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2022/2023  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 60
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Carsten Sørensen - Department of Finance (FI)
For academic questions related to the course, please contact course instructor Shlomi Ben Yehuda (sby.fi@cbs.dk).
Main academic disciplines
  • Finance
Teaching methods
  • Face-to-face teaching
Last updated on 16-11-2022

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 Written sit-in exam on CBS' computers
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-point grading scale
Examiner(s) One internal examiner
Exam period Summer and Summer, Exam schedules are available on https:/​/​www.cbs.dk/​uddannelse/​international-summer-university-programme-isup/​courses-and-exams
Aids Limited aids, see the list below:
The student is allowed to bring
  • Any calculator
  • Language dictionaries in paper format
The student will have access to
  • Advanced IT application package
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.
1st retake exam: 4 hour written sit-in exam, new exam question.
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.

Exam form for 3rd attempt (2nd retake): The second retake is always an online oral exam (20 minutes online oral exam with no preparation time) with one internal examiner and an internal co-examiner.
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, and a follow – up, “Apple hikes its dividend and boosts its buyback program”, Apr 30 2019, the Motley Fool, 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: Valuating: 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; PCF part 5.

 

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, fundamentals, advantages and disadvantages; PCF part 6.
Description of the teaching methods
Tests, lecture notes, case studies, in class examples, worksheets, excel spreadsheets, and articles from financial press, which will form the basis for of the class discussions.
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

Ordinary 6 weeks course.

 

Preliminary Assignment:

The course coordinator uploads Preliminary Assignment on Canvas at the end of May. It is expected that students participate as it will be included in the final exam, but the assignment is without independent assessment & grading.

 

Course and exam timetable is/will be 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 in start March.
Expected literature

Mandatory readings:

 

Brealey, Myers, Allen, "Principles of Corporate Finance", 10th-13th edition (noted as PCF)

 

"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

 

"Conflict of Interest and the Credibility of Underwriter Analyst Recommendations", Michaely, Womack, 1999, The Review of Financial Studies
 
"Apple to return $130bn to shareholders", Apr 23 2014,  The Telegraph
 
"Good Timing: CEO Stock Option Awards and Company News Announcements", Yermack, 1997, Journal of Finance
 
"Management Turnover and Financial Distress", Gilson, 1990, Journal of Financial Economics

 

"Do Managers Withhold Bad News?", Kothari Et al., 2008, Journal of Accounting Research

 

Additional relevant readings:

 

Benninga, Mofkadi, "Financial Modeling" 5th edition, 2022
 
"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 16-11-2022