MOD.2 CORPORATE FINANCE
- Overview
- Assessment methods
- Learning objectives
- Contents
- Full programme
- Delivery method
- Teaching methods
- Contacts/Info
There are no explicit prerequisites. However, a good understanding of basic principles of Corporate Finance, Accounting and Financial Statements and Financial Mathematics is recommended.
Final written test, which lasts an hour and a half, divided as it follows:
• theoretical questions to test the knowledge of definitions and basic principles of Corporate Finance
• exercises to verify the application of financial instruments for projects’ and firms’ valuations;
• multiple-choice questions (max. 6 points), to test reasoning ability.
If, during the academic year 2022/23, due to the restriction measures related to the health emergency, it will not be possible to take face-to-face examinations, the final exam will be carried out via the e-learning platform.
For the purpose of passing the exam is necessary to achieve a score of at least 18 points over 30. If the student got the maximum score (30 over 30 points) he will be awarded a final score of 30 over 30 cum laude in case of a particularly deserving written exam.
Mid-term exams are not scheduled.
The course covers a selection of the major advanced topics of corporate finance, focusing on some of the “pillars” of Corporate Finance:
• the investment policy;
• financing decision;
• the dividend policy;
• firm valuation.
We will examine the variables and the main algorithms to estimate the value of firms. We also focus on issues related to the complex choices of capital budgeting (real options and under uncertainty) and to the decisions on the composition of the firms’ financial structure and their impact on firms’ value.
Learning Outcomes
At the end of the course the student will be able to know and understand the main economic and financial variables used to estimate the value of a company.
Results of estimations should be analyzed by the student in order to make a judgment related to the acceptability or otherwise of an investment or financing decision. For example: whether or not to replace the firm’s car fleet, purchasing a new machine for the production chain,
compare the cost of a debt issue and a share issue, to assess M&A operations.
1. Basics of capital budgeting
1.1 The capital budgeting’s criteria
1.2 The estimation of cash flows
2. Advanced topics in capital budgeting
2.1 Sensitivity analysis
2.2 Break-even point analysis
3. Real options and decision trees
3.1 Extended NPV
3.2 The valuation of real options
4. The firm’s capital structure
4.1 The propositions of Modigliani-Miller
4.2 The weighted average cost of capital
4.3 The effect of corporate taxes
4.4 The effects of the collapse, the agency conflicts and information asymmetries
5. The capital budgeting for levered firms
5.1 Investments’ valuation for levered firms
5.2 The debt’s tax shield
5.3 How to choose funding sources?
6. “In-depth” topics
6.1 The dividend policy
6.2 International corporate finance
6.3 The firm’s valuation
yes
Teaching lessons and exercises, for a total of 40 hours.
No other forms of supplementary teaching are scheduled.
The course material required is as it follows:
• For a review of basic capital budgeting is recommended: Brealey R.A., Myers S.C., Allen F. and Sandri S., “Principles of Corporate Finance” [it], McGraw-Hill, Milan, 2020, 8th edition, chapters. 2, 5 and 6, or an equivalent handbook available at the Library of Economics.
• For all students: Brealey R.A., Myers S.C., Allen F. and Sandri S., “Principles of Corporate Finance” [it], McGraw-Hill, Milan, 2020, 8th edition.
Required parts will be indicated in class and reported within the syllabus/timetable on e-learning platform.
Chapters to be studied for the exam: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14, 15, 16, 17, 18 ,19, 22, 30, 31, 32.
Other materials (slides of the lectures, tutorials and study materials) will be made available online on the E-learning platform.
No other teaching materials (handouts, summaries, etc..) are authorized by the teacher.
Alternative text-book:
Hiller, Ross, Westerfield, Jaffe, Jordan, «Corporate Finance», III ed. McGraw-Hill 2018
Office Hours
• By appointment (in presence):
- Room #20, first floor, Department of Economics, Via Monte Generoso, 71 – Varese
• By appointment (remotely) contacting the teacher by email to schedule a meeting via Microsoft Teams.