Module Corporate Finance The course aims at providing knowledge of the financial aspects of an enterprise or corporation in order to enable students to assess its prospects, estimate its value, understand the process for deciding the investments underpinning its growth, judge the best way to source funds for such investments, understand hedging and payout decisions, all in the context of the financial and institutional environment in which firms operate.
Module Financial Investments The course aims at giving an in-depth overview of modern portfolio theory, with a specific focus on risk-return trade-off, portfolio optimization, implementation using index models, and risk management in the context of portfolios of fixed-income securities and stocks.
Expected learning outcomes
Instructional objectives that students are expected to achieve: Issues of corporate governance and introduction to a company's books. The balance sheet, book equity, market value of equity: value and prices, Enterprise Value Income and cash flow statements, liquidity and working capital management ratios. Working capital management (cont'd), financial adequacy, profitability and valuation ratios and indicators Compounding, discounting, the Time Line, Present Value, Future Value, perpetuities, annuities, both simple and growing. Bond's dynamic behavior; risk: corporates and sovereigns; bond ratings; towards a hurdle rate. Market risk-return, diversification and the Capital Assets Pricing Model Debt expected return, debt beta, WACC, assets beta, hurdle rates. The Modigliani-Miller propositions: assumptions, formulas, predictions. Debt, tax shield, costs and benefits of debt, optimal capital structure Equilibrium in capital markets, portfolio theory and practice: to understand theory and empirical evidence behind optimal risky portfolios; capital asset pricing models; arbitrage pricing models, single-index and multifactor models of risk and return. The efficient market hypothesis, and the behavioral finance: to understand theory and empirical evidence behind well-functioning markets, irrational behaviors and bubbles. Risk management in the context of fixed-income securities: to understand bond prices and yields, the term structure of interest rates, managing bond portfolios. Risk management in the context of stock securities: to understand macroeconomic and industry analysis, equity valuation models, financial statement analysis. Portfolio performance evaluation: to understand the reasons for the use of risk-adjusted indicators, to calculate and use them.
Lesson period: Second trimester
(In case of multiple editions, please check the period, as it may vary)
Risk and return (chapter 5) Returns and excess returns, risk and risk premiums, time series analysis of past rates of return, normal distribution, reward-to-volatility ratios Capital allocation to risky assets (chapter 6) Risk and risk aversion, capital allocation across risky and risk-free portfolios, risk tolerance and asset allocation, passive strategies, Capital Market Line Optimal risky portfolio (chapter 7) Diversification and portfolio risk, portfolio of two risky assets, asset allocation with stocks, bonds and bills, the Markowitz portfolio diversification model Index models (chapter 8) A single-factor security market, the single-index model, the multifactor-index model, the Fama-French Three Factor Model Equilibrium in Capital Markets (chapter 9, 10) The Security Market Line, the Capital Asset Pricing Model, the Arbitrage Pricing Theory The Efficient Market Hypothesis (chapter 11) The random walk and the efficient market hypothesis, versions of efficient market hypothesis, implications of the efficient market hypothesis, event studies, mutual funds and analyst performance Behavioral finance and technical analysis (chapter 12) The behavioral critique, forecasting errors and behavioral biases, technical analysis and behavioral finance Portfolio performance evaluation (chapter 24) Adjusting returns for risk, the Sharpe ratio, the Jensen ratio, the role of alpha in performance measures
Front teaching, discussions, group works, class presentations
Bodie, Kane, Marcus "Investments", McGraw Hill, Global edition
Module Corporate Finance
Chapter Sections 1 The Corporation 1.1 The Four Types of Firms 1.2 Ownership Versus Control of Corporations 29 Corporate Governance 29.1 Corporate Governance and Agency Costs 29.2 Monitoring the Board of Directors and Others 29.3 Compensation Policies 29.4 Managing Agency Conflicts 29.6 Corporate Governance Around the World 2 Introduction to Financial Statements Analysis No exam questions 2.1 2.2 2.3 2.4 2.5 2.6 26 Working Capital All sections Management 3 Financial Decision Making No exam questions No exam questions 3.2 4 The Time Value 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 5 Interest Rates 5.1 5.2 5.3 5.4 5.5 6 Valuing Bonds 6.1 6.2 6.3 6.4 6.5 Interest rates and Time Value of Money of Money The Timeline The Three Rules of Time Travel Valuing a Stream of Cash Flows Calculating the Net Present Value Perpetuities and Annuities Using an Annuity Spreadsheet or Calculator Non-annual Cash Flows Solving for the Cash Payments Interest Rates Quotes and Adjustments Application: discount rates and loans The Determinants of Interest Rates Risk and Taxes The Opportunity Cost of Capital Bond Cash Flows, Prices and Yields Dynamic Behavior of Bond Prices The Yield Curve and Bond Arbitrage Corporate Bonds Sovereign Bonds Firms' Disclosure of Financial Information The Balance SHeet The Income Statement The Statement of Cash Flows Other Financial Statement Information Financial Statements Analysis 10 Capital Markets 10.1 Insightsfrom89YearsofInvestorHistory 10.2 CommonMeasuresofRiskandReturn 10.3 HistoricalReturnofStocksandBonds 10.4 TheHistoricalTrade-offBetweenRiskandReturn 10.5 CommonvsIndependentRisk 10.6 DiversificationinStockPortfolios 10.7 MeasuringSystematicRisk 10.8 BetaandtheCostofCapital and the Pricing of Risk Noexamquestions 12 Estimating the Cost of Capital 12.1 TheEquityCostofCapital 12.2 TheMarketPortfolio 12.3 BetaEstimation 12.4 TheDebtCostofCapital 12.5 AProject'sCostofCapital 12.6 ProjectRiskCharacteristicsandFinancing 7 Investment Decision Rules 7.1 NPV and Stand-Alone Projects 7.2 The Internal Rate of Return Rule 7.3 The Payback Rule 7.4 Choosing Between Projects 8 Fundamentals of Capital Budgeting 8.1 Forecasting Earnings 8.2 Determining Free Cash Flow and NPV 8.3 Choosing Among Alternatives 8.4 Further Adjustments to Free Cash Flow 8.5 Analyzing the Project 14 Capital Structure in a Perfect Market 14.1 EquityVersusDebtFinancing 14.2 Modigliani-MillerI 14.3 Modigliani-MillerII 14.5 BeyondthePropositions 15 Debt and Taxes 15.1 TheInterestTaxDeduction 15.2 ValuingtheInterestTaxShield 15.3 RecapitalizingtoCapturetheTaxShield 15.5 OptimalCapitalStructureWithTaxes 16 Financial Distress, Managerial Incentives and Information 16.1 DefaultandBankrupcyinaPerfectMarket 16.2 TheCostsofBankrupcyandFinancialDistress 16.3 FinancialDistressCostsandFirmValue 16.4 OptimalCapitalStructure:TheTrade-offTheory 16.5 ExploitingDebtHolders:TheAgencyCostsofLeverage 16.6 MotivatingManagers:TheAgencyBenefitsofLeverage 16.7 AgencyCostsandtheTrade-offTheory 18 Capital Budgeting and Valuation with Leverage Noexamquestions 18.1 18.2 18.3 18.4 18.5 17 Payout Policy 17.1 17.2 17.3 17.5 17.6 30 Risk Management 30.1 30.2 30.3 20 Financial Options 20.1 20.2 20.3 20.4 OverviewofKeyConcepts TheWeightedAverageCostofCapitalMethod TheAdjustedPresentValueMethod TheFlow-to-EquityMethod ProjectBasedCostofCapital DistributiontoShareholders ComparisonofDividendsandShareRepurchases TheTaxDisadvantageofDividends PayoutvsRetention SignalingwithPayoutPolicy Insurance Commodity Price Risk Exchange Rate Risk Optionbasics OptionPayoffsatExpiration Put-CallParity FactorsAffectingOptionPrices
Front teaching, labs
JONATHAN BERK, PETER DEMARZO "CORPORATE FINANCE", 4th OR 5th EDITION