MBA 610
Spring 2008
Instructor Information
Jim Mahar
Course Description
MBA 610 is an advanced course in corporate finance. Its purpose is to use the theory underlying corporate financial decisions developed in MBA 604 or other financial foundation course(s) to evaluate more sophisticated corporate decisions and issues. We will extend and implement some concepts and techniques developed in MBA 604 (such as external financing, NPV analysis, and cost of capital) as well as cover new topics (such as capital structure, dividend policy, long-term financing, mergers and acquisitions, introductory option valuation, and applications of option pricing to corporate finance.) The student is expected to apply these concepts and techniques to make intelligent analyses and well-reasoned decisions.
Course Objectives
Prerequisites
You have to have passed MBA 604 or waived (note this means we will talk about things you did in 604 as if you have done them!)
you should be familiar with the Nexus of Contracts, Time Value of Money, Capital budgeting, Valuation, Risk and Return, CAPM, and WACC.
The textbook website is http://highered.mcgraw-hill.com/sites/0072338792/student_view0. It contains multiple choice quizzes, essay quizzes, problems, and spreadsheet templates.
Class website:
FinanceProfessor.com
The Web site is meant as a means of assistance to you and not as a replacement for text or coming to class. For some chapters there will be much online coverage, for others there will not be as much coverage. Remember this is not meant to replace your other means of learning
Office Hours: see above and by appointment. I will try to provide online office hours (AOL Instant messenger: FinanceProfessor)
Please see me or contact me if you have questions. Do so early before a problem becomes unmanageable
Required Texts and other Materials
1. Corporate Finance, Stephen A. Ross, Randolph W. Westerfield, and Jeffrey Jaffe (Irwin/McGraw-Hill, 2005, 8th edition).
2. Access to FinanceProfessor.com Newsletter and Blog
3. Cases: to be announced
Supplemental Texts and Websites
Text Website
Technology Requirements
Evaluation Procedures
Students will be evaluated based on their performances on exams, quizzes, projects, and class projects.
Grades
Class participation, attendance, Homework 25%
Cases 15%
Midterm 25%
Final 35%
Due to the difficulty of the class, I reserve the right to grade on a curve, however, in the absence of that eventuality, the schedule of grades will be as follows:
A 90 – 100%
B+ 83 – 90%
B 70 – 82.9%
C Below 70
Description of Instructional Methodology
Early classes are largely lecture-based although students will have periodic opportunities to work through material in class, either alone or in collaboration with other students. In the later part of the semester we will be doing cases for which students will need to present.
University Policies
Academic Honesty Policy at St. Bonaventure University:
I am committed to St. Bonaventure University’s academic environment for students, supporting and rewarding only the highest standards of ethical behavior. That said, academic dishonesty, in any form, will not be tolerated. Please consult the St. Bonaventure University Student Handbook for a list of unacceptable practices, penalties to be assigned and procedures to be followed in prosecuting cases of alleged academic dishonesty. Further, the St. Bonaventure University Undergraduate Catalog may be consulted for specific details on all academic policies at St. Bonaventure.
Short version: don’t cheat. If you do and I catch you, you lose.
Students with Disabilities
Students with disabilities who believe that they may need accommodations in this class are encouraged to contact the Disability Support Services Office, Doyle Room 26, at 375-2065 as soon as possible to better ensure that such accommodations are implemented in a timely fashion. Documentation from this office is required before accommodations can be made.
Short Version: Let me know and I will help you or help you find help.
Instructor Policies
Attendance
As you can see from the schedule, we will be investigating a new topic at nearly every class. It is critical that you come to class. With permission you can attend the other class if you have a conflict with your scheduled class time. Students who aren’t in class on a regular basis will not do well. Students are also expected to be on time for class and to be prepared.
Short Version: come to class
Participation
Students are expected to actively participate in class by asking and answering questions. NOTE: attending class should not be confused with participation!
Short Version: Participate
Preparation
Students are expected to have the reading assignment completed when they arrive at class. While some material is difficult and may need additional explanation, students should have a basic understanding of the concepts that are to be covered that day.
Short Version: come to class prepared
Courtesy
Students are expected to arrive on time and prepared for each class meeting and to refrain from behavior that distracts other students (answering cell phones, text messaging, etc.).
Short version: remember the golden rule.
Collaboration
There will be occasions during this course when students will be given the opportunity to work collaboratively with one other student or in a larger group. Collaborative work allows students to learn from each other. Individual participation is key to the success of any collaboration.
Short version: work well with others
REPEAT Academic Integrity
DON’T CHEAT!!!
Exemplary academic integrity is expected and assumed. Violating this
assumption to any degree is not tolerated and carries severe
consequences. .
Be sure to give credit (cite) work in homeworks, papers, cases etc. For instance, much of this syllabi (the various policies) and the format are a product of an email from Barb Russell and Mike Fischer. SO if it looks familiar, that is why. J
TENTATIVE Course Outline
COURSE OUTLINE
ADDITIONAL
GO TO CLASS WEBSITE AND DO NOT RELY ON THIS LIST
Required
Week 2 Market Efficiency (Chapter 13)
Theory of Stock Market Efficiency-Ray Ball (Summary available)
Fama 1991—Efficient Markets II
Behavioral finance Primer
Week 3 Chapter 13 – Corporate Financing Decisions and Efficient Capital Markets
Chapter 14 – Long-Term Finance
Chapter 15 – Capital Structure: Basic Concepts
Still Searching for Optimal Capital Structure—Stewart Myers
Who issues Stock? Fama and French 2003 working paper
One more TBA
Week 4
Chapter 16 – Capital Structure: Limits to the Use of Debt
Appendix A – Some Useful Formulas
Chapter 31 Financial Distress
Pecking order: from FinanceProfessor website
Fama and French (2004)
Galpin (2004)
2 others TBA
Week 5 Alternative Financing options and Short Term Financing
Chapter 21 – Leasing
Questions and Problems: 1, 5
Short term financial decisions (chapters 26-29)
Rights issues
Project Finance
Leasing paper—Smith
What is project finance?
Rights offering—Miles and Peterson 1999
Week 6
Chapter 17 – Valuation and Capital Budgeting for the Levered Firm
Appendix A – The APV approach to valuing LBO’s
Chapter 18 – Dividend Policy: Why Does It Matter? (also Repurchases)
Appendix A – Stock Dividends and Stock Splits
Financing Corporate Growth—Cornell and Shapiro
Convertible Bonds: Matching Financial and Real Options
What do we know about Stock Repurchases—Grullon and Ikenberry
Week 7
Test
Week 8 Raising capital: IPOs, Rights offerings, Carve-outs
Chapter 19 – Issuing Equity Securities to the Public
Chapter 20 – Long-Term Debt
Rights issues
Ritter
Ritter
Raising Capital Theory and Evidence--Smith
Google case
Week 9
Chapter 22 – Options and Corporate Finance: Basic Concepts
Chapter 23 – Options and Corporate Finance: Extensions and Applications
Questions and Problems: 1-6
Chapter 24 – Warrants and Convertibles
Questions and Problems: 3, 11, 12, 14, 15
Risk Management: how and why
Does Risk Management add value?
Simpkins et al 2004
Managing Financial Risk—Smith and Wilford
Week 10 Corporate Governance
Conflicts within the Nexus
Executive pay, shareholder voting, poison pills
Examples of what can go wrong
What is Wrong with Corporate Governance?
What is Right with Corporate Governance?
Week 11 Governance continued
Erickson,Hanlon,
and Maydew---GREAT!!!!
A look at
where we have failed---ok, so it is cynical and somewhat anti-market
It's the
form,. not the level--Jensen and Murphy
Chapter 30 – Mergers and Acquisitions
The Evidence
Week 12 More on the market for corporate control
Foreign Deals
Assignment: Case TBA
Additional
Week 13 Chapter 32 International
MNC
What makes International
Finance different?
Corporate Ownership and control in the
Three Other readings to be announced in class
Assignment: Case
TBA
Week 14 Finance now
and into the future
Trends in Finance
Behavioral Finance
Using Financial Theory
Fama: 1999
Barber and Odean TBA
Brannen’s address (summary available)
Five other readings on behavioral finance to be announced
Week 15 final—yes it is cumulative