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2012/2013  KAN-FSM_FS54  Corporate Finance

English Title
Corporate Finance

Course information

Language English
Exam ECTS 7.5 ECTS
Type Mandatory
Level Full Degree Master
Duration One Semester
Course period Autumn
Time Table Please see course schedule at e-Campus
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Claus Parum - Department of Finance
Claus Parum
Main Category of the Course
  • Finance
Last updated on 09-07-2012
Learning objectives
The aim of the course is that students after having followed the course are able to:
  • Master the vocabulary of corporate finance (i.e. define and explain all the relevant corporate finance terms and concepts in the syllabus).
  • Document knowledge on theories, methods and models in the syllabus.
  • Document regulatory, institutional and practical knowledge according to the syllabus.
  • Document knowledge on the validity of theories, methods and models from the syllabus (i.e. the empirical evidence).
  • Demonstrate an independent presentation.
  • Combine and apply all the insight (vocabulary, theories, methods, models, regulatory, institutional and practical knowledge, and empirical evidence) from the syllabus to solve corporate finance problems through accurately and correctly calculations.
  • Show and explain all relevant calculations to solve a given problem.
  • Make additional assumptions if necessary to unambiguously solve a given problem.
  • State the assumptions behind the theories, methods and models in the syllabus.
  • Demonstrate analytical thinking/skills.
  • Independently combine and structure the corporate finance vocabulary, theories, methods, models, regulatory, institutional and practical knowledge, and empirical evidence to solve corporate finance essay problems.
  • Analyze to what extent the models and theories from the corporate finance syllabus (primary developed for a public US corporation) are directly applicable in other countries or whether modifications are needed.
Corporate Finance
Corporate Finance:
Type of test Written Exam
Marking scale 7-step scale
Second examiner External examiner
Exam period December/January
Aids Closed Book
Duration 4 Hours
The exam has the form of an individual 4-hour written exam. No technical nor written aids are allowed at the exam, except from Texas Instruments TI-30X IIS (solar), Texas Instruments TI-30X IIB (battery), TI-30X IIS/IIB, TI-30XS MultiView and TI-30XB MultiView calculators. The regular exam will be held in December. The make-up/re-exam takes place in February.
Course content

Corporate finance is concerned with economic decisions in corporations:

  • How corporations allocate capital (capital budgeting decision).
  • How corporations obtain capital (financing decision).
    • Corporation’s investment decision.
    • Raising capital (e.g. IPO, seasoned public offerings).
    • Corporation’s payout policy.
    • Financing of corporations.
    • Corporate control and corporate governance.

Course objective is to provide students with a solid knowledge of corporations’ capital budgeting and financing decisions.

The course is organized as follows:
The course starts with a general introduction to corporate finance and a discussion of the goal of the corporation.
First focus is on the capital budgeting decision.
We start with investment decisions under certainty.
Hereafter, we focus on the relationship between risk and return (portfolio risk, beta and CAPM).
Then we analyze capital budgeting and risk, and practical problems in capital budgeting.
Then focus shifts to the financing decision starting with an overview of the efficient market hypothesis.
Hereafter, we focus on three central areas within the field of corporate finance: To understand the importance of a firm’s payout policy, why firms choose a specific capital structure, and how to estimate the cost of capital.
An analysis of options, financial leasing, mergers, corporate restructuring, corporate governance, and corporate control finishes the course.

Course status
This is a basic course in corporate finance that complements strategic decision analysis and forms the basis for the second semester course in applied corporate finance and governance.

Teaching methods
Lectures with exercises.
Expected literature

Brealey, R. A., S. C. Myers and F. Allen (2011). Principles of Corporate Finance (Global edition - 10th edition). McGraw Hill.
Corporate Finance Exercises. 2012. More literature may come up during the course.

Last updated on 09-07-2012