between business strategy and financial policy. Analysis of the firm's share
price reveals a substantial overvaluation in the market. A student Lotus worksheet file is
available on a computer diskette for use with this case.
Abstract:
Intel Corp., the world's dominant designer and manufacturer of microprocessors (the
"brains" of the personal computer), has accumulated a larage tranche of cash at an
unprecendented rate. Has the company grown up to the extent that it can begin
disbursing cash to its grown up to the extent that it can begin disbursing cash to its
shareholders? What kind of disbursement policy should it choose? Intel will continue to
face competition from imitators of its processors in the future, yet it is not clear whether
its cash holdings can or will be a competitive weapon in this competitive battle. The case
focuses on financial policy issued and on how they then interact with a very unusual and
dynamic form of product-market competiion and innovation. Can be used as a one-or-
two day exploration of the following issued: complementarity externalities and costs of
finance, appropritability of returns of investments, the role of finance in high-tech and
rapidly innovating sectors, the strategic uses of cah, analysis of capital structure and cash
disbursement policies, the use of financial policy as a competitive weapon, and timing in
the sale and purchase of equity linked instruments.
Abstract:
In late 1990, this company faced a large external financing requirement and needed to
reassess its traditional approaches to financing. The tasks for the student are to
recommend financing tactics to be employed for the next two years and to make a
general assessment of the firm's historical financing policy. Student and instructor Lotus
worksheet files are available on computer diskettes for use with this case and teaching
note.
Abstract:
With the aid of the bank's capital markets division, the lending officer is faced with
restructuring a customer's balance sheet to extend the maturity and to fix a larger portion
of the firm's interest payments. The alternatives include an interest-rate swap and private
placements. The objective of the case is to illustrate the lending officer as merchant
banker. A student LOTUS worksheet file is available on a computer diskette for use with
this case.
Abstract:
Describes the proper use of incremental analysis for capital investment decisions.
SUBJECTS: Finance; Managerial Economics; Capital Investment; Cost Analysis;
Decision Analysis; Foods; Investment Analysis; Return on Investment; Financial
Management
SETTING: United States
Abstract:
Includes twelve questions that add a new dimension to the question of whether a small
firm should acquire a piece of equipment and subsequently replace it with another.
Raises issues concerning time value of money, taxes, accelerated depreciation, working
capital, replacement equipment, timing of investment, inflation, and specific price
change. Based on Robinson Corporation (A) by R. F. Vancil.
Abstract:
The finance director of the Texas High Speed Rail Corp. (THSRC) is considering
modifications to the financing program designed to support the development,
construction and operations of THSRC's planned high-speed rail system. The current
plan achieves many objectives, including raising $6.5 billion from private sources, but a
few problems remain to be addressed. These include temporary overfunding, unutilized
tax losses, and certain important contingencies. Designed to highlight the shortcomings
of simple valuation tools in a static analysis when applied to a dynamic project. The
class discussion should isolate specific analytical issues, which may then be addressed in
a subsequent class sessions.
16 Case: Interco
Reading: Chapters 6, 11, 19 and 32
Abstract:
Interco has been advised by Wasserstein Perella to reject a $70 per share offer for the
company. The case deals with the various types of analysis employed by Wasserstein
Perella and allows a discussion of the actions of Interco's board as well as Wasserstein
Perella.
Abstract:
Gives students the opportunity to explore issues facing the board of directors in a
leveraged buyout. RJR Nabisco is valued under different operating strategies and the
source of gains in leveraged buyouts is stressed.
Abstract: This case deals with the origins of exchange rate risk and offers an introduction
to hedging techniques. The case emphasizes the relationship between interest rates and
exchange rates. Students are introduced to management of exchange risk in a
competitive-bidding situation.
2. To hone the students’ analytical, critical, creative, integrative and systemic thinking skills.
3. To instill values and attitudes that would make students more cognizant of their business
social responsibility.
Course Description
The course covers all topics taken up in the first two finance courses of the first year
MBA program. The contents of each topic, where applicable will be based on the CFA Institute’s
Chartered Financial Analyst (CFA®) Level 1 examination.
Textbooks:
1. Fundamentals of Financial Management --- Brigham and Houston (B&H)
2. Corporate Finance --- Brealey, Myers and Allen (BMA)
Course Outline
10 Midterm Exams