NMIMS SBM: Course Description

Executive MBA
Batch 2015-17 (Academic Year: 2015-16)

Course Name: CORPORATE FINANCE II

Course Code: CF3013
Credit Value: 1.5
Faculty Name: Dr. Chandan Dasgupta, Dr. Sangeeta Wats
Email:
Contact No.:

Learning Objectives:

This course in Corporate Finance II builds on the concepts developed in finance during the courses viz
Management Accounting and Control, Corporate Finance I and other Finance Subjects studied earlier.
The goal is to develop the financial tools, both theoretical and practical essential to a thorough understanding
of the issue that pelage managerial decision making at any level across all functional areas.
The objective is to demonstrate, contrary to popular belief, while financing decisions are not the all and only
criterion for decision making but given that any enterprise whether commercial or not is finally judged by its
financial performance, so a corporate financial officer CAN create value through financing strategic and
operating decisions. Any corporate action has its consequent financial implication even if it does not become
apparent in the near term and students build the knowledge and skills critical to an effective managers
responsibility of proposing assessing and implementing financial investment decisions. The course would
introduce advance valuation techniques and explore the empirical difficulties and judgemental ambiguities
inherent in applying the valuation process. It seeks to identify the conditions under which each valuation
technique is appropriate. WHEN to use a technique is as important as knowing how and our objective would
be reinforce that in this class.
An overriding objective of the course will be to demonstrate that financial strategies of corporations are usually
a complex amalgam of multiple factors, both exogenous and endogenous and some financial and some outside
the realm of the finance professional. Nevertheless, the finance professional is very often constrained and / or
influenced by the decisions taken beyond his / her own area of expertise.
A large part of the course deals in cases that are simply applications of concepts you have already covered under
other core / elective courses with only a different perspective that of the user corporation rather than the
financial institution which is counter party to the transaction.
We would also build on the latest thoughts on issues like cost of capital that have been discussed in earlier
trimesters / first year in the traditional, standardized form and while the ideas may not have any immediate
application, the purpose is to get you thinking along hitherto unexplored channels about concepts that appear
to be quite elementary. The principal difference between the traditional corporate finance course in earlier
periods and the current course is that so far we have looked at each topic as a self-contained and normative
element in decision making now we will proceed to focus on each event as a chain reaction / complex
combination of multiple elements and the main deliverable of the course will be if we can slice up a decision
event in the corporate finance officers life as into component parts just in the fashion of the first year courses
and then put them back together again as a coherent whole some kind of macabre combination of Humpty
Dumpty run amok and Granger causality!
It is next to impossible to discuss the various issues encompassing corporate finance without straying into areas
covered by other courses, viz., acquisition finance, corporate restructuring, uses and pricing of derivatives, cross
border valuation and financing, performance measurement like EVA etc. We would make the best efforts to
avoid such issues, but be forewarned that there may be some over lapping across subjects.

Evaluation Criteria (in %):

Class Participation 10 %
Assignments / Quizzes 30 %
Case Presentations / Submissions 10 %
 Term End Exam 50 %
TOTAL 100 %

All quizzes would be surprise quizzes. Request for re-evaluation of quizzes would not be normally entertained.

Pedagogy:

With emphasis on individual and collaborative learning, the course will be taught through the case method. For every
topic, the background reading material will be provided and a case will be used for class discussion.

Session Details:

Session
Topic
No.
Module - I: Assessing Estimating Funds Requirements: Long Term Sources of Funds
1 Capital Budgeting
Sensitivity Analysis
Scenario Analysis
Simulation Techniques

2 Capital Rationing, Managerial Options (Real Options)

Case: RETO S.A. (HBS)

3 Replacement of Machines
Optimum Replacement Cycle
Capital Budgeting and Risk

Module - II: Cost of Capital & Economic Value Added

4 Cost of capital / WACC in a multidivisional Company
Marriott Corporation - Cost of Capital (HBS)

5 Economic Value Added

Vyaderm Pharmaceuticals ( HBS)
Understanding EVA (HBS)

Module - III: Value Creation and Acquisition Decisions

6 Value creation
Case: Sampa Video (HBS)

7 Acquisition Decisions
Case: Cooper Industries(HBS)

Module - IV: Capital Structure Decisions

8 Theory of capital structure
Net income approach
Net operating approach
Traditional approach
MM approach
Taxes and capital structure

Module V: Alternate Mode of Financing: Lease Financing

9 Long-term Financing
Alternative mode of financing
Leasing and Hire Purchase
Finance lease vs borrowing
 Lessors perspective
Lessees perspective
Calculation of Lease Rentals

Module VI: Dividend Policy

10 Main determinants of a dividend policy
Reasons for firms following a policy of stable dividends
Case: Dividend Policy in Linear Technologies (HBS)

Reference Text Book:

Corporate Finance by Ross Westerfield Jaffe (RWJ), Seventh Edition, Tata McGraw Hill.