FIN 357 - Business Finance - Ducic 03635

fall DEPARTMENT OF FINANCE THE UNIVERSITY OF TEXAS AT AUSTIN Austin, Texas 78712-0217 • (512) 471-4368 • FAX (512) 471-5073 FINANCE 357: BUSINESS FINANCE FALL 2014 03635: TuTh 8:00am-9:30am GSB 2.120 03650: TuTh 9:30am-11:00am GSB 2.120 03665: TuTh 12:30pm-2:00pm UTC 4.132 Overview of the Course Instructor: Dr Robert C Duvic Distinguished Senior Lecturer Department of Finance Office: GSB 5.176D Office Hours: Monday, Wednesday, 10:00am-11:30am and by appointment Phone Number: 471-6026 E-mail: robert.duvic@mccombs.utexas.edu Textbook: McGraw-Hill Connect+ using Corporate Finance: Core Principles and Applications, Fourth Edition, Ross, Westerfield, Jaffe, Jordan, McGraw-Hill Irwin Course Objective: The firm is an economic entity that strives to create wealth Its success depends on the skills of its managers in making decisions that determine the firm's interaction with its economic environment This course examines these decisions: The investment decision: How managers look into an uncertain future and decide what assets the firm will acquire based on their view of their competitive markets The financing decision: How managers obtain the capital necessary to purchase the assets they require The working capital decision: How managers manage their cash to pay their short-term obligations These decisions are made in a market framework You must therefore understand the major aspects of markets and how they influence these decisions Prerequisites: As Dr Hadaway’s email stressed, we build on concepts from accounting, statistics and economics I will help you refresh these concepts, but will not re-teach this material Syllabus appendices A: Class Schedule B: Course Evaluation Structure C: Course Evaluation Procedures D: Course Materials E: Study Guidelines F: Course Policies G: Course Assignments 1|Page APPENDIX A: CLASS SCHEDULE Course structure: The course is organized into 22 Topics Each topic is divided into specific skills developed which provide the structure of the course, and assignments from LearnSmart, the text and supplemental readings These assignments are contained on our BlackBoard site under Assignments The dates in this schedule are approximate and will be adjusted as appropriate during the semester Part I: The Economy Aug 28 Course Introduction Sep 2 Topic 1: Human nature and economic activity Sep Topic 2: Human nature and the ethics of decision making Sep Topic 3: Structuring the business firm Sep 11 Topic 3: Structuring the business firm (Continued) Part II: The Accounting Framework Sep 16 Topic 4: Accounting value and statements Sep 18 Topic 5: Understanding accounting information Sep 23 Topic 5: Understanding accounting information (Continued) Part III: Economic Value Sep 25 Topic 6: Sep 30 10 Topic 7: Oct 11 Topic 8: Oct 12 Topic 9: Oct 13 Topic 9: Economic value: riskless assets Economic value: risky assets Basic structure of time value calculations Applying time value techniques Applying time value techniques (Continued) Part IV: Valuing Financial Securities Oct 14 14 Topic 10: Valuing the corporation Oct 16 15 Mid-term exam Oct 21 16 Topic 11: Valuing long-term debt Oct 23 Oct 28 17 18 Topic 12: Valuing equity Topic 12: Valuing equity Part V: Valuing non-financial assets Oct 30 19 Topic 13: Capital budgeting: Investment decision rules Nov 20 Topic 14: Capital budgeting: Cash flow analysis Nov 21 Topic 14: Capital budgeting: Cash flow analysis (Continued) Nov 11 22 Topic 15: Capital budgeting: Strategy and analysis Part VI: Risk and the opportunity cost Nov13 23 Topic 16: Risk and return: Single asset and portfolios Nov 18 24 Topic 17: Risk and return: Diversification Nov 20 25 Topic 18: Risk and return: Opportunity cost and CAPM Part VII: The cost of capital, capital Structure and working capital decisions Nov 25 26 Topic 19: Cost of capital Nov 27 27 Topic 20: Market efficiency Dec 28 Topic 21: Capital structure and firm value Dec 29 Topic 22: Working capital management Dec 12 2|Page Final Exam 7pm-10pm APPENDIX B: EVALUATION STRUCTURE The course evaluation is at the heart of your learning efforts You will have the opportunity to test yourself via LearnSmart exercises on-line tests and exams during the semester Major elements  Class performance: Each class will have from 10 to 20 questions that will be directed at random to individual students  Three on-line tests: Parts I, II, Part IV and Part V of the course have an associated on-line tests consisting of verbal and quantitative questions, and will be approximately one to one and one half hours to complete The scheduled dates and times will be announced as the semester progresses  Mid-term exam: One in-class mid-term exam, conducted on Thursday, October 16, covers Part III of the course and consolidates the important concepts of economic decision making  Final exam: The final exam emphasizes Parts IV through VII of the course and helps you to consolidate your skills at applying value to the investment and financing decisions involved in running a corporation This is a consolidated final for all of my sections of Finance 357 and will be given on Friday, December 12, 7pm10pm Grade distribution Evaluation Class performance: On-line Tests Part I: the Business Firm; Part II: Accounting Value Part IV: Valuing Financial Securities Part V: Valuing Non-financial Assets Mid-term exam Part III: Economic Value Final exam Percent of course grade 10% 10% 10% 10% 25% 35% Grading The final course letter grade will be based on a curve set by the McCombs School of business to produce an average GPA of 3.0 for the course Course letter grades will be based on the relative frequency distribution (percentile ranking) of the total points accumulated over the entire course weighted by the above percent allocations This approach implies that your final grade will be determined by the relative performance of the entire class That is, there is no predetermined standard as to what constitutes an A, A- B+, B, etc 3|Page APPENDIX C: EVALUATION PROCEDURES Class Performance In each class session I will ask between 10 and 20 questions concerning the material These questions may be a review of text material, student opinion of a relevant situation, or answer to a quantitative question These will be asked in a random basis, with the following grades assigned Not present-0 points; no relevant answer/don’t know1 point; good answer-2 points On-line Tests Venue: The tests will be conducted online using Canvas Content: The tests will contain a mix of fill-in-blank, matching, essay/short answer, and quantitative problems The general content and structure of each test will be announced in advance Scope: The three on-line tests cover all Parts I and II, Part IV, and Part V, respectively Procedure: The tests will be scheduled after we’ve covered each part of the course, with the specific date announced several days in advance of the test Each test will be available at 7:00pm on the scheduled day Each test will be available for two days You will have approximately from one to two and one half hours to complete each test Absences: Individuals missing a test without my permission will receive the lowest grade of anyone who did take the test Students with special situations that would make taking these tests difficult should contact me at least two days before the test begins Students with authorized absences will have the points for the missed test added to the weight of the final exam Students missing the text without my permission will receive the lowest grade given in the test Mid-term Exam Venue: The mid-term exam will be a paper exam given in class on Thursday, October 16 Content: The mid-term exam will contain a mix of fill-in-the-blank, matching, essay and or short answer and quantitative problems Scope: The mid-term exam covers Part III of the course Supporting documents: Formula sheets and time-value tables will be provided with the mid-term exam You need bring only writing instruments and your calculator No other materials will be allowed Absences: As this is exam is given during a regularly scheduled class session, only special situations will allow a make-up exam Please see me early if a situation does come up Individuals missing the mid-term exam with my permission will at my discretion take a make-up exam or have the points of that exam added to their final Individuals missing the exam without my permission will receive the lowest grade given in the exam Final Exam Venue: The final exam will be a paper exam given in a classroom scheduled by The University Registrar Content: The Final Exam will contain a mix of fill-in-the-blank, matching, essay/short answer, and quantitative problems Date: The final exam is a consolidated final for all four of my Fin 357 sections and will be on Friday, December 12, 7pm-10pm The alternate final exam will be on Friday, December 12, 7pm-10pm You must have my written permission to take this alternate exam Scope: The final exam is a comprehensive exam that concentrates on the latter half of the course and evaluates your comprehensive understanding of economic decision making Supporting documents: Formula sheets and time-value tables will be provided with the final exam You need bring only writing instruments and your calculator No other materials will be allowed Absences: Missing the final exam is a serious issue Students missing the final exam without my permission will receive the lowest grade of anyone taking the final exam Students facing a major problem must contact me by email prior to the exam and be ready to submit independently verifiable documentation as to why they are unable to take the final exam at the scheduled time 4|Page APPENDIX D: COURSE MATERIALS Supplemental Materials Text: The text is an excellent one, and provides a well-written, detailed support for your efforts It covers the materials in more depth than we can cover in class and provides many definitions, descriptions and examples that provide a comprehensive treatment of each topic Mediasite: The 9:30am class will be record using Mediasite These will be available to all of my Fin 357 sections for review The links to each presentation will be available on our BB site, under Course Documents/Mediasite The Class Lectures and Discussions Each Topic is supported by class notes These are modified copies of the PowerPoint slides used in class To access these documents go to our BB site, click on Course Documents/Class Notes Class content will be modified as the semester unfolds, so the notes will be posted as we approach each part of the course Solutions to End-of-Chapter Questions The solutions to all assigned end-of-chapter concept questions and problems are provided to enable you to check your work They are under Assignments,/Solutions to Text Questions Supplemental Readings These are readings from the business press that elaborate on points made in class The readings are available in Assignments, Supplemental Readings During the course of the semester I will distribute additional readings that support our class discussions You should study these readings before the topic is covered in class Finance Lab The Finance Department sponsors a Finance Lab for students enrolled in all sections of Finance 357 The staff in this lab can answer many of the questions concerning the end-of-chapter questions and other textbook related questions This is a major resource and I encourage you to take full advantage of it! Details of the labs operations will be announced 5|Page APPENDIX E: STUDY GUIDELINES Important concepts Business decisions are made in a market framework You must understand the major aspects of markets and how they influence these decisions • Market values: Managers must value projects from the viewpoint of those outside of the company whose choice determines the company’s survival and profitability: investors and customers • Cash flow: Cash is king—we need to understand what that means • Time value of money: Our decisions need to unify time, money and interest rates • Risk: We not know the future • Opportunity cost: All projects must provide an acceptable rate of return This return, often called the required rate of return, the discount rate, the hurdle rate, cost of capital, is the opportunity cost: the basis for all decisions This is the most important concept in our course! Study Guidelines You need to integrate the course information, understand what you are studying, whether it is conceptual or analytical, and apply it not only within the context of the course, but also to current business issues and topics covered in your other courses The skills developed are the building blocks of the course Topic by topic, they build an understanding of economic decision making Every element of the course is built on them, so please use them as the guide for your efforts Be an active student Ask yourself such questions as: i) What is the purpose of this concept or formula? ii) Why is it important? iii) How does the instructor or author demonstrate its importance? How does it "fit" with what you have studied so far either in this class or in an earlier class? Rephrase the information in your own words Develop your own examples Before each class you should complete the LearnSmart assignment, read any supplemental readings assigned, and review the class notes Our discussions in class assume that you have accomplished these assignments and will build on them and integrate your understanding of the material After class you should integrate the material and work on the assigned text questions and problems Be sure that you connect these problems with what we discussed in class and what is contained in the chapter If you are having trouble with a concept/problem, see me or visit the Finance Lab as soon as possible 6|Page APPENDIX F: COURSE POLICIES Course policies • • • • • • There is no make-up or extra credit work to improve your grade Your final letter grade is determined solely by your scores on LearnSmart, class performance, on-line tests, mid-term and final exam No special considerations concerning your general academic situation can be offered The final grade in the course, once assigned, will not be changed except in the event of a recording error You are responsible for all material assigned Do not construe any guidance that I give as limiting what you are responsible for except as I explicitly state in an email to the class that certain material will not be covered on a test No cheating! You are to your own work individually If you not attend a class it is entirely your responsibility to determine what you have missed, including any administrative announcements I may have made To be fair to all of my students, I will answer questions concerning the test only in class where all students can benefit from the answer Any student missing any test or exam without my prior approval will receive the lowest grade of anyone taking that assignment Special University Notices Students with Disabilities Students with disabilities may request appropriate academic accommodations from the Division of Diversity and Community Engagement, Services for Students with Disabilities, 512-471-6259, http://www.utexas.edu/diversity/ddce/ssd/ Religious Holy Days By UT Austin policy, you must notify me of your pending absence at least fourteen days prior to the date of observance of a religious holy day If you must miss a class, an examination, a work assignment, or a project in order to observe a religious holy day, you will be given an opportunity to complete the missed work within a reasonable time after the absence Policy on Scholastic Dishonesty The McCombs School of Business has no tolerance for acts of scholastic dishonesty The responsibilities of both students and faculty with regard to scholastic dishonesty are described in detail in the BBA Program’s Statement on Scholastic Dishonesty at http://www.mccombs.utexas.edu/BBA/Code-of-Ethics.aspx By teaching this course, I have agreed to observe all faculty responsibilities described in that document By enrolling in this class, you have agreed to observe all student responsibilities described in that document If the application of the Statement on Scholastic Dishonesty to this class or its assignments is unclear in any way, it is your responsibility to ask me for clarification Students who violate University rules on scholastic dishonesty are subject to disciplinary penalties, including the possibility of failure in the course and/or dismissal from the University Since dishonesty harms the individual, all students, the integrity of the University, and the value of our academic brand, policies on scholastic dishonesty will be strictly enforced You should refer to the Student Judicial Services website at http://deanofstudents.utexas.edu/sjs/ to access the official University policies and procedures on scholastic dishonesty as well as further elaboration on what constitutes scholastic dishonesty 7|Page Campus Safety Please note the following recommendations regarding emergency evacuation from the Office of Campus Safety and Security, 512-471-5767, http://www.utexas.edu/safety: • Occupants of buildings on The University of Texas at Austin campus are required to evacuate buildings when a fire alarm is activated Alarm activation or announcement requires exiting and assembling outside • Familiarize yourself with all exit doors of each classroom and building you may occupy Remember that the nearest exit door may not be the one you used when entering the building • Students requiring assistance in evacuation should inform the instructor in writing during the first week of class • In the event of an evacuation, follow the instruction of faculty or class instructors • Do not re-enter a building unless given instructions by the following: Austin Fire Department, The University of Texas at Austin Police Department, or Fire Prevention Services office • Behavior Concerns Advice Line (BCAL): 512-232-5050 • Further information regarding emergency evacuation routes and emergency procedures can be found at: http://www.utexas.edu/emergency 8|Page ... class Finance Lab The Finance Department sponsors a Finance Lab for students enrolled in all sections of Finance 357 The staff in this lab can answer many of the questions concerning the end-of-chapter... Content: The Final Exam will contain a mix of fill-in-the-blank, matching, essay/short answer, and quantitative problems Date: The final exam is a consolidated final for all four of my Fin 357 sections... consolidated final for all of my sections of Finance 357 and will be given on Friday, December 12, 7pm10pm Grade distribution Evaluation Class performance: On-line Tests Part I: the Business Firm;