THE OHIO STATE UNIVERSITY
Fisher College of Business
Department of Finance
COURSE SYLLABUS
Business Finance 4214
CORPORATE FINANCE IV
Autumn Semester (Term II) 2015
SECTION 0100: M W F, 11:30 AM – 12:25PM, SCHOENBAUM HALL 205
SECTION 0200: M W F, 3:00PM – 3:55PM, SCHOENBAUM HALL 315
Instructor Information
Prof. George Pinteris
Office: 306 Fisher Hall
Office Hours: see section below
Office Phone: 614-292-4334
E-mail: pinteris_1@fisher.osu.edu
Course Description
Corporate IV is an action-based course. The aim of this course is to enable students to
practice analytical and soft skills in a real-life scenario. The underlying theme of the
course will be Valuation Analysis. After reviewing standard methodologies for firm
valuation, students will work in teams on a firm valuation project and make an in-class
presentation at the end of the course. Furthermore, students will learn to use software
tools and databases and practice financial modeling with Excel.
The course is particularly useful to students interested in a corporate finance career
within a public or private company, in a career in investment banking, or in corporate
consulting.
Pedagogy
Course material will be delivered through a mixture of lectures, in-class and lab software
applications, and additional practice through problem sets. Emphasis will be given on
applications of techniques through the use of examples and real company data. Practice
with sources of financial data, such as Capital IQ, Mergent Online, or Bloomberg, is an
integral part of the learning experience in this course. Students are expected to work in
groups on a term project. The purpose of using various learning methods is to enhance
students’ understanding of how finance professionals use these analytical techniques in
their daily work.
1
Course Prerequisites
I assume that you have working knowledge of the material covered in the BUSFIN 4210,
4211, and 4213. These courses are considered prerequisites for this course and
students who have not completed the above courses will not be allowed to enroll in
BUSFIN 4214.
Textbooks and Course Materials
I have assigned one required textbook for this course. I strongly encourage you to
purchase this text, as it is one of the best in Valuation Analysis. Furthermore, I list below
a few other useful texts for your reference. Please NOTE that these other textbooks are
NOT listed as recommended for this course.
The required textbook is:
•
Valuation: The Art and Science of Corporate Investment Decisions, by Sheridan
Titman and John Martin, 3rd edition, Prentice Hall, 2015
Lecture notes, additional readings and handouts will be posted on the course web page.
The course web page is available through Carmen, the university’s course management
system (http://carmen.osu.edu). Materials will be posted on Carmen no later than one
day prior to class.
I strongly recommend that you check the course web page regularly. Under “Classlist”
you can see the students in the course.
Other useful texts are:
•
•
•
Equity Asset Valuation, by Jerald Pinto, Elaine Henry, Thomas Robinson, John
Stowe, and Abby Cohen, 2nd edition, John Wiley, 2010
Damodaran on Valuation: Security Analysis for Investment and Corporate
Finance, by Aswath Damodaran, 2nd edition, John Wiley, 2006
Financial Modeling, by Simon Benninga, 3rd edition, MIT Press, 2008
Software Applications
Any financial analyst must be familiar with spreadsheet modeling. Excel is a very
powerful tool for financial analysis. You will practice Excel modeling for company
valuation in this course. You will also be introduced to Crystal Ball, an Excel add-in,
which enhances your analysis by applying Monte Carlo simulation techniques.
Furthermore, you will be introduced to two databases widely used in the finance
profession. Bloomberg is the standard source of financial data and is used extensively
on Wall Street and in investment management. Capital IQ has become the standard
source of company data in investment banking and consulting. SOFTWARE TRAINING
TAKES PLACE IN ROOM 219 SCHOENBAUM.
2
Adopt a Company
Each team will adopt a public company. The team will be named after that company.
This exercise will enable each team to develop a good understanding of that company’s
history, financial performance, main competitors, and forces that shape the company’s
industry. Each team must adopt a company by FRIDAY, OCTOBER 30. The selected
company must meet the guidelines for the Company Valuation Report project described
on the last page of the syllabus. Notify me of your selection by e-mail. Teams will be
assigned to companies on a first-come, first-served basis.
THE COMPANY ANALYSIS AND VALUATION PROJECT will use financial
information from your adopted company. Guidelines for this project are provided
at the end of the syllabus.
Teamwork
A major aspect of any business program is to provide students multiple opportunities to
develop leadership, teamwork, and presentation skills. These so-called soft skills are
crucial for an effective job search and a successful career in business and finance. You
are asked to form teams of 4-5 students. PLEASE NOTIFY ME OF THE MEMBERS OF
YOUR TEAM BY OCTOBER 26. This working environment will challenge you as you
learn to become an effective leader and a productive team member.
Two homework assignments and the Company Analysis project, including the class
presentation, will be team projects. Each team member is responsible for his/her
performance. I strongly advise you to read the suggestions for effective team
performance provided further below.
Each student will be asked toward the end of the course to evaluate the
performance of his/her teammates. A student’s performance evaluation by his/her
peers will be taken into consideration in assigning final grades. You should be fair
and honest in your evaluation of your peers’ performance. Each team member
should exhibit enough effort throughout the course. This will be your ONLY
opportunity to evaluate your teammates. A team that fails to submit evaluations
from all team members will receive ZERO POINTS on the company analysis
project.
Grading Procedures and Policies
•
Course Grade: The course grade will be based on two group homework
assignments, an in-class midterm examination, a company analysis project and a
presentation. Information on the project and presentation is provided in a
separate section below. The midterm examination will be closed book, closed
notes. However, a formula sheet will be provided and you will also be allowed to
use a business calculator. I will also provide solutions to homework assignments.
3
The course grade composition is as follows:
Homework assignments
Midterm examination
Firm Valuation Project
Project Presentation
20%
35%
35%
10%
Grading will be based on relative rather than absolute scale. Final grades will be
assigned with a +/-.
•
Midterm Examination: The in-class midterm examination is scheduled for
NOVEMBER 4. The examination will take place in our regular class. There will
be no conflict examination.
•
Assignments: I will post the two problem sets on the course’s Carmen site.
Solutions will also be provided after the problem sets are submitted. It is vitally
important that you work on these problems if you want to master the material
covered in the course. Your ability to work on these problems is a key
indicator of how prepared you are for the midterm exam. Exam questions
will be adapted from the problem sets and any in-class practice examples.
The schedule of the homework assignments is as follows:
Assignment
1
2
Distributed
October 21
October 28
Due Date
October 28
November 2
The two assignments will be collected at the beginning of class on their due date. If you
or any of your teammates cannot attend class on that day, please drop your assignment
in my mailbox in 700 Fisher Hall before the beginning of class to receive any credit. No
late assignments will be accepted for any reason.
•
Office Hours: I will have office hours on Mondays, 4-5pm or by appointment.
These hours are especially for the benefit of students in this course. I also
encourage you to schedule an appointment to meet with me with any comments
or suggestions you may have about the course. I prefer NOT to discuss courserelated questions through the phone. The best way to address your questions is
to discuss them with me in person either during my office hours or by
appointment.
Course Workload Expectations
The University and College expectation is that students spend two hours outside of
class for every hour spent in class. Thus, for courses meeting 3 hours per week,
you should expect to spend 6 hours per week outside of class on course-related
work.
4
Academic Integrity
From the Fisher College statement on your obligation to maintain academic integrity:
“As a member of the Fisher College of Business community, I am
personally committed to the highest standards of ethical behavior.
Honesty and integrity are the foundation from which I will measure my
actions. I will hold myself accountable to adhere to these standards. As a
leader in the community and business environment, I will pledge to live by
these principles and celebrate those who share these beliefs.”
Students are responsible for knowing and abiding by these standards.
Academic Misconduct
Cheating is grounds for failing this course and additional sanctions. In accordance with
faculty rule 3335-5-487, all instances of alleged academic misconduct will be reported to
the university Committee on Academic Misconduct. If the committee concludes that a
violation has occurred, it recommends appropriate sanctions to the Office of Academic
Affairs.
As
stated
in
the
university’s
Code
of
Student
Conduct
(http://studentaffairs.osu.edu/resources/), students have an obligation to report academic
misconduct. Such misconduct can be reported to the appropriate faculty member or
program dean; confidentiality is protected.
Permitted collaboration for this course is as follows:
§
§
Individual exam – No collaboration
Group Assignments, Company Report, and Presentation –
Collaboration with teammates only
Disability Accommodation
To ensure that disability-related concerns are properly addressed from the beginning,
students with disabilities who require reasonable accommodations to participate in this
class are asked to contact the Office of Disability Services (150 Pomerene Hall, 2923307). Please also inform me of any arrangements you are making with ODS.
Suggestions for Effective Team Performance
The following suggestions (taken from Robert Bruner’s cases textbook) are necessary,
but not sufficient, conditions for effective team performance. A major factor in a team’s
success is each member’s effort and dedication to the success of the team. It is crucial
that you develop a good working relationship with your teammates. Each member
should hold every other member accountable for their contribution to the team’s
performance.
ü Members commit to the success of the team.
ü The team plans ahead, leaving time for contingencies.
5
ü The team meets regularly.
ü Members show up for meetings and are prepared to contribute.
ü There may or may not be a formal leader, but role assignments within the team
are clear. Team members meet their assigned obligations.
6
COURSE SCHEDULE
(Reading assignments are from the Titman and Martin text.)
DATE
TOPIC
READINGS
Oct. 19
Course Introduction
Course Syllabus
Oct. 21
Introduction to Valuation
Analysis
ASSIGNMENT 1
DISTRIBUTED
Lecture Notes
Chapter 2
Oct. 23
Discounted Cash Flow
Valuation
Lecture Notes
Chapter 9
Oct. 26
Financial Modeling: Firm
Valuation
Bring your Notebook to Class
Oct. 28
Relative Valuation
ASSIGNMENT 1 DUE
ASSIGNMENT 2
DISTRIBUTED
Lecture Notes
Chapter 8
Oct. 30
Valuation Examples
Lecture Notes
Nov. 2
Midterm Review
ASSIGNMENT 2 DUE
Nov. 4
Midterm Exam
Nov. 6
Software Training:
Capital IQ
219 SCHOENBAUM
Nov. 9
Software Training:
Crystal Ball
219 SCHOENBAUM
Nov. 13
Software Training:
Bloomberg
219 SCHOENBAUM
Nov. 16
No Class: Teams Work on
Project
Nov. 18
No Class: Teams Work on
Project
7
Handout on Crystal Ball
Nov. 20
No Class: Teams Work on
Project
Nov. 23
No Class: Teams Work on
Project
Nov. 25
No Class: Teams Work on
Project
Nov. 30
Team Presentations
COMPANY REPORTS DUE
Dec. 2
Team Presentations
Dec. 4
Team Presentations
Dec. 7
Team Presentations
8
COMPANY ANALYSIS & VALUATION REPORT GUIDELINES
(Follow these guidelines closely as you work on this project;
Failure to do so will result in lost points)
The purpose of this project is to give you the opportunity to apply the concepts and
techniques you learned in this course in a real-life setting. To that end, you are asked to
perform a financial analysis and valuation of your adopted firm. The company you adopt
must be a publicly traded U.S. company (I suggest that you select a company in the S&P
500 index). THE SELECTED COMPANY SHOULD NOT BE IN THE UTILITIES OR
FINANCIAL SERVICES INDUSTRIES. You must select a company that has been in
continuous operation for the past SEVEN years (meaning no recent merger or
acquisition that resulted in a major company transformation (name change, etc.); this
does not include acquisitions by your company that do not result in a change in the
company’s name; see available information in Capital IQ). The company should not have
been in bankruptcy proceedings either. (LIST OF S&P 500 FIRMS:
http://nyjobsource.com/sandp1.html )
For this project, you will collect and analyze financial information on your adopted
company. Your report will address certain aspects of your firm’s financial performance
according to the guidelines listed below. All reports are due on November 30
regardless of when you are scheduled to present your report in class.
The report should meet the following guidelines:
•
•
•
•
•
•
•
The report (text) should not exceed 12 pages. You must use 12-point font,
double-spaced paragraphs, and default Microsoft Word margins. There is no limit
on attached exhibits (charts, tables, etc.).
You must include a cover page followed by a half-page executive summary.
The report should include the following sections:
o Company overview (nature of business, major company developments
over the past five years, industry structure and main competitors)
o Overview of company’s historical financial performance (key financial
ratios and items from historical financial statements)
o Discussion of valuation estimation results (assumptions and results from
DCF, relative valuation, sensitivity analysis, Monte Carlo simulations)
o Conclusions and recommendations to senior management
You must report your estimated value per share.
Your report must include several valuation techniques.
Your report must include explanations of the differences in value per share
between the various valuation techniques as well as a triangulation of those
estimates.
Your presentation (Dates TBA) must meet the following guidelines:
o Use a maximum of 20 minutes
o All team members must participate
o Use PowerPoint slides
o Present the main points of your report
9
LIST OF COMPANIES THAT CANNOT BE ADOPTED
1. Amazon
2. The Gap
3. Nike
4. Exxon Mobil
5. Honeywell
6. General Mills
7. TJX Companies
8. The Home Depot
9. Costco
10. Cisco
11. Nordstrom
12. FedEx
13. Netflix
14. Tiffany & Co.
15. Target
16. Boeing
17. Teradata
18. Beckton Dickinson
19. Pepsi
20. Caterpillar
21. Union Pacific
22. Wal-Mart
23. BP
24. Mylan Pharmaceuticals
25. Royal Caribbean
26. Chipotle
27. Chevron
28. Southwest
29. Texas Instruments
30. Under Armour
31. O’Reilly
32. Brown-Forman
33. Walt Disney
34. Vulcan
35. Cummins
36. Pfizer
37. Wendy’s
38. Best Buy
39. Whole Foods
40. Google
10