ST. BONAVENTURE UNIVERSITY
Jim Mahar
FIN
402 – Problems in Finance
231 Murphy
Spring
2008
AIM: FinanceProfessor
:
e-mail: jimmahar@yahoo.com,
jmahar@sbu.edu (usually full)
Course Description
Problems in Finance (FIN402) is a course designed to implement the concepts covered in previous corporate finance courses in a way that is more in-depth and integrative than in possible through end-of-chapter questions and exams. It uses a combination of lectures, discussions and case analyses to enhance a student’s understanding of financial issues. Thus, the class will provide you with "real world" practice in many areas and on many of the skills you learned in earlier Finance classes. This class is designed as a "cap-stone" class in the area of finance and as such you will be expected to be able to draw on your expertise in all areas of Finance.
The course concentrates on the analysis of
financial and other information necessary to reach a decision and therefore
must draw on the student’s prior knowledge of economics, accounting, finance,
quantitative methods and other areas of business.
Course Objectives
Upon completion of this course, the student will be expected to:
1. create proforma financial statements and estimate
external funding requirements
2. model sophisticated capital budgeting problems
3. apply principles of derivative securities to capital
budgeting problems.
4. analyze and recommend simple and complex financing
strategies (i.e., capital structure)
5. estimate the cost of capital for a multi-divisional
organization
6. apply valuation techniques in a merger and acquisition
setting
This course should synthesize many of the finance program goals located
at http://ms.sbu.edu/SLAP_goals/slap_goals/Finance.doc
More on the class:
The Case Method (and other assorted ramblings):
This class is largely a "case" class. That means it will be predominantly taught using cases to illustrate points and to give you "hands-on" experience. If past history is your guide, you will both love and hate this class. It will be very fun (indeed I will be disappointed if it is not your favorite class this semester and possible ever (it was my second favorite class!) BUT it will also be one of the most frustrating classes you have ever had. It is difficult and we cover a great deal of material. I make no qualms about this not being a "cake" class. I apologize in advance for the fact that this class will take a great deal of time, but there really is no other way.
If you speak to employers one of their biggest concerns is that students do not have enough experience. This class will try to alleviate this problem. We will be examining many companies (both real and fictional) to learn from their successes as well as their failures. Thus through the experiences of those in the case, we will be expanding our own knowledge while also learning how to deal with real business experiences.
The case method of learning is beneficial in that is allows students to "get their hands dirty" and actually use the tools and techniques that were learned in other classes (both Financial Classes and other classes). You will find yourself using not only NPV, IRR, derivatives, but also EOQ, JIT, market research, and even a little common sense! ;-)
Pre-Requisites and
Technology Requirements
Corporation Finance (FIN 301) and Advanced Corporate
Finance (FIN 401). You should have a
sound familiarity with MS-Excel and an understanding of how to manipulate data,
formulas, and functions within MS-Excel.
Case
Studies in Finance, by Robert F.
Bruner (5th edition)
http://highered.mcgraw-hill.com/sites/0072338628/student_view0/
Recommended: A supplementary corporate finance text like
the text used in FIN 401
FinanceProfessor.com blog http://financeprofessorblog.blogspot.com/
FinanceProfessor.com class blog http://financeclass.blogspot.com//
Cases
35%
Participation (75%) and attendance (25%)
20%
Assessment Exam 10%
Test 2
10%
Final
20%
.
Late Assignments and Exams
This
class is designed to parallel real world experience in the investment
management profession. As such, it will
be a tremendous learning experience that will help increase your marketability
in the labor market. Therefore, no late
assignments will be accepted. So plan
ahead.
Stock reports, the midterm exam, and the final exam will be assigned a grade according to the following grading scale. The student’s final average will be a weighted average of these grades according to the weights above. The letter grade for the class will be assigned according to the following grading scale although I do reserve the right to curve the grades higher, but there is no guarantee of that occurring.
A 93
– 100%
A- 90
– 92%
B+ 87
– 89%
B 83
– 86%
B- 80
– 82%
C+ 77
– 79%
C 73
– 76%
C- 70
– 72%
D+ 67
– 69%
D 63
– 66%
D- 60
– 62%
F <
60%
The website for this course can be found at financeprofessor.com
(see finance 402 and financeclass blog and . It contains information about the course as
well as files that will help for homework and spreadsheet assignments. I will also use it to post commentary on the
progress of the course and answer frequently asked questions (FAQs) as they
arise.
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
aren’t in class on a regular basis will not do well. 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.
University Policy prohibits instructors from assigning a grade of Incomplete (I) to prevent a student from receiving a poor grade in the course. A similar policy applies to withdrawals (W).
Extra-Credit Policy
No opportunities for extra-credit will be given to select students. Otherwise, students who are not given the same opportunity are put at a relative disadvantage.
The first three
weeks of the class will be devoted to making sure we are all on the same
page. This will involve traditional
lecture style classes. After that, there
will be a case due every class. So it
will definitely be a busy semester! Many
of the cases will require computer modeling.
You are expected to use spreadsheets to solve problems and a
Grades for case presentations will be both for
analysis (write up etc) as well as presentation. At both the mid semester point and at the end
of the year group members will be allowed to submit grades for others in their
group.
Each group is to evaluate the other group’s
analysis. Challenge the analysis, if
necessary, but do so tactfully. Here are
some questions to consider. Were
numerical analyses performed properly?
Was their approach reasonable?
Why or why not? Were their
assumptions reasonable? Why or why
not? Did they overlook important
considerations? Did they emphasis
unimportant considerations too much? Note your participation grade will largely
come from this section, so you will want to be active!
The textbook
contains a CD-ROM with computer spreadsheet templates (MS-Excel format) for
case with significant numerical exhibits to limit your data entry efforts.
Whether-or-not you
are submitting a given case for a grade, you are required to have i.) read the
case, ii.) thought about how to approach it, and iii.) considered possible
questions before the case is being
discussed or presented in class. A case course
is not passive in nature. You must be
proactive or you will have no hope of learning what the methods or ideas the
cases is intended to promote. You will
have ample incentive to do this since both the mid-term exam and the final exam
will draw on methods and ideas developed in the cases – whether or not you
submitted the case for a formal grade.
Furthermore, this will enable you to participate in class with questions
and insights and will contribute to your grade.
To aid in this, each group will be required to submit a one page memo on
what the case is about and offer some questions for the group(s)
presenting.
Your written
projects should be typed, organized, and concise. Allow a reader who has never seen your work
before to quickly understand your approach and navigate through your
paper. Here are some suggestions.
1.
Create Section
Headings
a.
Problem Definition. Do not spend much time summarizing
the case; I have read it. But that said a one page introduction/summary
is fine and expected. Refer to facts in
the case, however, to define and frame the problem.
b.
Approach. Do not start with your analysis with trying
to achieve a specific result or arrive at a specific conclusion. Sell people on your approach and logic. The conclusions will follow.
c.
Analysis. This section most likely will include a
combination of quantitative and qualitative analyses. Do not crunch numbers and stop. You must
interpret your results, identify weakness, and take a step back to see the
broader picture. Number crunchers are
plentiful. When combined with
insightfulness and systematic thought processes, one adds value in a
multiplicative way.
d.
Conclusion. Make a recommendation, decision, or
conclusion. Explain why you assigned
greater weight to those facts/analyses that support your conclusion than to
facts/analyses that might support another.
(Be confident). Present potential pitfalls or future events, which may
subsequently change your conclusion (Be humble).
2.
Use of Exhibits
a.
Number your
exhibits.
b.
When making assertions
in your text, refer to supporting exhibits.
c.
Exhibits should
be succinct, perhaps summary in nature.
d.
Voluminous
supporting calculations (such as sensitivity and scenario analyses) may be
presented in an appendix. The summary
output may be presented in an exhibit.
e.
Use graphs when
appropriate to illustrate key points.
3.
Do not deliver
information overload.
a.
It frustrates and
confuses the reader (who will be grading you).
b.
It signals that
the writer is confused.
c.
It will
camouflage your meritorious work.
Your presentations
and paper submissions should be professional (not flashy). You will have 30 minutes to present your work
during which time you should try to convince the audience of your
approach. Your presentation should be
professional. That is, you should:
1. have a clear sense of the information you wish to
convey
2. be articulate in your communication
3. visual aids to assist your audience in gaining the
understanding your analysis
Because your
presentations are true business presentations in the purest sense of the word,
feel free to “teach the class”. That is,
feel free to review and/or develop concepts that are fundamental to your
analysis.
(thanks to Steve
Horan for this page of good ideas!)
Week 1 Introduction
Review of valuation
Capital
Budgeting, Capital Structure
Week 2 Nexus of contracts and Governance
Corporate Control Market
Week 3 Leasing
and Working capital management
Job Market discussion (time to get serious!) MAY BE OUT OF CLASS TIME.
Week 4 International
Finance and Derivatives recap
Week
5 Assessment test and
intro to cases, ethics section of book
Week 6 Cases
begin: We will be doing one to two cases per class Details will be announced in class and on
blog
Case 1
Case 2
Week 6 Case
3
Case 4
MID TERM BREAK
Week 7
1st half review
(assessment test discussion)
Case 5
Week
8
Case 6
Week 9 Case
7
Case 8
Week 10
Case
9
Case 10
Week 11
Case
11
Case 12
Week
12
Case 13
Case 14
Week 13
Case
14
Case 15
Week 14
Case
16
Personal Finance
Lecture
Week 15
Review
Last class