Curso: Finance III Strategy

Profesor: Maximiliano González F.

E-mail: maxgonza@uniandes.edu.co
Tel: 339-4999 Ext. 2339

Office hours: Every class day from 10 to 11a.m. or by appointment. Office

SD 973 (JMSD)

Asistente de apoyo Camilo Cervino

académico: E-mail: c.cervino10@uniandes.edu.co

Description
Finance III closes the basic finance courses offered by the Faculty. In this class, we will
deal with how financial choices should be aligned with the overall business strategy. This
course focuses on the right hand side of the firm’s balance sheet: debt and equity. This is
an advanced finance course, therefore a high level of motivation and work outside the
class is expected.

Objectives
The general objective is to present a complete financial model to be used as a guide to
the process of aligning the business strategy with the financial strategy. Therefore, at the
end of the course the student must understand fully the following concepts and should be
able to apply them in real life situations:
1) Risk/return paradigm.
2) How portfolios are made? And why do we use them?
3) Risk measurements.
4) Why do firms use debt?
5) Agency issues in real life financial decisions
6) Payout: dividends versus repurchases

Facultad de Administración – Universidad de los Andes

Calle 21 No 1-20. Edificio SD. Piso 9. Bogotá, Colombia. Tel.: [57.1] 332 4144 - 339 4949/99 Ext. 2336 Fax: [57.1] 332 4551
http://administracion.uniandes.edu.co
Universidad de los Andes | Vigilada Mineducación. Reconocimiento como Universidad: Decreto 1297 del 30 de mayo de
1964. Reconocimiento personería jurídica: Resolución 28 del 23 de febrero de 1949 Minjusticia
Methodology
We will use a participation-centered methodology, where each student should come to
class well prepared and ready to make valuable comments and solve problems posted in
class. We will also discuss real life cases and try all the time to understand how financial
theory could be apply to real life problems.

Evaluation
Partial exam 25%
Final 30%
Case 1: Dow Chemical’s 10%
Case 2 10%
Case 3 10%
Participation 15%
100%

For the three cases we plan to solve in class, groups of 2 to 3 students should be formed.
A professional two-page memo is expected at the beginning of the class when the case
is scheduled to be discussed. In the memo a precise and supported suggestion should be
articulated. Around half of the cases’ grade comes from the class discussion.

Bibliography:
Berk, J. y P. DeMarzo (2014), Corporate Finance, Pearson.

Other useful references (not required):

Breadly, R., S. Myers and F. Allen (2010), Principios de Finanzas Corporativas, 9na.
ed.: McGraw Hill: New York.

Ross, S., R. Westerfield y J. Jaffe, (2008): Corporate Finance. 8va. ed. Irwin: New York.

González, M. (2017), Determinantes de la medición del desempeño y endeudamiento

óptimo, Apuntes de Clase. Uniandes.

Facultad de Administración – Universidad de los Andes

Calle 21 No 1-20. Edificio SD. Piso 9. Bogotá, Colombia. Tel.: [57.1] 332 4144 - 339 4949/99 Ext. 2336 Fax: [57.1] 332 4551
http://administracion.uniandes.edu.co
Universidad de los Andes | Vigilada Mineducación. Reconocimiento como Universidad: Decreto 1297 del 30 de mayo de
1964. Reconocimiento personería jurídica: Resolución 28 del 23 de febrero de 1949 Minjusticia
 Class plan

Week 1 and 2:
Introduction and classical portfolio theory.

Required reading: Beck and DeMarzo (BDM) Ch 10 y 11.

Week 3 and 4:
CAPM and Multifactor models (Fama-French-Carthart).

Required reading: BDM Ch. 11, 12 y 13 (secc. 13.7, 13.8)

Week 5
Equity cost of capital estimation in practice. The use of CAPM in the emerging markets.

Required reading: BDM Ch. 12 (secc 12.5) and Ch. 14 (secc. 14.3).
González (2017) Prima de inversión en los países emergentes

Week 6:
Partial exam (Tuesday Sept. 12th)

Case: Dow Chemicals bid for the privatization of PBB in Argentina (Harvard Case: 9-204-
021). (Thursday Sept. 14th)

Week 7 and 8:
Capital structure.

Required reading: BDM Ch.14, 15 and 16

Facultad de Administración – Universidad de los Andes

Calle 21 No 1-20. Edificio SD. Piso 9. Bogotá, Colombia. Tel.: [57.1] 332 4144 - 339 4949/99 Ext. 2336 Fax: [57.1] 332 4551
http://administracion.uniandes.edu.co
Universidad de los Andes | Vigilada Mineducación. Reconocimiento como Universidad: Decreto 1297 del 30 de mayo de
1964. Reconocimiento personería jurídica: Resolución 28 del 23 de febrero de 1949 Minjusticia
Week 9:
Capital structure (review)

Case 2: Diageo PLC (Harvard Case: 9-201-033). (Thursday Oct. 14th)

Week 10 and 11:

Payout policy: dividends versus re purchases

Required readings: BDM Ch. 17

Week 12:
Payout policy (review)

Case 3: Linear Technologies (Harvard Case: 9-204-066). (Thursday Nov. 2nd)

Week 13 and 14:

Advance valuation topics

Required readings: BDM Ch. 18

Week 15:
Course review

Facultad de Administración – Universidad de los Andes

Calle 21 No 1-20. Edificio SD. Piso 9. Bogotá, Colombia. Tel.: [57.1] 332 4144 - 339 4949/99 Ext. 2336 Fax: [57.1] 332 4551
http://administracion.uniandes.edu.co
Universidad de los Andes | Vigilada Mineducación. Reconocimiento como Universidad: Decreto 1297 del 30 de mayo de
1964. Reconocimiento personería jurídica: Resolución 28 del 23 de febrero de 1949 Minjusticia