Corporate Finance
A.Y. 2023/2024
Learning objectives
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.
Expected learning outcomes
At the end of the course the student knows a corporation's accounts explaining how the main internal governance and external environment issues are interrelated and how they can best be analyzed to gauge the health, prospects and value of a business. Specifically, the student knows the time value of money, the cost of capital and the identification of the appropriate discount or hurdle rate, the main decision criteria such as IRR, NPV, repayment period, capital structure and distribution policies and the main issues involved in the decision to hedge risk through futures and options.
Lesson period: First trimester
Assessment methods: Esame
Assessment result: voto verbalizzato in trentesimi
Single course
This course can be attended as a single course.
Course syllabus and organization
Single session
Responsible
Lesson period
First trimester
Course syllabus
This module offers in-depth insight in key theories and topics in Corporate Finance. The focus of this module is on how corporations manage financial investments and decisions in the long term and short term, and make optimum corporate financial decisions.
Objectives:
- Introducing the basic definitions of concepts in finance and financial management, such as the forms of business organization and their relationship with the corporate financial system.
- A short overview on time, money and interest rates.
- Introducing the decision rules to value projects and firms.
- Fundamentals of capital budgeting.
- Introducing the measures of return and risk; the Capital Asset Pricing Model and its application will also be covered.
- Introducing the concept of expected return and risk; explain cost of equity, cost of debt, WACC, and how to apply WACC in business project valuation.
- The mechanics of raising capital through debt and equity issuance will be covered, and the variety of capital structure implemented by firms in different industries introduced. To explain how firms adjust their capital structure to fund future projects.
- Describing the different ways of making distributions to the investors of the firms. To explain the relation between payout policy and agency problem.
Having successfully completed this module, students will be able to demonstrate knowledge and understanding of:
- the important sources of information for corporate decision-making and budgeting;
- the theoretical setup of the risk and return relationship of a financial investment relationship and how this may be used to price financial assets, such as stocks and bonds;
- the capital structure of a firm and how firms decide between bonds and stocks;
- the theories of Modigliani and Miller regarding payout policy and capital structure.
Objectives:
- Introducing the basic definitions of concepts in finance and financial management, such as the forms of business organization and their relationship with the corporate financial system.
- A short overview on time, money and interest rates.
- Introducing the decision rules to value projects and firms.
- Fundamentals of capital budgeting.
- Introducing the measures of return and risk; the Capital Asset Pricing Model and its application will also be covered.
- Introducing the concept of expected return and risk; explain cost of equity, cost of debt, WACC, and how to apply WACC in business project valuation.
- The mechanics of raising capital through debt and equity issuance will be covered, and the variety of capital structure implemented by firms in different industries introduced. To explain how firms adjust their capital structure to fund future projects.
- Describing the different ways of making distributions to the investors of the firms. To explain the relation between payout policy and agency problem.
Having successfully completed this module, students will be able to demonstrate knowledge and understanding of:
- the important sources of information for corporate decision-making and budgeting;
- the theoretical setup of the risk and return relationship of a financial investment relationship and how this may be used to price financial assets, such as stocks and bonds;
- the capital structure of a firm and how firms decide between bonds and stocks;
- the theories of Modigliani and Miller regarding payout policy and capital structure.
Prerequisites for admission
Basic knowledge of economic concepts, mathematics, and finance is assumed. The lecturer will provide some additional material to help the students to familiarize themselves with basic financial terminology and concepts if needed.
Teaching methods
Teaching and learning methods include lectures, short videos, numerical exercises, case studies, class discussion of relevant academic papers, testimonials from practitioners and use of a student response system (Kahoot or Vevox) for comments and questions. All classes will follow an iterative approach.
Teaching Resources
Berk, J. and DeMarzo, P (Fifth Edition or previous editions). Corporate Finance. Pearson Education, Inc.
Principles of Corporate Finance, Brealey, Myers, Allen (thirteenth edition or previous editions)
Case studies
Selected academic papers
Principles of Corporate Finance, Brealey, Myers, Allen (thirteenth edition or previous editions)
Case studies
Selected academic papers
Assessment methods and Criteria
Module evaluation consists of final written exam with numerical exercises, open questions and multi-choice questions. The module might also include a mid-term examination and a group presentation.
SECS-P/09 - CORPORATE FINANCE - University credits: 6
Lessons: 40 hours
Professor:
Degl'Innocenti Marta
Educational website(s)
Professor(s)
Reception:
On appointment