Course Syllabus

"My favorite class!" 

Finance 401

St. Bonaventure University

“Fall” 2008

Jim Mahar

Instructor: Jim Mahar, 231 Murphy Building, 375-2359 (warning this is worst way to reach me!), jimmahar@yahoo.com or jmahar@sbu.edu.

AIM: FinanceProfessor

Class time: 2:30-3:45 Monday-Wednesday

Office Hours: MW 4:00-4:45, T 2:00-3:45, Th 2:00-3:45 and by appointment

Course Description

Finance 401 is a 3 credit class. It is designed to develop your understanding of corporate finance.  It is in some ways the most challenging of finance classes as its breadth 

Course Objective:

This class will show you how corporate finance fits into the business world.  We will examine models that increase our understanding as well as help us to predict the behavior of individuals and firms.  Advanced Corporate Finance has always been one of my favorite classes as it encompasses a bit from all areas of finance.  is my favorite class and I hope you like it as well!  The class allows us to implement much of what has been learned in other classes as well as to achieve a greater understanding of  how and why the financial world "is how it is," or in more academic-speak, why the financial world has evolved as it has.

Applicable Program Objectives

For specific program goals please see (note this link only works from on campus computers): http://ms.sbu.edu/program_learning_goals.htm

Upon completion of the course, you should be able to

• Describe the model of the financial system
• Explain the nexus of contracts model and discuss its importance through the eyes of various stakeholders (and be able to identify the incentives of various stakeholders)
• Describe what is meant by the term "holistic" finance
• Apply Time Value of Money techniques in both personal and corporate decisions
• Correctly use various valuation techniques and be able to express the techniques strengths and weaknesses
• Identify opportunities to use finance theory
• Explain the implications of the Market Efficiency Hypothesis
• Discuss intelligently differing capital structure theories
• Discuss the advantages of alternative capital structures
• Discuss the recent corporate governance crises and be able to identify good and bad practices in the field
• Discuss common trends in the finance
• Identify benefits that accrue to multinational corporations within the large discussion of globalization—Example why would firms issue internationally?
• Utilize finance theory and concepts to solve real world problems

Text:

Principles of Corporate Finance by Brealy, Myers, and Allen

Text’s website: will be used a great deal—highly recommend doing problems from there.

Class Website: Essentially FinanceProfessor.com, but more specifically http://www.financeprofessor.com/fin401/fin401mainpage.html

Supplemental Texts and websites:

Required:

FinanceProfessor.com blog http://financeprofessorblog.blogspot.com/

FinanceProfessor.com class blog http://financeclass.blogspot.com//

Recommended but optional

Wall Street Journal

It should be noted that the class website is meant as a means of assistance to you and as a means of organizing the class. It is not as a replacement for the text or for coming to class. For some topics there will be much online coverage, for others there will not be as much coverage. Remember this is not meant to replace your other means of learning.

Prerequisites: As per catalog. Finance 301

Technology Requirements

• Proficiency in Excel as demonstrated by successful completion of either CS 104 or CS 120 or by a waiver for CS 104.
• An ability to access the internet
• Use of RSS reader and ability to play MP3 files is recommended but not required.
• A basic calculator is required for every class.

Evaluation Procedures

Students will be evaluated based on their performances on exams, quizzes, class participation, and out of class projects.

• Exams will assess your comprehension of the covered topics as well as your ability to apply the concepts and theories to new and different situations. Two exams will be given during the courses of the semester as well as a comprehensive final exam. The dates for the three exams are tentative. The date of the final is determined by the university calendar. Students who are absent from an exam without prior permission from the instructor will receive a “0” on that exam.

• Quizzes will be given in class to assess your understanding of the material and to provide you with more timely feedback than is possible with exams. Each quiz will cover all material assigned and/or covered since the previous quiz/exam. Failure to attend class the day of an in-class quiz will result in a zero for that quiz. There will be no make-up quizzes.

• Projects will be completed individually. You can help each other but each student is expected to turn in his/her own work. Failure to hand in projects on time will result in a zero for that project.

Operational Details:

The course will be centered on lectures and text readings but will also

incorporate financial events as they occur throughout the semester.

There will be several “special topics” days during the semester. These will include guest lecturers, discussion of current financial topics, and other timely material. This material will be tested.

We will cover a great deal of material. I make no qualms about this not

being a "cake" course. It is imperative that you "keep up" with the

material..

You are expected to attend class AND to participate. Sitting quietly is not sufficient. I would HIGHLY recommend reading the book prior to class. You will be amazed at how much better (and easier!) class is when you make this small investment.

This means that you should do all of the readings and attend all classes. J

Grading: Grades will be assigned based on the following:

Attendance and Class Participation (5% attendance, 10% participation, 5% quizzes)	20%
Test 1	20%
Test 2	20%
Cumulative Final	30%
Term Paper/Project (you can come up with own topic but it must be approved in advance)	10%

Grades will be assigned using the following scale:

90-100 = A

80- 90 = B

70- 80 = C

60-70 = D

Below 60 = F

I should warn you that I am often accused of being a hard "tester" and frequently my grades are lower than the above scale. For example the typical average on the test is a low C, whereas the typical average grade I assign at the end of the year is a C+. This means that I reserve the right to "curve" grades at the end of the semester. The curve is done relative to your peers so that the grades will be roughly in line with those from the other sections. Thus how you do relative to your peers is more important than any number grade you receive on a test. (Please reread that).

This is not a guarantee of curving!

The tests will center predominately on lecture notes. The tests may include multiple choice, true/false, problems, short answers, and/or essays. Currently I plan on having the majority of the questions multiple choice. The tests are somewhat cumulative and will generally include approximately 10%-15 based exclusively from the book and outside readings (blog, newsletter etc.) packet. The final is cumulative and is required.

I reserve the right to have unannounced quizzes. However, I do not currently have any unannounced quizzes scheduled.

You will need a calculator that can do exponents. While you probably want a financial calculator it is not required.

University Policies

Academic Honesty Policy at St. Bonaventure University:

I am committed to St. Bonaventure University’s academic environment for students, supporting and rewarding only the highest standards of ethical behavior. That said, academic dishonesty, in any form, will not be tolerated. Please consult the St. Bonaventure University Student Handbook for a list of unacceptable practices, penalties to be assigned and procedures to be followed in prosecuting cases of alleged academic dishonesty. Further, the St. Bonaventure University Undergraduate Catalog may be consulted for specific details on all academic policies at St. Bonaventure.

Cheating will not be tolerated. Unless specifically stated in class, students can work together on the homework, but each student is expected to submit his/her own work. Cheating on a test or project will result in a Failing grade for the course. Please do not cheat

Students with Disabilities

Students with disabilities who believe that they may need accommodations in this class are encouraged to contact the Disability Support Services Office, Doyle Room 26, at 375-2065 as soon as possible to better ensure that such accommodations are implemented in a timely fashion. Documentation from this office is required before accommodations can be made.

Instructor Policies

Attendance

As you can see from the schedule, we will be investigating a new topic at nearly every class. It is critical that you come to class. Students who are not in class on a regular basis will not do well. It is really that simple.  Students are also expected to be on time for class and to be prepared.

Participation

Students are expected to actively participate in class by asking and answering questions.

Preparation

Students are expected to have the reading assignment completed when they arrive at class. While some material is difficult and may need additional explanation, students should have a basic understanding of the concepts that are to be covered that day. Use your notebook to jot down topics/ideas that you don’t understand from the reading and questions that you want to have answered during the next class.

Courtesy

Students are expected to arrive on time and prepared for each class meeting and to refrain from behavior that distracts other students (answering cell phones, text messaging, etc.).

Collaboration

There will be occasions during this course when students will be given the opportunity to work collaboratively with one other student or in a larger group. Collaborative work allows student to learn from each other.

Now that the legal and administrative parts of the class are out of the way it should be noted that this will also be a very fun class. You will be challenged, but you will learn a great deal. This will help you in other finance classes as well as in both your personal financial life as well as in your business life.

Please let me know of any problem you are having--Preferably early in the semester. Tell me in advance of the problem when we can still solve it, not afterwards when it is too late.

Tentative Outline

Week	Topic	Chapters from book	Other events
1	Introduction to class Introduction to Finance Introduction to Corporate Finance Role of Ethics	1,2 parts of chapter 12
2	Nexus of Contracts Agency Costs Controlling Agency costs ---a look at a few contracts-Bonds vs. stock
3	A Look at Accounting and Cash Flows Projecting Cash flows—sensitivity analysis and more! A review of Time Value of Money Applied Time Value of Money – Valuation	3 10	EXCEL
4	Valuation of Bonds Valuation of stock Introduction to risk and return	4 7
5	Investigating Risk and Return Diversification and portfolio math CAPM	7 8
6	CAPM and alternatives Capital Budgeting: NPV and Alternatives What risk should we use?	5,6 9
7	Market Efficiency Test is before midterm break Are markets efficient? Implications	13	Probable test
Test 8	Capital Structure: Intro, international differences, M&M Capital Structure: More on capital structure	17,18,19
9	Pecking order, Tradeoff, hybrid theories of cap structure Raising capital	19 14
10	Raising capital con’t Public vs Private Role of Investment banker Costs IPOs	14 15	Term paper due
11	Corporate Governance International differences on governance	34	Probable test
12	Market for Corporate Control Takeovers, Spin-offs, etc.	33
13	Derivatives and financial engineering: an intro And how they are used in Corporate finance	20 21
14	Derivatives: what can go wrong Hedging risks: special emphasis on currency and international exposures	26 27