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2019/2020  KAN-CCMVI2041U  Graduate Corporate Finance

English Title
Graduate Corporate Finance

Course information
Language English
Course ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration Summer
Start time of the course Summer
Timetable Course schedule will be posted at calendar.cbs.dk
Max. participants 80
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Shlomi Ben Yehuda - Department of Accounting (AA)
For academic questions related to the course, please contact instructor Shlomi Ben Yehuda at sby.acc@cbs.dk
Main academic disciplines
  • Finance
Teaching methods
  • Online teaching
Last updated on 16/04/2020

Relevant links
Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors:
  • Evaluate a firm/project, distinguish between accounting value economic value and incremental value.
  • Using the theory related to risk and return, explain and show how risk affects the cost of capital.
  • Calculate the WACC by analyzing the risks involved in each component of the firm.
  • Know the different objectives of equity holders and debt holders, as well as the agency problems they imply.
  • Analyze the effect of leverage on bankruptcy risk, required return, yield spread and firms choices.
  • Show the impact of performance based compensation and its influence on firms and employees.
Course prerequisites
Completed social science Bachelor. Fundamentals in economics and management.
Examination
Graduate Corporate Finance:
Exam ECTS 7.5
Examination form Home assignment - written product
Individual or group exam Individual exam
Size of written product Please see text below
4 hour home assignment. No requirement for maximum number of pages.
Assignment type Written assignment
Duration Written product to be submitted on specified date and time.
Grading scale 7-point grading scale
Examiner(s) One internal examiner
Exam period Summer, Ordinary exam: 4 hour home assignment in the period of 27–31 July 2020
Retake exam: 4 hour home assignment in the period of 28 September–2 October 2020
3rd attempt (2nd retake) exam: 72-hour home assignment- 23-26 November 2020 – for all ISUP courses simultaneously

Exam schedules available on https:/​/​www.cbs.dk/​uddannelse/​international-summer-university-programme-isup/​courses-and-exams
Make-up exam/re-exam
Same examination form as the ordinary exam
Retake exam: 4 hour home assignment, new exam question
Exam form for 3rd attempt (2nd retake): 72-hour home project assignment, max. 10 pages.
Course content, structure and pedagogical approach

This course will cover firms' financial decisions, 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 estimating 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 used in the evaluation of the firms: how it is calculated and its link to firms' risk.
 The third part deals with capital structure, the tension between equity and debt. Specifically we learn about raising money, payout policy, bankruptcy 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 firm's 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&9. Bankruptcy, payout policy, agency problems and CEO's objective; PCF part 3,5,8.
Class 10. Capital structure with taxes, the advantage of issuing debt; PCF part 5.
Class 11. Performance based compensation: an overview, the basics, advantages and disadvantages; PCF part 6.
Description of the teaching methods
This year all courses are taught digitally over the Internet. Instructors will apply a mixture of direct teaching through a live link (like Skype, Team, Zoom…) and indirect, where visual pre-recorded material is uploaded on Canvas. The instructor will inform participants about the precise format on Canvas.
Feedback during the teaching period
An optional "take home mini exam" based on the material covered so far.
Student workload
Preliminary assignment 20 hours
Classroom attendance 33 hours
Preparation 126 hours
Feedback activity 7 hours
Examination 20 hours
Further Information

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 March 2020.

 

 

 

 
Expected literature

Mandatory readings:

 

Brealey, Myers, Allen, "Principles of Corporate Finance"
8th-13th edition (noted as PCF), parts 2,3,4,5,8
 
"Capital structure",Myers, 2001, Journal of Economic Perspectives
 
"Apple to return $130bn to shareholders", Apr 23 2014,  The Telegraph
 
"Event studies in economics and finance", Mackinlay, 1997, Journal of Economic Literature
 
"Buys, holds, and sells: The distribution of investment banks’ stock ratings and the implications for the profitability of analysts’ recommendations.", Barber et al., 2006, Journal of Accounting and Economics
 
"What do we know about capital structure? Some evidence from international data", Rajan and Zingales, 1995, Journal of Finance
 
"Dividends, asymmetric information, and agency conflicts: evidence from a comparison of the dividend policies of Japanese and U.S. firms", Dewenter and Warther, 1998, Journal of Finance
 
"Management turnover and financial distress", Gilson, 1990, Journal of Financial Economics
 

 

Additional relevant readings:

 

Benninga, Mofkadi, "Principle of Finance with Excel" 3rd edition, 2017
 
"Conflict of interest and the credibility of underwriter analyst recommendations", Michaely, Womack, 1999, The Review of Financial Studies
 
"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
 
"Netflix to issue $1.5 billion of junk bonds to finance its massive spending plans", April 24 2018, Marketwatch

 
Last updated on 16/04/2020