FIN 357 - Business Finance - Duvic 03130

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 SPRING 2015 03130: TuTh 8:00am-9:30am UTC 4.104 Overview of the Course Instructor: Dr Robert C Duvic Distinguished Senior Lecturer Department of Finance Office: GSB 5.176D Office Hours: Monday, Wednesday, 9:00am-10:00am and by appointment Phone Number: 512-471-6026 E-mail: robert.duvic@mccombs.utexas.edu Textbook: 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: 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 Procedures C: Course Materials D: Study Guidelines E: Course Policies 1 | P a g e APPENDIX A: CLASS SCHEDULE Course structure: The course is organized into 20 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 Jan 20 Course Introduction Jan 22 Topic 1: Human nature and economic activity Jan 27 Topic 2: Human nature and the ethics of decision making Jan 29 Topic 3: Structuring the business firm Part II: Economic Value Feb Topic 4: Economic value: riskless assets Feb Topic 5: Economic value: risky assets Feb 10 Test Topics through Feb 12 Topic 6: Basic structure of time value calculations Feb 17 Topic 7: Applying time value techniques Part III: Valuing Financial Securities Feb 19 10 Topic 8: Valuing the corporation Feb 24 11 Topic 9: Valuing long-term debt Feb 26 12 Topic 10: Valuing equity Mar 13 Topic 10: Valuing equity (Continued) Mar 14 Topic 11: Capital budgeting: Investment decision rules Part IV: Valuing non­financial assets Mar 10 15 Test Topics through 10 Mar 12 16 Topic 11: Capital budgeting: Investment decision rules (Continued) Mar 16-20 Spring Break Mar 24 Mar 26 Mar 31 Apr Apr Apr Apr 14 17 18 19 20 21 22 23 Topic 12: Capital budgeting: Cash flow analysis Topic 12: Capital budgeting: Cash flow analysis (Continued) Topic 13: Capital budgeting: Strategy and analysis Topic 14: Options Test 3: Topics 11 through 14 Topic 15: Risk and return: Single asset and portfolios Topic 16: Risk and return: Diversification Part V: Risk and the opportunity cost Apr 16 24 Topic 17: Risk and return: Opportunity cost and CAPM Apr 21 25 Topic 18: Cost of capital Apr 23 26 Topic 18: Cost of capital (Continued) Part VI: Using the opportunity cost Apr 28 27 Topic 19: Market efficiency Apr 30 28 Topic 20: Capital structure and firm value May 29 Topic 20: Capital structure and firm value (Continued) May 30 Test Topics 15 through 20 2 | P a g e APPENDIX B: EVALUATION PROCEDURES Grade distribution Evaluation Class performance: Test Tuesday, February 10 Test Tuesday, March 10 Test Tuesday, April 14 Test Thursday, May Percent of course grade 10% 20% 20% 20% 30% 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 present­0 points; no relevant answer/don’t know­ 1 point; good answer­2 points In-class tests Venue: The Four in-class tests will be paper tests given in class on the days specified in Appendix A: Class Schedule Content: These tests will contain a mix of fill-in-the-blank, matching, essay and or short answer and quantitative problems Scope: The tests cover all aspects of the assigned materials: class materials, text and assigned reading 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 make-up tests are not available Please see me early if a situation does come up Individuals missing the mid-term exam with my permission will have the points of that test added to their final Individuals missing the exam without my permission will receive the lowest grade of the students who took the test 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 | P a g e APPENDIX C: COURSE MATERIALS Supplemental Materials Textbook : Corporate Finance: Core Principles and Applications, Fourth Edition , Ross, Westerfield, Jaffe, Jordan, McGraw-Hill Irwin 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 The Third Edition is also acceptable Mediasite: The class will be record using Mediasite The links to each presentation will be available on our Canvas site, under the Module Course Documents The Class Lectures and Discussions Each Topic is supported by class notes These are modified copies of the PowerPoint slides used in class Class content will be modified as the semester unfolds, so the notes will be posted as we approach each part of the course The class notes are in each topic’s module 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 contained in each topic’s module Supplemental Readings These are readings from the business press that elaborate on points made in class The readings are available in each topic’s module 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 are below Basic Skills Workshop The Finance Lab has an excellent workshop on basic finance skill such as the time value of money and basic accounting These are optional programs, but well worth the time Event Time Dates Room TVM Workshop 6-7:30 January 22 UTC4.122 TVM Workshop 6-7:30 or 7:30-9 January 26, 27, and 28 UTC4.122 The Finance Lab has regular office hours during the semester Thus far we have the evening hours, given here I will post the day-time hours when they are set Finance Lab 5-9 pm MT* February 2- May GSB 5.154 6:30-9 pm Wed February 2- May GSB 5.154 Daytime hours will be announced at a later date *Note exception­Time for Tuesday March 10 is 6:00­9:00.  4 | P a g e APPENDIX D: 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 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 5 | P a g e APPENDIX E: 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 a 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 6 | P a g e 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 7 | P a g e ... 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... evening hours, given here I will post the day-time hours when they are set Finance Lab 5-9 pm MT* February 2- May GSB 5.154 6:3 0-9 pm Wed February 2- May GSB 5.154 Daytime hours will be announced... worth the time Event Time Dates Room TVM Workshop 6-7 :30 January 22 UTC4.122 TVM Workshop 6-7 :30 or 7:3 0-9 January 26, 27, and 28 UTC4.122 The Finance Lab has regular office hours during the semester