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Corporate Finance and Investment

  • Module code: FE5001
  • Year: 2018/9
  • Level: Year 5
  • Credits: 30.00
  • Pre-requisites: None
  • Co-requisites: None

Summary

This module provides an introduction to modern finance and financial markets. Core elements of corporate finance are examined in the broader context of the working of financial markets and institutions, and the pricing of financial assets. We will discuss key analytical concepts, tools and theories of financial decision making and the functioning of financial markets, and examine empirical information about trends in the global financial system. 

Aims

  • To introduce students to key concepts of finance and the role of the financial system in the economy.
  • To provide students with an understanding of the role of different financial institutions and markets, and the pricing of financial assets.
  • To enable students to understand and work through the key elements of corporate capital budgeting.
  • To develop students’ capacity to obtain and interpret qualitative information and quantitative data on corporations, financial instruments and markets.

Learning outcomes

  • Explain key concepts of finance, the role of different financial institutions and markets, and recent developments in financial systems.
  • Explain key features of different financial instruments and solve quantitative exercises related to the pricing of financial assets.
  • Evaluate corporate investment projects using different appraisal methods; explain and estimate the opportunity cost of capital.
  • Assess the advantages and disadvantages of different financing strategies for a corporation.
  • Demonstrate proficiency in obtaining and analysing financial data.

Curriculum content

  • Role of the financial system in the economy
  • Key concepts: time value of money, compounding and discounting; risk and return; arbitrage and speculation; information and market efficiency
  • Overview of financial institutions, instruments and markets
  • Prices and yields of bonds and stocks; risk premia; risk and portfolio diversification
  • Corporate capital budgeting: types and goals of firms; net present value and other appraisal methods; opportunity cost of capital; advantages and disadvantages of equity and debt financing; theories and evidence of corporate financing strategies
  • Equity markets: types of equity; market participants; issuing shares to the public
  • Bond and money markets: types of bond and money market instruments; market participants; theories of the yield curve; money and bond markets and monetary policy
  • Role of banks in the financial system: types of banks; banks and the payments system; banks and credit creation; banking regulation
  • Global finance and financial crises: capital flows and the globalization of financial markets; exchange rates; currency, banking and sovereign debt crises

Teaching and learning strategy

The teaching/learning experience will involve a combination of lectures and seminars, and guided independent study. Lectures are designed to introduce students to the key elements of each topic and provide the basis for further independent reading and solving of problem sets. Seminars offer an opportunity for critical discussion and review of problem sets. Completing a case study of an investment project appraisal provides practical experience in capital budgeting.

Breakdown of Teaching and Learning Hours

Definitive KIS Category Indicative Description Hours
Scheduled learning and teaching Lecture 44
Scheduled learning and teaching Seminar 22
Guided independent study Recommented reading and solving problem sets 110
Guided independent study Preparation of coursework case study 40
Guided independent study General independent study and revision for class test and exam 84
Total (number of credits x 10) 300

Assessment strategy

Summative assessment will comprise: a written report (25%); a case study of a corporate investment appraisal exercise to be submitted in the first half of the second semester (25%); and a two hour end of module examination (50%).

A range of formative assessments undertaken both in class and during independent study will be set on a weekly basis on the content covered in the week’s lecture. This will allow students to monitor their progress and provide a basis for feedback from the module leader and discussions with the personal tutor.

Mapping of Learning Outcomes to Assessment Strategy (Indicative)

Learning Outcome Assessment Strategy
1) Explain key concepts of finance, the role of different financial institutions and markets, and recent developments in financial systems. Written report/examination
2) Explain key features of different financial instruments and solve quantitative exercises related to the pricing of financial assets. Written report/examination
3) Evaluate corporate investment projects using different appraisal methods; explain and estimate the opportunity cost of capital. Coursework case study/examination
4) Assess the advantages and disadvantages of different financing strategies for a corporation. Examination
5) Demonstrate proficiency in obtaining and analysing financial data. Written report/coursework case study

Breakdown of Major Categories of Assessment

Assessment Type Assessment Name Assessment Weighting
CWK Written report 25
CWK Case study of investment project appraisal 25
EXWR Two hour unseen examination 50
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. (2011) Corporate Finance. Global Edition. Second Edition. Boston: Prentice Hall

Brealey, R.A., Myers, S.C. and Marcus, A.J. (2012)  Fundamentals of Corporate Finance. International Edition. 7th Edition. New York: McGraw-Hill

Cecchetti, S.G. and Schoenholtz, K.L.(2011)  Money, Banking and Financial Markets. Global Edition. Third Edition. New York: McGraw-Hill

Bibliography recommended reading

Bodie, Z., R.C. Merton and Cleeton, D.L. (2009) Financial Economics. Second Edition. UpperSaddleRiverNJ: Prentice Hall

Vaitilingam, R. (2011) The Financial Times Guide to Using the Financial Pages. 6th Edition. Harlow (UK): Pearson Education

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