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
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.
Regular attendance, participation, 3 homework: 10%
Case Analysis: 30%
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)
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?