• Know how to evaluate a value of a firm/project, the differences between accounting value economic value and incremental value
• Understand how risk affects the cost of capital, the theory related to risk and return
• Understand the different parts in the capital structures, the relates discount rate, and how the WACC is calculated
• Know the different objectives of equity holders and debt holders and the agency problems related to that
• Understand the effect of leverage on bankruptcy risk and required returns, yield spreads, and firms choices
• Understand what is performance based salary and the influence of it on the firms and the employees

This course will cover the financial decisions firms take, as in most cases they are at least as important as the operational decisions for the success of these firms.
 The first part of the course will focus on evaluating projects and finding the value of firms using the DCF method, along with understanding the differences between economic (or incremental) value and accounting value.
 In the second part we will explore the discount rate that is used in the evaluation of the firms: how it is calculated and its link to the risk of the firm.
 The third part deals with capital structure, the tension between equity and debt, payout policy and agency problems such as under investing and risk shifting.

Preliminary assignment:
1. Read PCF part 1 chapters 2,3 (or any other review and practice of NPV and discounting);
2. Read the short article, "Apple to return $130bn to shareholders", Apr 23 2014, The Telegraph, to be discussed in class

Class 1:Firm structure, objectives and historical overview. The value calculation: discounting and timing; PCF part 1.
Class 2 &3:Evaluating firms value using the DCF method. The incremental value. Theory verses reality, analysts recommendations; PCF part 1.

Class 4&5:Interest, Risk and Return. Expected versus realized. The CAPM model and market efficiency; PCF part 2,4.
Class 6. Capital structure without taxes

Feedback activity: an optional "take home mini exam"

Class 7. The different holders: raising money; PCF part 5,6,7.

Class 8. Capital structure with taxes, the advantage of issuing debt; PCF part 5.
Class 9&10. Bankruptcy, payout policy, agency problems and CEO's objective; PCF part 3,5,8
Class 11. Performance based salary: an overview, the basics, advantages and disadvantages; PCF part 6.

Preliminary Assignment: To help students get maximum value from ISUP courses, instructors provide a reading or a small number of readings or video clips to be read or viewed before the start of classes with a related task scheduled for class 1 in order to 'jump-start' the learning process.

Course timetable is available on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams.

We reserve the right to cancel the course if we do not get enough applications. This will be communicated on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams end February 2018 at the latest.

Mandatory readings:

Brealey, Myers, Allen, "Principles of Corporate Finance"
8th-11th edition (noted as PCF)

"Apple to return $130bn to shareholders", Apr 23 2014,  The Telegraph

"Event studies in economics and finance", Mackinlay, 1997, Journal of Economic Literature

"Management turnover and financial distress", Gilson, 1990, Journal of Financial Economics

Additional relevant readings:

"Boys will be boys: gender, overconfidence and common stock investments", Barber ans Odean, 2001, the Quarterly Journal of Economics

"The efficient market hypothesis and its critics", Malkiel, 2003, Journal of Economic Perspective

"Analysts' poor predictions", April 16 2016, Barrons

"Buybacks, money well spent?", October 12 2014, Financial Times

"Financial ratios and the probabilistic prediction of bankruptcy", Ohlson, 1980, Journal of Accounting research

"Bonuses don't have that much to do with performance", June 3 2015, The Telegraph