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Corporate Finance

  • Module code: BA6802
  • Year: 2018/9
  • Level: 6
  • Credits: 30
  • Pre-requisites: BA5804 Finance
  • Co-requisites: None

Summary

The importance of companies in economic, social and personal life is indisputable and whatever role students will have in a company it is important to understand the nature of its economic decisions.This module builds on the foundations of BA5804 Finance to provide a comprehensive and thorough study of contemporary corporate finance. It incorporates the most recent theoretical and empirical developments in corporate finance and explores the traditional theoretical principles in force alongside the most recent developments. Students will be expected to get involved in discussions and debates of theoretical issues and their application in corporate life and they will be encouraged to develop and adopt a critical approach.

Aims

  • To provide the opportunity to explore strategic decision-making in the field of financial management and corporate finance, with particular focus on the investment, fundraising, and distribution decisions.
  • To examine the interface and interactions between corporations and the capital markets.
  • To engage in a critical analysis of modern finance theory and the associated empirical research literature and to provide students with opportunities to explore how theory and evidence can be applied to enhance corporate finance decision-making.
  • To develop knowledge and understanding about the role of corporate finance professionals in business operations and strategic management.
  • To enable the acquisition of analytical and numerical skills and the handling of complex variables in the area of finance to inform decision-making.

     

Learning outcomes

On successful completion of the module, students will be able to:

  • Demonstrate a critical understanding of the theories and empirical evidence related to modern finance theory.
  • Apply the concepts and principles of contemporary corporate finance theory to specific decision making contexts.
  • Demonstrate and illustrate the complexity of the relationships between firms and investors and how those relationships affect and interact with the financial decision-making process.
  • Analyse the financial implications of specific incentive mechanisms and configurations for the delivery of organisational goals and shareholder value.
  • Apply the theory of financial options to evaluate the value of strategic choices available to management in the context of capital investment.

Curriculum content

  • Information and agency theory
  • Capital asset pricing model: de-gearing and re-gearing beta; the arbitrage pricing model
  • Business valuations:
  • Valuation theory/tools/techniques of financial assets
  • Sources of finance: cost of debt(long-term and medium-term debt instruments, short-term debt)
  • Theory of capital structure: Modigliani and Miller with and without taxes; adjusted present value model
  • Share valuation
  • Dividend policy and distribution decisions: theories of dividends, share buy-
  • Estimating theoverall cost of capital
  • Impact of cost of capital on investments
  • Risk management
  • Options and derivatives
  • Internal sources of finance and dividend policy
  • Initial public offerings (IPOs)

Teaching and learning strategy

The module is mainly delivered through a series of lectures with separate seminar sessions.. The two-hour lectures will present and examine the major issues and theoretical material relating to corporate finance and, where appropriate, provide demonstrations of the application of theoretical models.These lectures will be reinforced by one-hour seminars which will provide students with the opportunity to apply the theoretical knowledge, explore solutions to corporate problems and critically evaluate their details, often through (but not limited to) case study analysis and exercises.

To facilitate and aid self-managed learning the cohort will be divided into study groups that will be expected and encouraged to collaborate in the learning process. Students will be expected to read widely, encouraged by weekly references to the academic literature and the financial press. In addition, materials will be delivered via Canvas and will furthermore be used to present the cohort with topical material from the financial press and to invite study groups and individuals to contribute to online discussion and critique. Students will also be introduced to use of Bloomberg Professional suite among other financial databases.

Due to the experiential nature of the learning on this degree, and the importance of professional development enabling students to develop practical skills, learn from and interact with others, attendance is compulsory. Any students not attending a minimum of 80% of their timetabled sessions will be at risk of academic failure.

Breakdown of Teaching and Learning Hours

Definitive UNISTATS Category Indicative Description Hours
Scheduled learning and teaching A combination of two - hour lectures and one - hour seminars 66
Guided independent study 234
Total (number of credits x 10) 300

Assessment strategy

The assessment strategy for this module is based on a formal assessment regime that includes both coursework and a written exam. The coursework comprises of an individual case study report of 2,000 words that accounts for 30%; and a series of short in-class exercises, which account for 10% of the module marks.The case study report will require use of knowledge and understanding but also, importantly, skills of analysis, evaluation and synthesis. It is important that students have the ability to coherently structure an argument supported by real-life qualitative as well as quantitative research.The seminars will require utilisation of technical knowledge regarding specific tools and techniques applied in modern corporate finance.

The exam will combine theory and numerical data and is designed to allow individual students to demonstrate knowledge, understanding and the technical ability to apply financial models, tools and techniques. Students will also be provided with a number of opportunities for formative assessment via individual and study-group settings, the seminars and the in class exercises.

Mapping of Learning Outcomes to Assessment Strategy (Indicative)

Learning Outcome Assessment Strategy
1) Demonstrate a critical understanding of the theories and empirical evidence related to modern finance theory. Case study report, in-class exercises and exam.
2) Apply the concepts and principles of contemporary corporate finance theory to specific decision making contexts. Case study report, in-class exercises and exam.
3) Demonstrate and illustrate the complexity of the relationships between firms and investors and how those relationships affect and interact with the financial decision-making process. Case study report, in-class exercises and exam.
4) Analyse the financial implications of specific incentive mechanisms and configurations for the delivery of organisational goals and shareholder value. Case study report, in-class exercises and exam.
5) Apply the theory of financial options to evaluate the value of strategic choices available to management in the context of capital investment. Case study report, in-class exercises and exam.

Elements of Assessment

Description of Assessment Definitive UNISTATS Categories Percentage
Case study report Coursework 30%
In-class exercises Coursework 10%
Written closed-book exam Written Exam 60%
Total (to equal 100%) 100%

Achieving a pass

It IS NOT a requirement that any major assessment category is passed separately in order to achieve an overall pass for the module.

Bibliography core texts

Berk, J. and DeMarzo, P.,2013.Corporate Finance, Pearson/Addison Wesley.

Additionally:the associated MyFinanceLab with this text.

Bibliography recommended reading

Arnold, G.,2008.Corporate Financial Management. 4th ed.Financial Times/Prentice Hall.

Benninga, S.,2010. Principles of Finance with Excel. Oxford University Press.

Brealey, R, Myers, S.and Allen, F.,2008. Corporate Finance. 9th ed. International:McGraw Hill.

Megginson, W. and Smart, S.,2008. Introduction to Corporate Finance.Thomson South-Western.

Bodie, Z.,Kane, A.and Marcus, A.,2008. Investments.7th ed. International: McGraw Hill.

Blake, D.,2000. Financial Market Analysis. 2nd ed. Wiley & Sons.

Pike, R. and Neale,B., 2008. Corporate Finance and Investment. 6th ed. Financial Times/Prentice Hall.

Sharpe,W.,Alexander,G. and Bailey, J.,1999. Investments.6th ed. International:Financial Times/Prentice Hall.

Pilbeam, K.,2005.Finance and Financial Markets. 2nd ed.Palgrave Macmillan.

Van Horne, J.and Wachowicz, J.,2008. Fundamentals of Financial Management.13th ed. Financial Times/Prentice Hall.

Tirole, J., 2006.The Theory of Corporate Finance. Princeton.

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