Corporate Finance


 date:2010-1-7 11:14:00 source:BiMBA         

References:

Richard A. Brealey, Stewart C. Myers, and Alan J. Marcus: Fundamentals of Corporate Finance, Fifth Edition, McGRAW-HILL, 2007 (Teaching Material)

Stephen A. Ross, Randolph W. Westerfield, and Bradford D. Jordan: Fundamentals of Corporate Finance, Eighth Edition, McGRAW-HILL, 2008

Aswath Damodaran: Corporate Finance: Theory and Practice, Second Edition, Wiley, 2001

Structure of the Course:

1.       Introduction (Company and Finance)

2.       Company and Financial Markt

3.       Financial Statement Analysis

4.       The Time Value of Money

5.       Present Value and Arbitrage; Risk and Interest Rate

6.       Valuing Bonds

7.       Valuing Stocks

8.       Investment Decision: Net Present Value

9.       Investment Decision: Using Discounted Cash-Flow Analysis

10.   Project Analysis

11.   Risk and Return; Market Efficiency

12.   Efficient Portfolio;

13.   Capital Asset Pricing Model

14.   Multi Factor Asset Pricing Model; Capital Budgeting

15.   First Case Discussion

16.   Financing Strategy

17.   Share Issue: Underwrite and Private Placement

18.   Capital Structure

19.   Long-Term Financial Planning

20.   Short-Term Financial Planning

21.   Working Capital Management

22.   Introduction of Option

23.   Valuing Option

24.   Real Option

25.   Risk Management

26.   Merger and Acquisition

27.   International Financial Management

28.   Second Case Discussion

Course Objectives:

This course is introductory course of corporate finance. Students should know about basic concepts and methods of corporate finance. In addition, students should be able to establish the analytical framework of financial decision.

Examination:

Regular attendance, participation, 3 homework: 10%

Case Analysis: 30%

Requirement:

Case 1:  Please estimate the value per share of Chinese Petroleum Company when Chinese Petroleum Company finishes IPO on 5th July, 2007.

Case 2:  After IPO, suppose that Chinese Petroleum Company needs raise fund for future development. Please make financing proposal. )

Mid –Term Test: 30%

Final Test: 30%

Credits & Workload:

4 Credits & 4 hours per Week (teaching) + 2 hours per Week (tutoring); 15 Weeks, 60 hours (teaching) + 30 hours (tutoring)

Excerpt:

Homework 1:

1. Use the table for the question(s) below.

Consider the following four bonds that pay annual coupons:

Bond         Years to maturity           Coupon        YTM

A                 1                      0%           5%

B                 5                      6%           7%

C                10                      10%          9%

D                20                      0%           8%

Assume that the YTM increases by 1% for each of the four bonds listed. Rank the bonds based upon the sensitivity of their prices from least to most sensitive.

2. Use the table for the question(s) below.

The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value):

Maturity (years)              1             2            3           4           5

Price (per $100 face value)     94.52         89.68         85.40       81.65        78.35

1) Compute the yield to maturity for each of the five zero-coupon bonds.

2) Plot the zero-coupon yield curve (for the first five years).

3. Use the information for the question(s) below.

Suppose that Texas Trucking (TT) has earnings per share of $3.45 and EBITDA of $45 million. TT also has 5 million shares outstanding and debt o $150 million (net of cash). You believe that Oklahoma Logistics and Transport (OLT) is comparable to TT in terms of its underlying business, but OLT has no debt. OLT has a P/E of 12.5 and an enterprise value to EBITDA multiple of 7.

1)       Based upon the price earnings multiple, the value of a share of Texas Trucking is closest to:

A) $ 49.30

B) $ 43.10

C) $ 24.15

D) $ 27.60

2)   Based upon the enterprise value to EBITDA ratio, the value of a share of Texas Trucking is closest to:

A) $ 33.00

B) $ 82.50

C) $ 43.10

D) $ 21.25

3)   What are some common multiples used to value stocks?

4)   What are some implicit assumptions that are made when valuing a firm using multiples based on comparable firms?

 
 
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