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2010/2011  KAN-FSM_FS54  Corporate Finance

English Title
Corporate Finance

Course Information

Language English
Point 7,5 ECTS (225 SAT)
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
Main Category of the Course
  • Finance
Last updated on 29 maj 2012
Learning Objectives
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 aim of the course is that students – after having followed the course FS54 Corporate Finance – 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 both simple and complex and realistic corporate finance problems through accurately and correctly calculations (e.g. calculate project NPV by first deciding that the WACC method is appropriate for the specific problem at hand, then estimate after-tax cash flows used in the WACC method, thereafter estimate project after-tax WACC after taking into consideration project after-tax WACC may be different from company after-tax WACC, and finally calculate project NPV).
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 (e.g. analyzing efficient markets, payout policy, capital structure).
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 (e.g. different regulatory and institutional assumptions) or whether modifications are needed.
The exam in the subject consists of two parts:
Weight 25%
Censorship External examiners
Exam Period October and December/January
The exam has the form of an individual 2-hour multiple-choice (weight: 25 % of the grade) and an individual, 4-hour written exam (weight: 75 % of the grade). No technical nor written aids are allowed at the exams, 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 4-hour written exam exam is external and will be graded by a teacher and an external examiner, cf. the General Degree Regulation § 25, S. (1) no.1. The regular multiple-choice exam will be held in October 2010. The regular 4-hour exam will be held in December 2010. The make-up/ re-exam takes place in December 2010 and February 2011
Weight 75%
Assessment Written Exam
Marking Scale 7-step scale
Censorship External examiners
Exam Period October and December/January
Aids Closed Book
Duration 4 Hours
Prerequisites for Attending the Exam
Course Content

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.

Brealey, R. A., S. C. Myers and F. Allen (2008). Principles of Corporate Finance (9th edition). McGraw Hill.
Corporate Finance Exercises. 2008. More literature may come up during the course.