EMBA Program in Mexico City
FINANCIAL MANAGEMENT: Spring 2009
Professor: Dr. Ramesh K. S. Rao
Voice Mail: 512-475-8756
Fax: 512-471-5073
E-Mail: ramesh.rao@mccombs.utexas.edu
Professor: Prof. James (Jim) Nolen
Voice Mail: 512-471-5798
Fax: 512-471-5073
E-Mail: james.nolen@mccombs.utexas.edu
Web Site: www.mccombs.utexas.edu/faculty/james.nolen/
Teaching Assistants:
John Walker (Mexico City)
Email : juan.walker@mba06.mccombs.utexas.edu
Email 2 : jwalker22ar@gmail.com
Mobile : 04455-16962736
Alejandro Del Valle (Austin)
Email : Alejandro DelValle@mba09.mccombs.utexas.edu
Course Objectives
• to introduce the concepts and theories of modern financial management,
• to develop an appreciation for the usefulness of these theories for financial
decision-making,
• to develop the student's financial decision-making skills,
• to provide an overview of current financial management theories and practices.
Text
Required: Corporate Finance by Ross, Westerfield and Jaffee, 8th ed., McGraw-Hill Irwin
Supplemental: Financial Management, Concepts and Applications, 3rd ed., 1995, Ramesh
K.S. Rao, SouthWestern Publishing Co., Cincinnati, a division of International Thompson.
The required chapters will be made available to you (Blackboard and the readings package).
Course Structure and Grading
The course consists of lectures, four homework assignments (not graded), case discussions, a teambased take-home case final, and four in-class exams.
Lectures: The lectures are designed to provide an understanding of the major elements of finance.
The emphasis is on the logic underlying each concept, on how each concept is used in finance, and
on how the concepts are interrelated. The lectures are not note taking drills; rather, they are
dynamic sessions in which information is presented by the instructor via visual aids and through
direct interaction with the class.
Homework Assignments: Five Problem Sets are posted on Blackboard for problem-solving
practice. These will not be graded. These assignments contain problems in addition to those in the
RWJ text and Rao Chapters. It is important that you work through these on your own and compare
your answers with the solutions. Solutions to these problems are also posted on Blackboard. Those
needing additional problem-solving practice should attempt more RWJ problems. Solutions to these
are posted separately on Blackboard.
Case Discussions: Two in-class case discussions. No written analysis will be required to be turned
in but you should have prepped the case before class and be prepared to discuss your analysis of the
case. Instructor may cold call students to give their analysis of the case. You may work with your
study group in preparing the case analysis.
Exams (400 points): There are four exams worth 100 points each.
Starting with Session 2, the first 45-minutes of each finance session will be an in-class exam
covering the material from previous session(s). Details will be provided in class.
Final Exam Case Analysis (100 Points): A team-based written analysis of the take-home case is
required. The case will be assigned on April 4th, the last class day, and the written analysis is due on
April 25th by 5 p.m. Your case analysis should not exceed 10 pages (double spacing) including
spreadsheet exhibits. You will be graded on the accuracy and completeness of your analysis. Study
questions are attached to the case.
Session 1: Rao (January 11)
Topics: Overview of Course, Procedures, and Expectations. The Global Firm and its
Goals, An Introduction to Corporate Finance, Time Value, Valuation of Stocks and
Bonds.
Overview of Course
Readings: (Required)
RWJ Chapter 1: Introduction to Corporate Finance
Rao Chapter 1: The Firm and its Environment
Rao Chapter 2: Maximizing Stockholders' Welfare
RWJ Chapter 4: Net Present Value
RWJ Chapter 5: How to Value Bonds and Stocks
RWJ Chapter 6: Some Alternative Investment Rules
You should now be able to do Problem Set I (it contains questions from Chapters 4 and
5).
Readings (Recommended, not required)
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RWJ Chapter 2: Accounting Statements and Cash Flow
RWJ Chapter 3: Financial Planning and Growth
Session 2: Rao (January 16 and 17)
In-Class Exam: The first 45-minutes of session 2 will be the administration of an in-class
exam covering topics presented in session 1.
Topics: More on NPV, Valuation, Risk and Return, Introduction to Capital Markets,
Financing and Market Efficiency
Readings: (Required)
RWJ Chapter 7: Net Present Value and Capital Budgeting
RWJ Chapter 8: Risk Analysis and Capital Budgeting
Applied Research Technologies (Blackboard)
RWJ Chapter 9: Capital Market Theory: An Overview
You should now be able to do Problem Set II (it contains questions from Chapters 6
through 10).
Readings: (Required)
RWJ Chapter 10: Return and Risk: The Capital-Asset-Pricing Model (CAPM)
RWJ Chapter 13: Corporate-Financing Decisions and Efficient Capital Markets
RWJ Chapter 19: Issuing Securities to the Public
Session 3: Rao (February 13 and 14)
In-Class Exam: The first 45-minutes of session 3 will be the administration of an in-class
exam covering topics presented in previous session(s).
Topics: More on Risk and Capital Budgeting, Debt and Equity, financial distress resolution.
Readings: (Required, but read on your own. These chapters will not be covered in class.)
RWJ Chapter 14: Long-Term Financing: An Introduction
RWJ Chapter 20: Long Term Debt
Readings: (Required)
RWJ Chapters 15, 16: Capital Structure Basics
Rao Chapter 16: Resolving Financial Distress
Rao Chapter 11: Managing Total Risk with Derivative Securities
You should now be able to do Problem Sets III (they contain questions from Chapter 14
to Chapter 22).
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Session 4: Nolen (March 14)
In-Class Exam: The first 45-minutes of session 4 will be the administration of an in-class
exam covering topics presented in previous session(s).
Topics: Dividend Policy, Cost of Capital, Capital Budgeting, Working Capital Management,
Asset Forecasting and External Funds Requirements
Dividend Policy
Reading: (required)
RWJ Chapter 18: Dividends and Other Payouts
Blackboard PP Decks: Dividend Policy 18
Cost of Capital and Capital Budgeting
Reading: (required)
RWJ Chapter 12: Risk, Cost of Capital, and Capital Budgeting
Blackboard PP Deck: Risk_Cost_of_Cap_Cap_Bud_Ch 12
Case Discussion – Encana – Corp: the Cost of Capital – Prep the case prior to class and be
prepared to discuss.
You should now be able to do Problem Set III & IV (it contains questions from Chapters
12, 15, 16, 17, and 18).
Working Capital Management and Planning
Reading: PowerPoint Slide Decks posted on BlackBoard (required)
Working Capital.ppt
Asset Forecasting.ppt
Reading: (Optional)
Rao Chapter 20: A Framework for Financial Planning
Rao Chapter 21: Working Capital Management/ Cash Conversion Cycle
Rao Chapter 22: Managing Current Assets
Rao Chapter 23: Managing Current Liabilities
Blackboard PP Decks: Financial Planning (Ch 20); Working Capital Mgt. (Ch 21);
Current Asset Mgt (Ch 22); Current Liability Mgt (Ch 23);
Session 5: Nolen (April 4)
In-Class Exam: The first 45-minutes of session 5 will be the administration of an in-class
exam covering topics presented in session 4.
Topics: Business Valuation, Cost of Capital, & Mergers and Acquisitions
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Business Valuation and Mergers and Acquisitions
Readings: (Required)
RWJ Chapter 17: Valuation and Capital Budgeting for the Levered Firm
Parrino and Nolen: Note on Business Valuation
Blackboard PP Decks: Ch 17 Valuation_and_Cap_Bud; Valuation 2008.ppt
Reading: (Optional)
RWJ Chapter 29: Mergers & Acquisitions
Blackboard PP Deck: M&A Chap 29
Class Case Discussion: Eller Media (Prep the case prior to class - Study questions are
attached to case)
You should now be able to do Problem Set V (it contains questions from Rao Chapters
20-23 and RWJ Chapters 17 and 29)
Final Case Due (April 25)
Case Analysis: Comfort Plus (Study questions attached to case)
Team-based take-home case analysis due on April 25 by 5:00 p.m. Maximum of 10 pages
including spreadsheet exhibits. Use a 12-point font and double line spacing in text analysis.
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