MBA 610
Fall 2007
Hilbert III
Instructor Information
Jim Mahar,
Contact Information
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 or waived MBA 604
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, 2008, 8th edition). (7th edition is OK)
2. Access to FinanceProfessor.com and Financeclass Blogs
3. Cases: to be announced
Supplemental Texts and Websites
Text Website
http://www.financeprofessor.com/mba610/MBA610mainpagefiveweek.html
Technology Requirements
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 – 89.9%
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. I will also be offering bonus points on the tests as a means of rewarding students for turning in other students who do cheat. I also will most likely be screening multiple choice exams for high correlations.
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. 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 whenever possible
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.). You can use (and are encouraged to do so) lap top computers in classes (not in tests). However, the computer should be used for class-specific activities only (so no instant messenging or email etc.—exceptions will be made on draft day ;) )
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: a much better
source of what
we will be covering will be on the class website. It
will be updated regularly. This is what I
expect to be able to cover in
advance.
COURSE OUTLINE
ADDITIONAL
Required
Week 2 Market Efficiency (Chapter 13)
Theory of Stock Market Efficiency-Ray Ball (Summary available)
Fama 1991—Efficient Markets II
Behavioral finance Primer
Chapter 13 – Corporate Financing Decisions and Efficient Capital Markets
Questions and Problems: 11, 16-19, 21-24
Chapter 14 – Long-Term Finance ( 14.4, pp.382-387)
Chapter 15 – Capital Structure: Basic Concepts
Questions and Problems: 1, 3, 4, 6, 11, 16-19, 21, 23
Chapter 17 – Valuation and Capital Budgeting for the Levered Firm
Appendix A – The APV approach to valuing LBO’s
Questions and Problems: 1, 5, 14, 16
Who issues Stock? Fama and French 2003 working paper
Security issuance
Chapter 30 Financial
Distress
Pecking order: from FinanceProfessor website
Fama and French (2004)
Galpin (2004)
Rights issues
Week 3
Chapter 16 – Capital Structure: Limits to the Use of Debt
Appendix A – Some Useful Formulas
Appendix B – The Miller Model and Graduated Income Taxes
Questions and Problems: 3-5, 11, 14, 16
Financing Corporate Growth—Cornell and Shapiro
Convertible Bonds: Matching Financial and Real Options
What do we know about Stock Repurchases—Grullon and Ikenberry
Chapter 18 – Dividend Policy: Why Does It Matter? (also Repurchases)
Appendix A – Stock Dividends and Stock Splits
Questions and Problems: 1, 4, 6, 7, 9, 10, 11, 13, 17-21, 24
Week 3 Raising capital: IPOs--- Carve-outs
Chapter 19 – Issuing Equity Securities to the Public
Questions and Problems: 8-11, 13, 17
Chapter 20 – Long-Term Debt
Questions and Problems: 13-16
Leasing
Alternative Financing options and Short Term Financing
Chapter 21 – Leasing
Questions and Problems: 1, 5
Short term financial decisions (chapters 26-29)
The Dividend Cut heard around the World: The case of FPL: Soter, Brigham, and
TEST Saturday afternoon
Week 4
Derivatives
Chapter 22 – Options and Corporate Finance: Basic Concepts
Questions and Problems: 2, 6, 7, 10, 12, 16, 17, 21, 25-27
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
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?
Is American Corporate Governance Fatally Flawed? –Merton Miller
Enron Case Haley and Palepu
Measuring the Effectiveness of Different Corporate Governance Systems: towards a more Scientific Approach—Macey
Assignment:
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
TBA
Assignment: The Takeover
Week 5 More on the market for corporate control
Foreign Deals
Assignment:
Case TBA
Additional
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
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
Assignment:
CASE
Adelphia Communications or TBA
Saturday afternoon final—yes
it is cumulative J