HOFSTRA UNIVERSITY
FRANK G. ZARB SCHOOL OF BUSINESS
“Educating for Personal and Professional Achievement”
DEPARTMENT OF FINANCE
FINANCE 402- MANAGERIAL FINANCE
(Graduate course)
Spring 2014, Section 01, Saturday 3:15 PM to 6 PM, CRN 24527
INSTRUCTORS’ NAMES:
LOCATION OFFICE:
OFFICE HOURS:
PHONE EXTENSION:
EMAILS:
Dr. Ehsan Nikbakht, CFA
116A Weller
TH 9:30-11am, 2:15-3:45 PM
463-5679
FINEZN@HOFSTRA.EDU
Dr. Andrew Spieler, CFA
220 Weller
On Leave
463-5334
FINACS@HOFSTRA.EDU
GENERAL INFORMATION
Location of Department Office
Telephone number of Department
Department Chairperson
221 Weller Hall
463-5698
Dr. K.G. Viswanthan
DESCRIPTION OF COURSE
Course explores key issues encountered by financial managers and analyzes the decision making that is
most consistent with maximizing the value of the firm. Coverage includes, but is not limited to, capital
expenditure analysis, mergers and acquisitions, working capital management, financing, cost of capital
and capital structure decisions, dividend policy, and risk management. Differences among manufacturing
services and financial services firms are analyzed. The financial decision-making process is developed
with emphasis on the role of global financial markets, ethics, and considering the various constituencies
of modern corporation. Cases and computer applications are employed extensively.
PREREQUISITES OF COURSE
Prerequisites: Open only to matriculated Zarb School of Business E.M.B.A. students.
READING SOURCES
 TEXTBOOK: Ross, Westerfield, and Jordan, Fundamentals of Corporate Finance (Alternate
Edition), McGraw Hill, Latest Edition ISBN 978-0-07-328212-1
 CASES: Ginny’s Restaurant; Southport Minerals; Netscape IPO; JetBlue IPO; Ebay IPO
 FINANCIAL CALCULATOR: Students are required to use a Texas Instrument BA for this course.
This calculator is required for the CFA exam as well.
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PROGRAM-WIDE LEARNING GOALS
This course exposes the students to a variety of perspectives in finance including ethics, communication,
teamwork, critical thinking, global perspectives, the use of information technology, and understanding the
regulatory, political, social, and demographic forces underlying finance decisions.
Upon completion of this courses, students will:
1. understand time value of money applications for financial analysis.
2. understand the risk-return relationship in the CAPM.
3. learn to calculate the cost of capital and WACC.
4. be able to analyze capital budgeting decisions.
5. learn to value basic financial securities including stocks and bonds.
6. be able to analyze financial statements and understand their limitations.
7. learn how to identify and value real options.
8. understand and apply risk management techniques.
9. learn how to analyze finance related cases and develop solutions.
Students are expected to read the financial pages of a major newspaper and relate this material to the
course work. Significant written and oral communication skills (including class participation,
presentations, and projects) will be emphasized.
INSTRUCTOR’S COURSE-SPECIFIC LEARNING GOALS
This course presents the tools to develop the conceptual skills required of managers. It is designed to put
in practical use the theories and techniques analyzed in the classroom. Finance 402 is a core course that
also serves as a foundation for upper level finance courses and other graduate interdisciplinary courses.
Emphasis will be placed on valuation in an environment of risk. Some of the more modern issues
concerning the interpretation of firm policy with respect to dividends, financial structure and corporate
asset and liability restructuring, plus modern techniques employed in capital budgeting will be discussed.
This course also represents a survey of financial principles and is designed to provide students with a
sound background in the field of finance. Upon completion of this course, students will understand the
mathematics of time value of money, the principles of risk and return, stock and bond valuation, and
financial statement analysis. The course will familiarize students with the institutional environment of
finance, which includes financial markets and instruments and financial institutions.
SCHOOL OF BUSINESS POLICY ON MAKEUP EXAMINATIONS
To be eligible for a makeup examination, a student must submit to the instructor written documentation of
the reason for missing a scheduled examination due to medical problems or death of an immediate family
member. This has to be done before the scheduled exam. The instructor (not the student) determines
whether and when a makeup is to be given. If a makeup examination is to be given, the instructor will
determine the type of makeup examination. If the student misses (for any reason) the scheduled makeup
examination, additional makeups are not permissible.
UNIVERSITY POLICY ON INCOMPLETE GRADES
When requested by the student, the instructor may grant, at her/his discretion, a grade of Incomplete (‘I’).
An ‘I’ grade should be given only when unforeseen circumstances prevent the student from completing
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course work on time. As part of the normal final-grade process, the instructor must submit an ‘I’ grade
online to the Office of Academic Records with a default grade, the grade the student will receive if the
missing work is not completed. The default final grade must be a letter grade or a permanent ‘I’; a UW is
not an acceptable default grade. In unusual circumstances, the faculty member may submit an ‘I’ grade
without prior discussion with the student. The instructor will decide the time frame in which the student
will complete the required course work. However, the deadline may not exceed one calendar year from
the close of the semester or session in which the course was taken. A student will not be allowed to attend
the regular class meetings at the next offering of the course. The instructor will inform the student of the
completion requirements and terms.
The instructor is required to submit a grade for the student within 30 days after the student has submitted
work to fulfill the terms specified. If the instructor cannot oversee the completion of the incomplete work
with the student, the instructor will arrange for oversight within the department with the Dean’s
permission. If the incomplete work is not completed by the deadline, the ‘I’ grade will convert to the
default grade previously submitted by the instructor.
UNIVERSITY POLICY ON ACADEMIC HONESTY
Academic dishonesty is a serious ethical and professional infraction. “Hofstra University places high
value upon educating students about academic honesty. At the same time, the University will not tolerate
dishonesty, and it will not offer the privileges of the community to the repeat offender.” Please refer to
the Undergraduate Policy at http://www.hofstra.edu/pdf/Faculty/Senate/senate_FPS_11.pdf for details
about what constitutes academic dishonesty, including plagiarism, and Hofstra’s procedures for handling
violations.
DEPARTMENT STATEMENT ON ACADEMIC HONESTY
The Department of Finance is dedicated to maintaining the highest level of academic honesty in all of its
classes. The University Policy on Academic Honesty states that expulsion from the University is a
possible punishment for academic dishonesty. The University Policy also states that students "must avoid
not only cheating, but the very appearance of cheating." Activities such as looking at the examination of
another student, talking, or passing notes during examinations give the appearance of cheating, and
therefore will be regarded as cheating. Submission of assigned work that is identical in any abnormal way
to the work of another student is subject to reasonable interpretation as cheating. Students knowingly
providing work to others are as guilty of cheating as those who accept their work. (For further
information on academic honesty, please refer to the "Policy on Academic Honesty" in the Hofstra
University General Bulletin. )
STUDENT WITH DISABILITIES STATEMENT
If you believe you need accommodations for a disability, please contact Services for Students with
Disabilities(SSD). In accordance with Section 504 of the Rehabilitation Act of 1973 and the
Americans with Disabilities Act of 1990, qualified individuals with disabilities will not be
discriminated against in any programs, or services available at Hofstra University. Individuals with
disabilities are entitled to accommodations designed to facilitate full access to all programs and
services. SSD is responsible for coordinating disability-related accommodations and will provide
students with documented disabilities accommodation letters, as appropriate. Since accommodations
may require early planning and are not retroactive, please contact SSD as soon as possible. All
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students are responsible for providing accommodation letters to each instructor and for discussing with
him or her the specific accommodations needed and how they can be best implemented in each course.
For more information on services provided by the university and for submission of documentation,
please contact the Services for Students with Disabilities, 212 Memorial Hall, 516-463-7075.
METHODS OF EVALUATING STUDENTS

Class sessions will be primarily devoted to presentation of assigned materials following the latest
edition of the text book. Students will be evaluated based on their learning of the concepts and
topics covered in lectures.

Class discussion/participation is both expected and encouraged. Students should read the assigned
materials in advance of the class sessions, to ensure better understanding of the issues involved,
and meaningful class participation.

Class attendance is required. Missed classes would call for extra effort on the part of the student
to catch up before the following class.

Supplemental readings and case studies will also be assigned.
GRADING POLICY
Mid-Term
Final
Projects/Participation
Total
35%
35%
30%
100%
ASSIGNMENTS
1. Odd- numbered problems (ONP) of each chapter on weekly basis. See the weekly assignments on
your course calendar as attached.
2. Group project on stock valuation (3 stocks in each portfolio) including:
a.
b.
c.
d.
e.
f.
g.
Introduction of the firm
Fundamental statistics for each stock
Technical indicators of for each stock
Computation of the risk and return ratio, using historical data , for each stock
Valuation of each stock
Class presentation
Submission of the report on June 1, 2013
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COURSE CALENDAR
Week
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
Date
2/2
2/2
2/9
2/16
2/23
3/2
3/9
3/16
3/23
3/30
4/6
4/13
4/20
4/27
5/4
5/11
5/18
5/25
6/1
Topic
Classes Begin.
An Overview of Finance and Investment
Chapter 1, 5
Chapter 6 plus CASES*
Chapter 7
Chapter 7
Chapter 8 plus CASES*
Chapter 8
Chapter 9
NO CLASS
Chapter 13
Chapter 14
Chapter 15
Chapter 22
Chapter 22
Chapter 23
Chapter 23 and CASES*
NO CLASS
CASES and Final Exam*
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Assignment
Assigning Students into Groups
ONP 1-19
ONP 1-19 Ginny’s Restaurant
ONP 1-17
ONP 1-17
ONP 1-17
ONP 1-17
ONP 1-17
ONP 1-15
ONP 1-15
ONP 1-15
ONP 1-15
ONP 1-15
ONP 1-15
Final Report is due
COURSE OUTLINE
Chapter 1
Introduction to Corporate Finance:
-Corporate Finance and the Financial Manager
-Forms of Business Organization
-The Goal of Financial Management
-The Agency Problem and Control of the Corporation
-Financial Markets and the Corporation
Chapter 5
Introduction to Valuation: The Time Value of Money:
-Future Value and Compounding
-Present Value and Discounting
-More about Present and Future Values
Chapter 6
Discounted Cash Flow Valuation
-Future and Present Values of Multiple Cash Flows
-Valuing Level Cash Flows: Annuities and Perpetuities
-Comparing Rates: The Effect of Compounding
-Loan Types and Loan Amortization
Chapter 7
Interests Rates and Bond Valuation
-Bonds and Bond Valuation
-More about Bond Features
-Bond Ratings
-Some Different Types of Bonds
-Bond Markets
-Inflation and Interest Rates
-Determinations of Bond Yields
Chapter 8
Stock Valuation
-Common Stock Valuation
-Some Features of Common and Preferred Stocks
-The Stock Markets
Chapter 9
Net Present Value and Other Investment Criteria
-Net Present Value
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-The Payback Rule
-The Discounted Payback
-The Average Accounting Return
-The Internal Rate of Return
-The Profitability Index
-The Practice of Capital Budgeting
Chapter 13
Return, Risk, and the Security Market Line
-Expected Returns and Variances
-Portfolios
-Announcements, Surprises, and Expected Returns
-Risk: Systematic and Unsystematic
-Diversification and Portfolio Risk
-Systematic Risk and Beta
-The Security Market Line
Chapter 14
Options and Corporate Finance
-Options: The Basics
-Fundamentals of Option Valuation
-Valuing a Call Option
-Employee Stock Options
-Equity as a Call Option of the Firm’s Assets
-Options and Capital Budgeting
-Options and Corporate Securities
Chapter 15
Cost of Capital
-The Cost of Capital: Some Preliminaries
-The Cost of Equity
-The Costs of Debt and Preferred Stock
-Weighted Average Cost of Capital vs. Required Rate Return
-Implications for valuation
Chapter 22
International Corporate Finance
-Terminology
-Foreign Exchange Markets and Exchange Rates
-Purchasing Power Parity
-Interest Rate Parity, Unbiased Forward Rates, and the International
Fisher Effect
-International Capital Budgeting
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-Exchange Rate Risk
-Political Risk
Chapter 23
Risk Management and Introduction to Financial Engineering
Hedging with options
Hedging with futures
Hedging with swaps
Securitization
Analysis of Selected Cases: Written Analysis of Cases is required:
1. Ginny’s Restaurant;
2. Netscape IPO;
3. JetBlue IPO;
4. Ebay IPO
Note: A volume of detailed slides, readings and assignments will be posted on
Blackboard. Check your Blackboard site periodically, please.
Additional Readings
“An Economist’s Perspective on the Theory of the Firm”, Oliver Hart, Columbia Law Review, Vol. 89,
No. 7, Contractual Freedom in Corporate Law (Nov., 1989), pp. 1757-1774
http://business.illinois.edu/josephm/BA549_Fall%202010/Session%204/Hart%20%281989%29.pdf
“How CFOs Make Capital Structure and Capital Budgeting Decisions”, Journal of Applied Corporate
Finance, 2002
“Corporate Dividend Policies: Lessons from Private Firms” Michaely and Roberts, University of
Pennsylvania, Review of Financial Studies, 2012
“Mergers, Acquisitions & Corporate Restructuring”, Malacrida and Watter, Swiss Commercial Law
Series, 2005
“Understanding the Risk Management Process”, Internal Auditor, 2007,
http://www.theiia.org/intAuditor/itaudit/archives/2007/may/understanding-the-risk-management-process/
“Risk Management for Beginners”, EconoMonitor, 2009,
http://www.economonitor.com/blog/2009/01/risk-management-for-beginners/
“Risk Management” New York Times Magazine, http://www.nytimes.com/2009/01/04/magazine/04riskt.html?_r=0
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“Financial Crisis 101: A Beginner’s Guide to Structured Finance, the Financial Crisis, and Capital Market
Regulation” by William Werkmeister, Kennedy School Review, Harvard University, 2010,
http://isites.harvard.edu/icb/icb.do?keyword=k74756&pageid=icb.page399909
“Market Risk Premium used in 82 countries in 2012: a survey with 7,192 answers”,
Pablo Fernandez, Javier Aguirreamalloa and Luis Corres, IESE Business School, SSRN-id2084213
“Ten Badly Explained Topics in Most Corporate Finance Books”, Pablo Fernández, Working Paper,
IESE, SSRN-id2079055
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