Business Finance - Spring 2016

Faculty:
Office:
Telephone:
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Professor Doug Nikias

Bldg. 37, Room 535
259-1393
dnikias@ulsan.ac.kr
M, W, R 3 and by appointment
W 6, 7 24-320 F 7 24-211

Course Description: Continuation of Financial Management, introducing the concept of

risk, the types of risk that can be diversified away through the portfolio investment. Examines
how corporate financial managers and investors manage risk using derivative securities, such
as options, swaps, futures, and forward contracts. Emphasis is on managing financial risk.
Diversification and portfolio selection, valuation theory and equilibrium pricing of risky
assets (Capital Asset Pricing Model and Arbitrage Pricing Theory) will be covered in this
course. Advanced financial topics, capital structure, dividend policy, working capital
management, business reorganization, will be also included and facilitated with the use of
cases, as appropriate. Simulation techniques using Crystal Ball in special finance topics will
be included, if possible.
Goal of Instruction: This course will examine how market, financial and operating decisions
and risk affect corporate and investment valuation. Financial and operating strategies in
addition to theoretical models for evaluating and hedging against risk will be analyzed. This
will include an examination of corporate financing decisions for debt and equity policies, in
addition to financial and operating options, derivatives and hedges. Valuation models and
strategies for mergers and acquisitions will also be analyzed.
Main Contents & Methods of Teaching: The basic properties and models for evaluating
corporate policies and risk will be examined. Policies and strategies for corporate financing
decisions, evaluating investment risk in addition to strategies for managing cash and working
capital will be analyzed. Strategies for evaluating and hedging market, financial and
operating risk with investment portfolios, options, futures and swaps will also be analyzed.
Valuation models for mergers and acquisitions will also be developed and evaluated. Course
material will be delivered through a combination of lectures, discussions, student
presentations, special problems and case studies. My task is to help you understand key
concepts, issues and topics in financial management. Your contributions and participation to
class discussions are always welcome and appreciated.
Evaluation Criteria: Grades will be assigned based on your performance on the following:
Midterm Exam
Final Exam
Group Presentation
Problem Sets
Class Participation

28%
32%
10%
20%
10%

The midterm and final exam will be closed book and closed notes, however you will be
provided with a one-page sheet of financial formulas. In addition, you will be allowed to
bring a financial calculator. The final exam will be comprehensive, over all material covered
in the course. If your score on the final exam is higher than your score on the midterm exam,
your score on the final exam will replace your score on the midterm exam. Your lowest score
Professor Doug Nikias Spring 2016

Business Finance - Spring 2016

on the problem sets will be dropped, in addition problem sets may be handed in late for onehalf credit. At the end of the course, if the average score is less than 75 percent of the total
points available scores will be curved to bring the average up to 75 percent. Class
participation points may be earned by attending class, in addition part of the participation
points will be based on contributions to class discussions, comments, questions and other
contributions to the course. There will be no make-up exams given, except for university
approved reasons. If you are excused from the midterm exam for a university approved
reason, your score on the final exam will be substituted for the midterm exam. However, you
must take the final exam. Any grade disputes must be resolved within one week after the
results have been posted.
Textbook & Reference Books:
Fundamentals of Corporate Finance, 8th ed., Brealey, Myers and Marcus, McGraw-Hill.
Case Studies in Finance, 2nd ed., Bruner, Eades and Schill, McGraw-Hill.
Course materials to be distributed on the course webpage.
Course Topics:
Week 1-3:
Corporate Governance, Financial Markets and Institutions, Financial Statements, Risk and
Returns, Capital Budgeting
Chapter 1 P22,24,37
Chapter 2 P3,6,10,18
Chapter 3 P14,22,30*,32*,34,35*,36*,Financial Statements,Financial Statement Preparation,
Corporate Income Taxes,Personal Income Taxes
Chapter 11 P14*,15,16,17*,21,Nominal & Real Returns,Stock Portfolios,Portfolio Returns I,
Investor Source Dividends
Chapter 12 P5*,14,16,31*,Portfolio Returns II,Multi-Factor Models
Case Study: Guna Fibres, Ltd.,The Boeing 7E7
Week 4-6:
Stock and Investment Valuation
Chapter 7 P3*,17,22,24*,25*,28*,29,38,44,Comparables,Payout Ratios II,CARs,Market
Value FSs
Chapter 9 P11,26*,27*,29*,Capital Budgeting,Capital Budgeting w/ Inflation,Capital
Budgeting with Real Options
Chapter 10 P23,25*,28,Break-Even Points,Simulation Analysis
Case Study: Flinder Valves and Controls Inc.,Worldwide Paper Co.
Week 7-8
Distributions to Owners, Corporate Financing
Chapter 17 P3,17,21*,23,24,29*,Dividends,Stock Repurchases and Stock Splits,Stock Prices,
Dividends and Stock Repurchases Valuation
Chapter 14 P5,8,Corporate Voting and Takeovers
Case Study: Gainesboro Machine Tools Corp.

Professor Doug Nikias Spring 2016

Business Finance - Spring 2016

Week 8
Midterm Exam
Week 9-11
Venture Capital, Debt, Short-Term Financing Plans
Chapter 15 P6,14*,16*,20*,21*,IPOs,Venture Capital,Rights Issue
Chapter 16 P6,9,18,19*,25*,31,32*,Investor Source Capital Structure,Capital Structure and
Value
Chapter 19 P4,7,13-16,17*,18*,25,Cash Budget
Case Study: The Wm. Wrigley Jr. Company
Week 12-13
Working Capital Management, Mergers and Acquisitions
Chapter 20 P9,11,12,14,22*,26*,27,28*,Trade Credit,Credit Scores,Credit Policies,Economic
Order Quantity,Lockbox System
Chapter 21 P3*,7,8,14*,15*,Mergers
Case Study: The Timken Company
Week 14-15
Options and Risk Management
Chapter 23 P8,12,24,25,26*,27,28*,29*,Stock Options I & II,Convertible Bonds
Chapter 24 P8,10,11,17,Futures Contracts,Interest Rate Swaps,Foreign Currency Swaps
Case Study: J & L Railroad
*

presentation problems.

Professor Doug Nikias Spring 2016