Duong Nhu Hung.

PhD Summer 2013

PhD Finance (ODU) MBA (Asian Institute of Technology, Bangkok, Thailand) Electrical engineer (Budapest, Hungary) Research interest: Investments E-Mail: duongnhuhung@gmail.com Office Hours: Tue 9.30 11.30 AM or by appointment Dept of Finance, School of Industrial Management

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This course will provide students with an advanced understanding and skills of corporate finance. Topics:
Review of risks, capital budgeting dividend policy, capital structure

Bruner, Eades, and Schill (2010), Case studies in Finance, 6th ed., McGraw-Hill Irwin (called Bruner) Brealey, R. A., Myers, S. C. (2006), Corporate Finance, 8th ed., McGraw-Hill. (called BM) Group Online Exercises (called OE)

https://docs.google.com/open?id=0B80OJ7uWGG2TeTNi T0pwaXFlYkE http://www.mhhe.com/business/finance/corpfinonline/

BM Powerpoint:

http://highered.mcgrawhill.com/sites/0072467665/student_view0/chapter1/
4

BEFORE CLASS:
Write up the cases Complete the group OE exercises Read the relevant BM chapters

DURING CLASS:

Bring your laptop, printouts of case and group exercise questions Actively participate in class discussion Be prepared to be cold called

You are expected to spend the same amount of time outside class as inside class
10

Individual basis

Group basis

Midterm Final Exam

:
: :

10% 50% 25%. 15%

60% 40%

Total

Case analysis & presentation Short reading (group)

100%

Important note: the group scores will be calculated only if the final exam score is 45 or above.

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Date 1 Mon

Topics BM Reviews 1: Time value of Money, Risk and return, 12-Aug Capital budgeting BM 2-9 Reviews 2: Time value of Money, Risk and return, 13-Aug Capital budgeting BM 2-9 14-Aug An overview of Corporate Financing 16-Aug How corporation issue securities? 17-Aug The Dividend controversy 1 19-Aug The Dividend controversy 2 20-Aug Capital structure 1 21-Aug Capital structure 2 BM13, 14 BM 15 BM 16 BM 16 BM 17, 18 BM 17, 18

Bruner Cases Corp Finance Online OE1: TVM #13 (reading), OE2: Estimating L/T Risk Premium for security #14 OE3: Dutch Auctions IPO OE4: Buyback Catch (share repurchase) OE5: Payback Time (Div. policy)

2 Tue 3 Wed 4 Fri 5 Sat 6 Mon 7 Tue 8 Wed

#29 (TRX)

#27 (EMI Group)

OE6: Rapidly rising Corp. Debt #31 (Intro to Debt policy..)

9 Fri 10 Sat

23-Aug Capital structure 3 24-Aug Conclusions

BM19 BM35

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Final exam:
Opened book, covering the topics discussed in class Brief essay questions + a case analysis Several cases from Bruner will be assigned for reading, and Only one of them will be picked and a set of questions will be given on the exam

Quiz:

composed of multiple choice questions

13

Writing (50%)

Both case write-ups and online exercises will be submitted to the TA BEFORE class
4 case write-ups + 6 online exercises Submission after the class is not accepted

You can drop 1 case and 1 online exercises with the lowest grade

Class participation (50%)

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Groups will be cold called to present cases/online exercises For presentation groups:

For participating groups:

include a BRIEF review of the relevant case identification of questions, accurate and thorough analyses, quality of decisions, and response to Analysts critiques. Come prepared + active (at least three questions/ arguments): 4 Come prepared, but passive: 3 Come not prepared, but actively participate: 2 Come not prepared, and passive:1 If all members are absent: 0
15

form groups of three members

do group homework Help each other

Changing group is NOT possible. Deadline for changing group: August 13th

16

Please have your name card on your table Group members should sit closely Avoid changing your seats

17

 You

will be asked to form your group! Introduce your neighbor:

Name Employer Type of job (if is/was employed) and desired job. Hobby Expectations from this class ?
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I REPLY emails that meet ALL following conditions:

IU CORPORATE FINANCE is mentioned in the subject line Addressed to my name (Dr. Hung Duong) Your name!!!

Any emails that do not meet all the above conditions will not be replied

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No private conversation is allowed in the class Dont leave the class until it is concluded

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Final: ???

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What is finance?
(N) The science of management of money and other assets (V) to Obtain the money for some purposes

Corporate finance

Deal with financial decisions firms make and tools/ analysis that help making financial decisions.

3 types of financial decisions?

How to obtain the money? (L/T) How to spend the money? (L/T) How to manage working capital? (Short term)

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What are the methods of obtaining the money?

Selling bonds Selling stocks

What are they? How are they issued? What are the cost of capital? Should the firm pay more or less dividend? Does debt policy matter? BM 13 -18

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Bond Cash Flows Price

YTM

Face (Par) Value

1
Coupon Payment

N
Maturity

Stock Cash Flows Price

Insignificant Par value

1
DIV1

2
DIV2

DIVn

How to spend the money?

Investment criteria (NPV, IRR, Payback, Profitability Index)

Price

Timeline

K (discount rate)

How to estimate the cash flows of an investment? GIGO problems Break-Event analysis
25

Relationship between Risks and Returns: Higher risk higher expected return (CAPM model) (BM 7-8)

RExpected=Rfree + x (R market Rfree)

Companys weighted average cost of capital (WACC) BM 9

26

How to make a cash budget and manage working capital?

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QUESTIONS ???

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