Course Syllabus - Georgia State University

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Georgia State University
J. Mack Robinson College of Business
Department of Finance
PMBA 8135
Corporate Finance
Course Syllabus
Spring 2012
NOTE: It is your responsibility to read, understand and abide by all of the course information and policies
listed below. Failure to do so could result in your failing of this course or of your being administratively
withdrawn from the course by your instructor, by the Department of Finance, or by the Robinson College of
Business. This course syllabus provides a general plan for the course; deviations may be necessary.
Purpose of the course:
This course focuses on the financial management of both publicly held and private corporations. Students are
presented with a conceptual framework for understanding and addressing problems commonly faced by corporate
decision-makers and provided opportunities to apply these concepts to contemporary business situations. All
topics reflect the impact on the overall value and risk of the company. Topics covered include, but are not limited
to: time value of money, the valuation and role of debt and equity, capital acquisition and the organization of
financial markets, the relationship between risk and return including the capital asset pricing model, capital
budgeting/project evaluation techniques, cost of capital, cash flow estimation, project risk analysis, real options
and company valuation. All topics are presented from a perspective that will enable the corporate manager to
better understand how corporate decisions impact the value and risk of the firm.
Course Prerequisites/Corequisites:
Prerequisites: MBA 8000, MBA 8025.
All students, regardless of degree program, must have completed the appropriate prerequisites listed above with a
grade or "C-" or better.
Corequisites: MBA 8015, MBA 8030.
Either or both of these courses can be taken simultaneously with MBA 8135.
Georgia State University
MBA 8135: Corporate Finance
Required Text:
Ross, Westerfield, Jaffee: Corporate Finance, 9th. ed., ISBN 978-0-07-733762-9.
Additional student resource material can be found on and downloaded from the textbook’s
Financial Calculator:
It is necessary that you have a financial calculator to use throughout the course and that you bring it to each
class. Many end-of-chapter problems require complex arithmetic operations, and a financial calculator is
necessary to solve these problems efficiently. Recommended financial calculators are the Texas Instruments BA
II Plus, the Hewlett Packard 10B or 12C, the Sharp EL 733, and similar models. Approximate price: $35.
Attendance Policy:
Each student is expected to attend ALL scheduled class meetings for the entire duration of the class meeting. An
attendance sign-up sheet will be circulated each class period. It is your responsibility to sign the attendance
sheet. If you do not sign the list, you will be considered absent (see the note on academic honesty below).
Students arriving late may be permitted to sign the sheet only at the discretion of the instructor.
Any student who is absent from more than the equivalent of three classes will be dropped from the course.
Absences include the first week of class regardless of when a student registered for the course. If a student is
withdrawn for excessive absences after the midpoint of the grading period, a final grade of WF will be assigned.
There will be no exceptions to this policy!
An absence from class for any reason (job conflict, illness, appearance in court, transportation problems, etc.),
even if permitted and/or excused by your instructor, will count as one of the class absences against the three
class cumulative limit specified in the previous paragraph.
Academic Honesty:
The Department of Finance adheres strictly to the University's policy on academic honesty as contained in the
Academic Regulations section of the University catalog. Any student found copying during exams or quizzes,
signing someone else's name to the attendance list, using stored formulas in programmable calculators, using nonauthorized formula sheets or other notes during exams, collaborating on and/or copying any in-class or take-home
assignments, or the like will receive an F for the course and possibly be subject to additional University
disciplinary action.
No other electronic devices are allowed during quizzes and exams besides a financial calculator (see page 2).
Such prohibited items include laptops, personal digital assistants (PDA’s), text messaging systems and similar
devices. If you have any questions about the legality of your calculator, check with your instructor.
Georgia State University
MBA 8135: Corporate Finance
Grade Weights:
Exams (2 at 20% each)
Final exam
All course grades, once assigned, are final and cannot be changed except in the rare event of a mathematical
miscalculation by the instructor.
Grading Policy - Department of Finance:
In accordance with Departmental policy, for masters level courses (MBA and FI prefixed), it is expected that no
more than 35 percent of the students in a given class section will receive a grade of A. The majority of the
remaining students are expected to receive grades of B. Those students demonstrating significantly lagging
performance shall earn grades of C or lower as appropriate.
The finance department employs the +/- grading system. A C- is considered a passing grade for this course and a
C- is considered passing for prerequisite purposes for this course as well as for all finance electives.
Refer to the University catalog for information concerning +/- grading and quality points for GPA calculations.
Georgia State University
MBA 8135: Corporate Finance
Class 1: January 9th
Read: Chapter 1; Introduction to Corporate finance
Transition to world of finance from accounting
o Explain the reason for the owner wealth maximization goal
o Explain the nature of the conflicts between company stakeholders
o Describe the source of capital
o Describe the basic factors that influence interest rates in financial markets
o Explain why cash flows, timing, and risk are the primary factors affecting value
o Explain why after-tax cash flow is more relevant than net income
o Explain why future cash flows are more relevant than historical cash flows
o Explain why we should focus on market value rather than book value
Class 2: January 23rd
Read: Chapter 4; Valuation of future cashflows
Timing of cash flows
o Explain why money has a time value
o Compute the future value of a single sum-annual
o Compute r given other values-annual
o Compute the present value of a single sum-annual
o Compute the present value of an annuity-annual
o Compute the present value of a series of flows
o Compute the present value of an annuity & single sum-semi-annual
o Apply time value of money methodology to business problems (e.g., loan amortization)
Class 3: February 6th
Review and Exam-1
Read: Chapters 8 & 9; Bonds and Stock valuation
o Explain how value is based on future cash flows
o Explain how total market value is the sum of the market value of debt plus the market value of
o Describe the basic characteristics of bonds
o Describe basic characteristics of bank debt
o Compute the value of an option-free bond
Georgia State University
MBA 8135: Corporate Finance
Calculate yield to maturity
Explain inverse relationship between interest rates and bond prices
Explain key cash flow characteristics of equity (residual, dividends, capital gains)
Compute equity value for a no-growth firm
Compute equity value for a constant-growth value
Explain how growth opportunities relate to equity value
Explain how the expected value of growth is impounded in equity values
Class 4: February 20th
Read: Chapter 10 & 11; Return, Risk, and CAPM
Risk & return
o Explain why expected return and standard deviation are good measures of investment outcome
o Compute asset expected return and standard deviation
o Describe risk aversion and explain how it affects decision-making
o Explain why there is a risk-return tradeoff (maximize return for risk, minimize risk for return)
o Explain how adding assets to a portfolio affects expected return of the portfolio
o Explain how diversification eliminates firm specific risk--correlation
o Explain how diversification does not eliminate market risk
o Differentiate systematic and unsystematic risk
o Compute required return using the CAPM when given data input
o Explain how the CAPM expected return is the sum of the risk-free return plus a risk premium
o Explain why the CAPM provides a reasonable measure of required return
o Understand market equilibrium through the SML
o Understand that there are limitations to the single-factor CAPM and know that there are multifactor models that address these limitations
Class 5: March 5th
Read: Chapter 13; Risk, Cost of Capital
Risk, Cost of Capital
o Explain why the return for a specific security should be related to the risk of that security
o Compute the after-tax cost of debt
o Explain why all equity has a cost
o Compute the cost of equity using the CAPM and constant growth models where inputs are given
o Compute the WACC
o Explain that the WACC measures the cost of debt and equity together
Georgia State University
MBA 8135: Corporate Finance
Class 6: March 19th
Review and Exam-2
Read: Chapter 5 & 6; Investment rules, Capital investment decisions
Project valuation
o Identify the relevant cash flows of a project
o Explain why investment decisions should not be based on the cost of the actual funding
instrument alone
o Explain when the WACC is an appropriate measure of funding cost
o Compute payback
o Compute NPV
o Compute IRR
o Explain the application and limitations of payback, NPV and IRR to decision-making
Class 7: April 9th
Read: Chapter 7; Risk-analysis, Real-options, and Capital budgeting
Real Options
o Explain the importance of business strategy to investment decisions
o Understand the nature of real options
o Know how to evaluate the relative risk of a project using sensitivity and scenario analyses
Valuing a business
o Compute free cash flow
o Explain why free cash flow determines business value
o Compute business value using free cash flow and WACC
o Describe how asset needs drive funding needs
o Explain how the following factors affect company cash flow: industry production-marketing
technology, strategic marketing and production choices, growth, profitability, cyclicality, and
Cumulative review
Class 8: April 23rd
Final exam
Georgia State University
MBA 8135: Corporate Finance
Milind M. Shrikhande
Associate Professor of Finance
Department of Finance
Chartered Financial Analyst (CFA)
Ph.D., University of Pennsylvania, The Wharton School
M.A., University of Pennsylvania, The Wharton School
M.B.A., Indian Institute of Management, Calcutta
B.Tech., Indian Institute of Technology, Bombay
Corporate Governance
Asset Pricing
International Finance
Corporate Finance
Prior to joining Georgia State University, Dr. Milind
Shrikhande has worked at Georgia Tech, Unilever, and
the World Bank. He was nominated for excellence in
teaching at the Institute level at Georgia Tech’s DuPree
College of Business, and also won the Best Research
Paper Award at the Global Finance Conference. He was
awarded the First Harvey Brightman Award for teaching
innovation at the J. Mack Robinson College of Business
in 2006, GSU’s Instructional Effectiveness Award in 2007,
and the GPMBA Outstanding Professor Award in 2010.
His research has been published in the Review of
Financial Studies journal. He has also published his
research in European Financial Management, Journal of
International Financial Management and Accounting, as
well as the Journal of Multinational Financial
Management. He directs the MS-Finance program at
Georgia State University, and is a Visiting Scholar at the
Federal Reserve Bank of Atlanta.

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