Principles of Corporate Finance

2023/2024

Учебный год

ENG

Обучение ведется на английском языке

10

Кредиты

Кто читает:

Международный институт экономики и финансов

Статус:

Курс обязательный

Когда читается:

4-й курс, 1-4 модуль

Преподаватели

Гач Иван Петрович

Дойникова Ирина Владимировна

Наумова Елена Христофоровна

Собченко Олег Евгеньевич

Улугова Азиза Эркиновна

Course Syllabus

Abstract

The course develops theoretical and practical frameworks to analyze, understand and make decisions regarding problems faced by companies and corporations associated with operating, financing and investment activities and focused on the value of a business maximization. The course covers basics of investment analysis, capital structure and valuation, dividend policy decisions and M&A, risk management and hedging, corporate governance. It provides necessary knowledge in evaluating different management decisions and their influence on corporate performance and value. The course requires existing knowledge in micro- and macroeconomics, accounting and banking. It is based on lectures, classes, case studies and self-study. “Principles of Corporate Finance” is a two-semester course designed to prepare students for the University of London examination and future employment with professional financial markets participants.

Learning Objectives

• The main objective of the course is to provide a conceptual background for decision making in corporations regarding financial problems (starting with quarterly budgeting and finishing with decision making).
• Finishing the course, students should be able to: • solve different problems associated with the daily routine of financial officer in corporation; • work with information: to find, evaluate and use information from various sources, necessary to solve professional problems in the field of corporate finance (capital budgeting, financing policy, payout policy, M&A motives); • communicate, express their thoughts orally and in writing on basic topics of corporate finance; • organize the activities of a small group created for the implementation of a specific project; • use financial, accounting and other information contained in the statements of companies for making management financial decisions (regarding investments, capital structure, payout policy).

Expected Learning Outcomes

• Analyse simple numerical examples of efficient takeover activity
• Analyse the impact of taxes on the Modigliani–Miller propositions
• Be able to calculate the adjusted present value
• Be able to explain and evaluate the winners’ curse problem
• Be able to show the irrelevance of the dividend policy under Modigliani–Miller assumptions
• Be able to write down the relationship between debt, equity, the unlevered return on the firm, and the levered return on the firm
• Be familiar with debt overhang and risk-shifting problems
• Be familiar with real options approach to capital budgeting
• Be familiar with the clientele model of dividends
• Be familiar with the effects of asymmetric information and agency costs on dividend policy
• Be familiar with the elements of corporate governance
• Be familiar with the empirical evidence regarding the gains from mergers and acquisitions
• Be familiar with the empirical research on the effects of corporate governance on the market value of a corporation
• Be familiar with the methods of interest rate risk
• Be familiar with the stylized facts of dividend policy
• Be familiar with the trade-off and pecking order theories
• Calculate the agency cost of debt in stylised settings
• Derive and discuss the Modigliani–Miller theorem
• Detail the argument of Grossman–Hart (1980) regarding the impossibility of efficient takeovers
• Discuss the effects of asymmetric information on capital structure
• Draw a link between Modigliani–Miller’s 1st and 2nd propositions
• Explain and calculate the source of option value
• Explain and evaluate the cost of hedging
• Explain the intuition behind the pecking order theory of finance
• Explain venture capital and equity issuance in the public market
• Explain why and how companies manage risk
• Find the equity beta of a firm by unlevering and relevering the equity beta of a comparable firm with different capital structure.
• Outline the main features of risky debt and equity
• Perform valuation with multiple financing rounds
• Show that dividend policy (and share repurchases) are irrelevant to firm valuation under the Modigliani–Miller assumptions
• Understand covered and uncovered interest rate parity
• Understand how the stock prices of bidders and targets react around the time of acquisition announcements
• Understand how to calculate ownership structure in initial public offerings and seasoned equity offerings
• Understand the advantages and disadvantages of corporate diversification
• Understand the effect of corporate and personal taxes on capital structure
• Understand the factors determining optimal leverage
• Understand what happens to equity returns, and the weighted average cost of capital as leverage increases with and without taxes

Course Contents

• Introduction to the Course. Why is Finance Corporate? The Foundations for Proper Financial Analysis of the Firm
• Сapital Structure Choice and Corporate Value
• Leverage and WACC, Corporate Value
• Dividend Policy and Corporate Value: Theory and Evidence
• Corporate Investing Policies and Value Creation
• Valuing Corporate Strategic Opportunities and Flexibility: Corporate Real Options.
• Corporate Governance
• Equity Financing
• The Market for Corporate Control: Mergers&Takeovers
• Corporate Risk Management and Hedging

Assessment Elements

• Midterm exam
• Quizzes
• Home Assignments
• Quizzes
• Home Assignments
• Winter exam
• Final exam
• Group assignment
• Group assignment

Interim Assessment

• 2023/2024 2nd module
  0.05 * Group assignment + 0.15 * Home Assignments + 0.25 * Midterm exam + 0.1 * Quizzes + 0.45 * Winter exam
• 2023/2024 4th module
  0.6 * Final exam + 0.134 * Group assignment + 0.133 * Home Assignments + 0.133 * Quizzes

Bibliography

Recommended Core Bibliography

• Financial markets and corporate strategy, Hillier, D., 2012
• Principles of corporate finance, Brealey, R. A., 2017

Recommended Additional Bibliography

• Corporate finance, Berk, J., 2007