English   Danish

2013/2014  KAN-CM_SU2K  Advanced Graduate Corporate Finance

English Title
Advanced Graduate Corporate Finance

Course information
Language English
Exam ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration Summer
Course period Summer
Please check www.cbs.dk/summer for the course schedule.
Time Table Please see course schedule at e-Campus
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Course instructor - Shelton Weeks, Florida Gulf Coast University
    Patricia Plackett - Department of Operations Management (OM)
Main academic disciplines
  • Finance
  • Management
  • Financial and management accounting
  • Economics, macro economics and managerial economics
Last updated on 22-07-2013
Learning objectives
After having completed Graduate Corporate Finance, students will:
  • Be able to provide evidence of knowledge and understanding of the theories, methods and models of corporate finance.
  • Be able to provide evidence of knowledge and understanding of the regulatory, institutional and practical knowledge of corporate finance.
  • Be able to provide evidence of knowledge and understanding of the validity of theories, methods and models (i.e. the empirical evidence) of corporate finance.
  • Be able to describe and explain the assumptions behind the theories, methods and models in the syllabus.
  • Be able to demonstrate analytical thinking, critical thinking and computation.
  • Be able to discuss the relationship between capital markets and firms and the broad and expanding array of financing vehicles available to modern corporations.
  • Be capable of describing and explaining capital structure theory and the process of determining the relative mix of equity and debt that should be chosen to maximize the value of the firm's investments.
  • Be able to analyze the capital budgeting decision and identify factors relevant to choosing investments that maximize the market value of the firm.
  • Be able to discuss factors related to international finance and its impact on corporate governance.
  • Be able to combine and apply all the insight (vocabulary, theories, methods, models, regulatory, institutional and practical knowledge, and empirical evidence) from the syllabus to solve both simple and complex corporate finance problems.
  • Be able to analyze the extent to which the models and theories from corporate finance are applicable in other countries.
Course prerequisites
This is an advanced course in corporate finance at the graduate level that builds upon the basic principles and concepts taught in introductory level graduate finance courses. Thus, students enrolling in this course must have successfully completed the introductory graduate level finance course, which itself requires successful completion of courses in accounting, economics and statistics.
Prerequisites for registering for the exam
Requirements about active class participation (assessed approved/not approved)
Mandatory Mid-term Assignment: Midterm Group Assignment: Given the current state of thinking and empirical research on efficient markets theory, evaluate the usefulness of market timing strategies in terms of management's ability to raise capital at below market rates in order to maximize firm value? In a ten minute presentation in front of your peers, be prepared to discuss, explain, and provide support for your response.
Examination
4 hour written exam:
Examination form Written sit-in exam
Individual or group exam Individual
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Summer Term
Aids allowed to bring to the exam Limited aids, see the list below and the exam plan/guidelines for further information:
  • Allowed dictionaries
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Course content and structure
The course begins with a brief review of fundamental corporate finance topics normally covered in an introductory corporate finance course including the corporate financial environment, financial institutions, financial markets, financial statements, time value of money and valuation.  The core of the course is an article-based review of advanced topics in corporate finance that is comprehensive in scope. Topics reviewed include financial markets, corporate investment decisions, corporate capital structure decisions, corporate financing decisions, risk management, corporate governance, and international finance.   

Tentative Course Schedule: The following is a schedule of topics, readings, assignments, due dates and examination dates.  Adjustments to the schedule may be made at my discretion. Note that although the schedule is organized by week, there will be two class sessions per week over the first five weeks and one class session in the sixth week resulting in a total of 11 class meetings.
 
The course's development of personal competences:

Interpersonal competences students will develop during this course include:
The ability to do mathematical computations
The ability to speak comfortably in front of a large group of other students
The ability to work and collaborate with other students
The ability to analyze and synthesize complex concepts ad material
The ability to write effectively
The ability to listen effectively
Teaching methods
Short Lectures, Lengthy Discussions and Presentations

Preliminary Assignment: To help students get maximum value from ISUP courses, instructors provide a reading or a small number of readings to be read before the start of classes with a related task or tasks in the first two classes in order to 'jump-start' the learning process. The preliminary assignment which will be discussed during week one (and which require a substantial investment in time before we meet) consists of an analysis of two cases which are primarily intended as a review of core concepts learned in the introductory graduate finance class. The first case (Pleasure Craft Inc.) is designed as a review of capital budgeting and cost of capital concepts. The case should be read and completed individually prior to the first class meeting as it is intended to drive class discussion. It is somewhat lengthy so be sure to allow for adequate preparation time. I recommend that you use the optional course textbook “Corporate Finance: A Focused Approach (any edition) by Brigham and Erhardt but other graduate corporate finance texts will also work well. The first case will be reviewed during the first meeting so it is essential that everyone prepares sufficiently. The second case (California Pizza Kitchen) is intended to provide a review of the Modigliani and Miller capital structure irrelevance propositions and the concepts of debt tax shields. This case must be completed in teams (which will be created during the first class meeting) and will be discussed during the second class meeting.
Expected literature

Required Textbook/Readings:

  • The Revolution in Corporate Finance: Fourth Edition,
  • Paperback: 648 pages
  • Publisher: Wiley-Blackwell; 4 edition (June 9, 2003)
  • Language: English
  • ISBN-10: 1405107812
  • ISBN-13: 978-1405107815
  • Optional Supporting Textbook (note that others may be used as well):
    • Corporate Finance: A Focused Approach, 4th Edition; Michael C. Ehrhardt University of Tennessee, and Eugene F. Brigham University of Florida;
    • ISBN-10: 1439078084,
    • ISBN-13: 9781439078082;
    • 848 Pages 
    • Hardcover, 2011 

Tentative Course Schedule:
Week of June 24, 2013

  • An Overview of Corporate Finance and the Financial Environment.
  • Financial Statements, Cash Flow & Taxes.
  • Time Value of Money and Valuation.
  • Modigliani and Miller's Propositions

Week of July 1, 2013
Financial Markets:

  • The History of Finance: An Eyewitness Account, Merton H. Miller (University of Chicago)
  • The Theory of Stock Market Efficiency: Accomplishments and Limitations, Ray Bell (University of Rochester)
  • Market Myths, G. Bennett Stewart, III (Stern Steward & Co.)
  • An Analysis of Trading Profits: How Trading Rooms Make Money, Alberic Braas and Charles N. Bralver (Oliver, Wyman & Company)

The Corporate Investment Decision:

  • Finance Theory and Financial Strategy, Stewart C. Myers (Massachusetts Institute of Technology)
  • In Defense of Beta, S.P. Kothari and Jay Shanken (University of Rochester)

Week of July 8, 2013
The Corporate Investment Decision (continued)

  • The Liquidity Route to a Lower Cost of Capital, Yakov Amihud (New York University) and Haim Mendelson (Stanford University)
  • The Promise of Real Options, Aswath Damodaran (New York University)
  • Real Options: State of Practice, Alex Triantis (University of Maryland) and Adam Borison (Applied Decision Analysis/Pricewaterhouse Cooper)

The Financing Decision I: Capital Structure

  • The Modigliani-Miller Propositions After Thirty Years, Merton H. Miller (University of Chicago)
  • Still Searching for the Optimal Capital Structure, Stewart C. Myers (Massachusetts Insitute of Technology)
  • The Capital Structure Puzzle: Another Look at the Evidence (Michael J. Barclay and Clifford W. Smith, Jr. (University of Rochester)

Week of July 15, 2013
The Financing Decision I: Capital Structure (continued)

  • What do we Know about Stock Repurchases? Gustavo Grullon and David L. Ikenberry (Rice University)
  • The Dividend Cut: ”Heard ’Round the World’”: The Case of FPL, Dennis Sorter (Stern Stewart & Co), Eugene Brigham (University of Florida), and Paul Evanson (Florida Power & Light)
  • Stern Stewart Roundtable on Capital Structure and Stock Repurchase, Clifford Smith (University of Rochester), Tim Opler (Credit Suisse First Boston), Rich Thevenet (PepsiCo); Dennis Soter (Stern Stweart & Co), David Ikenberry (Rice University), and Erik Sirri (Babson College).  Moderated by Donald Chew (Stern Steward & Co)

The Financing Decision II: The Finance Vehicles

  • Raising Capital: Theory and Evidence, Clifford W. Smith, Jr. (University of Rochester)
  • Financing Corporate Growth, Bradford Cornell (University of California Los Angeles) and Alan C. Shapiro (University of Southern California)
  • Are Banks Still Special? New Evidence on Their Role in the Corporate Capital-Raising Process, Christopher James and David C. Smith (University of Florida)

Week of July 22, 2013
Risk Management:

  • Financial Innovation: Achievements and Prospects, Merton H. Miller (University of Chicago)
  • Managing Financial Risk, Clifford W. Smith, Jr (University of Rochester), Charles W. Smithson (Continental Bank), and D. Sykes Wilford (Chase Manhattan Bank)
  • Theory of Risk Capital in Financial Firms, Robert C. Merton and Andre F. Perold (Harvard Business School)

International Finance and Corporate Governance:

  • Financial Markets and Economic Growth, Merton H. Miller (University of Chicago)
  • Globalization, Corporate Finance, and the Cost of Capital, Rene Stulz (Ohio State University)
  • Is American Corporate Governance Fatally Flawed? Merton H. Miller (University of Chicago)

Week of July 29, 2013
International Finance and Corporate Governance (continued):

  • Corporate Ownership and Control in the UK, Germany, and France, Julian Franks (London Busines School), and Colin Mayer (Oxford University)
  • Universal Banks are not the answer to America’s Corporate Governance Problem: A Look at Germny, Japan, and the US, Jonothan R. Macey (Cornell Law School) and Geofrey P. Miller (New York University Law School)
  • Measuring the Effectiveness of Different Corporate Governance Systems: Toward a More Scientific Approach, Jonothan R. Macey (Cornell Law School)
Last updated on 22-07-2013