BRANDEIS INTERNATIONAL BUSINESS SCHOOL
FIN 202 A
INTERNATIONAL CORPORATE FINANCE
SPRING 2016
SYLLABUS
Instructor:
Office:
Phone:
E-mail:
Class Hours:
Office Hours:
Teaching Assistants:
Elif Sisli-Ciamarra
Lemberg, 130-D
(781) 736-8544
esisli@brandeis.edu
T,Th 11:00– 12:20
M 10:00 AM – 12:00 PM and by appointment
Maria Vishniakova (mvishnia@brandeis.edu)
Jose Martinez Morazan (jadres@brandeis.edu )
Mengnan Zhu (cliffzhu@brandeis.edu )
COURSE DESCRIPTION
This course covers the fundamental concepts in corporate finance from the perspective
of financial managers who are responsible for making significant investment and
financing decisions. The course will provide the students with the tools that are used to
make capital budgeting decisions, to determine cost of capital, capital structure and
corporate payouts. We will learn how corporations raise equity and debt capital. We
will also discuss how the agency problems between firms’ stakeholders may impact the
financial policies.
Learning Goals
 Incremental Cash Flows from a Project
 Capital Budgeting Rules (Net present value, internal rate of return, payback
period)
 Discount Rate for a Project (Cost of equity, cost of debt, weighted average
cost of capital)
 Optimal Capital Structure (tax benefit of debt, financial distress cost of debt)
 Corporate Payouts (dividends and share repurchases)
 Working effectively in teams
PREREQUISITES
FIN201a (Investments) and FIN212a (Accounting and Financial Analysis). Students must
also understand basic Statistics such as mean, variance, simple regressions.
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6 January 2016. Please follow Latte for Updates to the Schedule during the semester.
TEXTS
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(RWJ) Ross, Westerfield and Jaffe, Corporate Finance, 10 Edition, McGraw-Hill.
http://highered.mcgraw-hill.com/sites/0078034779/information_center_view0/
Cases from Harvard Business School and University of Virginia Publication Websites
(Detailed instructions on how to access the case studies will be available on Latte).
As appropriate, additional readings will be assigned from relevant media such as the
Economist, the Wall Street Journal (WSJ) and the Financial Times (FT). Ideally, you will
read these papers daily to familiarize yourself with the intricacies of corporate finance.
Exam questions may be based on recent news articles.
CLASS SESSIONS
Copies of the basic slides used in the class sessions will be distributed at the beginning
of the discussion of each topic. I strongly suggest that you read the assigned reading
before the class discussion of the topic. In the class discussions, I will usually cover the
concepts and issues that are most challenging, reinforcing and extending what is in the
required reading. I suggest that after the class session you review the assigned reading
to solidify your understanding.
ONLINE COURSE MATERIALS
This course will rely heavily on the new LATTE platform – the web site will include
downloadable files with the class handouts, copies of problem sets and suggested
answers. You will need your UNet username and password to log on to the system at
http://lts.brandeis.edu/courses/newlatte/ . It is your responsibility to check this site,
and your e-mail regularly for the course announcements.
OFFICE HOURS AND COMMUNICATION
I will usually be available for quick questions in the classroom during the several minutes
before and after the class session begins. My office hours are on Tuesdays, between 10
AM and 12 PM. I strongly prefer that you come to my office hours, but if you cannot
make it, I will arrange an alternative time to meet. I usually respond quickly to e-mail
messages, so this is an excellent way to contact me if you need to set an appointment.
Also, please check your e-mails frequently for course announcements.
TA SESSIONS AND TA OFFICE HOURS
Your TAs will be holding review sessions or office hours daily. I try to make sure that you
have access to me or one of your TAs whenever you need, so please take advantage.
Please see the course page on LATTE for weekly schedules. TA sessions are optional, but
highly recommended, and are provided to give you an additional resource to gain the
ability to use and apply the concepts and tools developed in the course. These sessions
will give you a chance to ask questions about the material that has been covered in
class, and solve additional practice questions assigned at the end of class sessions.
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6 January 2016. Please follow Latte for Updates to the Schedule during the semester.
USE OF LAPTOP COMPUTERS AND CELL PHONES IN CLASS
All cell phones must be turned off during lectures. Laptops and tablets may be used but
only to take notes, I will not tolerate other uses since it significantly diminishes the
quality of in-class learning. Laptop computers, tablets and cell phones are not allowed
during exams.
ONE-MINUTE MEMOS
As part of your class participation, you will be asked to complete a one-minute memo at
the end of every class. The purpose of the 1-minute memo is to establish a direct line of
communication from you to me so that I can assess your grasp of the main topics of the
day, identify unclear points, and address other concerns. I want students to feel that
they can be open and honest in these memos, so your grade is not affected by what you
communicate to me on these memos. If you are not present, there will be no oneminute memo from you, and an absence will be recorded.
After each class I will return to my office to digest your memos. I will then discuss the
major questions that were raised during the following class session. In this manner you
can get replies to your questions and learn from all the questions your classmates have
raised as well.
COURSE REQUIREMENTS AND EVALUATION
Your grade will be based on in-class review problems (short quizzes), case reports,
equity analyst reports, the midterm, final presentations and the final exam.
In-Class Quizzes (10%)
We will have 6 short in-class review quizzes. These are short quizzes covering the
material from the last 1 or 2 weeks. Studying for them will give you a chance to review
the most recent material and you will be able to check whether or not you are
comfortable with it. You are permitted to bring one sheet of paper (8½ by 11 inches)
with notes on one side, to refer to during the quizzes. The quizzes will take about 10-15
minutes to complete at the beginning of class, so please do not be late! I will remind
you about an upcoming short quiz during the previous class. I will count 5 of the quizzes
with highest grades towards your final grade. There will be no rescheduling of the
missed quizzes.
Case Study Reports (10%) – GROUP WORK
There will be 2 required case studies and one optional case study. The optional case
study that will be assigned during the final exam period is to give you an opportunity to
make-up if you have not performed as high as you wanted in the two required case
studies. We will use the cases to examine the decision making process of managers and
to review the mechanics of corporate finance. Each group (4 students) is required to
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6 January 2016. Please follow Latte for Updates to the Schedule during the semester.
submit a two – three page write-up analyzing each case. Detailed instructions for the
case study reports will be posted on Latte.
Equity Analyst Reports (15%) – GROUP WORK
You will prepare 3 Equity Analyst Reports. Each team is expected to select an industry
and track one firm per member (4 firms for a 4 person team) from that industry. You
will use these same firms in all three reports. These firms must be headquartered and
incorporated in the U.S.. You will need to pick firms that have been publicly listed for a
minimum of five continuous years. The listing requirements would therefore exclude
the very young firms (e.g., Etsy), firms that have been privately owned in recent memory
(e.g. Dunkin Donuts), gone through bankruptcy, or firms that have their primary listings
in other countries (e.g., Cemex, British Petroleum, Baidu, etc.). Also, please exclude the
firms in the financial services industry and utilities industry. In addition, the firms should
have at least 5 years of financial data available on CRSP/Compustat database.
Throughout the semester your group will analyze your chosen industry using the
perspective of an analyst who is trying to understand a company’s capital budgeting and
financial management decisions. Detailed guidelines for each analyst report will be
provided.
Please see “Teamwork” section for additional details.
Midterm Exam (25%)
The midterm examination will be held on ***, Monday during regular class session. I will
announce the location as we get closer to the exam date. You are permitted to bring
one sheet of paper (8½ by 11 inches) with notes on one side, to refer to during the
exam. Otherwise, the midterm exam is closed-book.
Final Exam (30%)
The final examination will be held during the final examination period, which will be
announced later in the term by the Registrar. It will cover material from the entire class
with an emphasis on the part of the course after the midterm. You are permitted to
bring one sheet of paper (8½ by 11 inches) with notes on both sides, to refer to during
the exam. Otherwise, the final exam is closed-book.
You will need a calculator during the exams (quizzes, midterm and final examination).
On the structure of the exams, 80 % of it will be pulled out directly from the previous
examples from class, lecture presentations, assignments, quizzes, or suggested
exercises. The other 20 % will be used to see if you can apply the course concepts to
more advanced problems. All exams are closed book. You can bring one page (singleside) cheat sheet for the first midterm and one page (double-sided) cheat sheet for the
final exam.
Final Presentation (10%) – GROUP WORK
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6 January 2016. Please follow Latte for Updates to the Schedule during the semester.
At the end of the semester your team will give an in-class presentation. The content of
the presentation will be drawn out of the equity analyst reports that you will be
preparing. I will announce the specific presentation topic after the midterm exam. The
presentation should not exceed 10 minutes; questions will last up to 5 minutes. Each
member of the group must share roughly equally in presentation time.
The final presentation grade depends not only on content but also on presentation
values. The overall grade depends in part on your contributions as a teammate. Your
team’s grade for the final presentation depends 50% percent on content and 50%
percent on presentation values. I decide the content grade. Another IBS professional will
observe your presentation and determine your grade for presentation values. Criteria
for that portion of your grade are listed in the Presentation Performance Appraisal Form
(available on Latte under “Presentations”). Shortly after the presentation, that same IBS
professional will meet with your group to review the presentation’s strengths and
weaknesses and give you general feedback on your presentation skills.
Teamwork
The final grade for any student who does not contribute to her team equitably will not
exceed a B-. One of the objectives of this course is to help students develop essential
teamwork skills. All of the assignments in this course will be done in teams, and our
overall grade will depend in part on your performance as a teammate. Your team will
participate in a structured program of meetings and team activities, step-by-step
instructions for which are provided in MANAGING TEAM PERFORMANCE (MTP). You
should have a hard copy of this; and it is also available on Latte under “Team
Work.” MTP also provides succinct advice for each critical teamwork skill: for example, is
lists six keys to running an effective meeting and gives a script for providing constructive
feedback.
Your contribution to your team will be determined according to criteria described in
Managing Team Performance (page 8). By the end of the final exam period each of
your teammates will submit a Teamwork Performance Appraisal Form rating your
(individual) contributions. To understand what is expected from you as a team member,
please refer to the “Teamwork Performance Appraisal Form” directly. To learn more
about how you will evaluate each other, please refer to Section II.A, “Observing Peer
Performance,” and Section II.B, "Peer Evaluation."
COURSE POLICIES
Attendance
Attendance is required. Records of attendance will be kept for each class. Please notify
me in advance when you are unable to make it to class.
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6 January 2016. Please follow Latte for Updates to the Schedule during the semester.
Assignments and Exams
NO LATE SUBMISSIONS ARE ACCEPTED. THERE WILL BE NO MAKE-UP EXAMS. There will
be absolutely no opportunity to assign the weight of a missed case-study report or exam
to another assignment or exam. If you miss an exam or do not submit the case study
analysis on time, you will receive a grade of zero. Therefore, please make every effort in
advance to insure that you will be in attendance on the exam dates shown on the
syllabus. If you get sick on the day of the exam, I need to see the doctor’s report to
verify your condition. In that case, I will work out an alternative arrangement with you.
Calculator
You can use any calculator you would like when solving problems on the problem sets,
including scientific, programmable, graphing, financial, or software (such as Excel).
However, on the exams (i.e. quiz, midterm, and final) you will be allowed to only use
scientific calculators.
Students with Disabilities
If you are a student with a documented disability on record at Brandeis University and
wish to have a reasonable accommodation made for you in this class, please see me
immediately. For more information go to: http://www.brandeis.edu/disability/
Academic Integrity
You are expected to be honest in all of your academic work. Please consult Brandeis
University Rights and Responsibilities for all policies and procedures related to academic
integrity. Consistent with Brandeis University’s honor code, your exams and
assignments must be solely your own work. The use of another’s material without
permission and without recognition is cheating. This applies to textbooks, solution
manuals, study guides, a friend's assignment, past assignments, internet resources or
any other material irrespective of the source.
Students may be required to submit work to TurnItIn.com software to verify originality.
Allegations of alleged academic dishonesty will be forwarded to the Director of
Academic Integrity. Sanctions for academic dishonesty can include failing grades and/or
suspension from the university. Citation and research assistance can be found at LTS Library guides. Any attempt to represent the work of others as your own will be
considered plagiarism and will be referred to the Office of Campus Life. Potential
sanctions include failure in the course and suspension from the University. For more
information, please see the Chapter 4 of “Brandeis University Rights and
Responsibilities.”
(http://www.brandeis.edu/studentlife/sdc/ai/).
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6 January 2016. Please follow Latte for Updates to the Schedule during the semester.
Course Schedule
Date
14-Jan
Topic
Readings
Overview of the Firm (The goal of RWJ: Chapter 1
financial management, Stakeholders of
the firm, Agency problems)
Deliverables
Review on your own: The Value of
Common Stocks and Bonds (Chapter 8,
Chapter 9. These chapters are covered in
Investments, FIN201)
19-Jan
Incremental Cash Flows
RWJ: Chapter 6
21-Jan
Incremental Cash Flows
Discounted Cash Flow Analysis
RWJ: Chapter 6
Teamwork: Submit the names of team
members, your industry, companies.
Schedule a time with me to go over your
firms.
Quiz 1 (Overview of the firm)
Review on your own: Discounted Cash
Flow Valuation (Chapter 4.
These
chapters were covered in Investments)
26-Jan
28-Jan
Incremental Cash Flows
Discounted Cash Flow Analysis
Sensitivity Analysis
Capital Budgeting Rules
RWJ: Chapters 6, 7
RWJ: Chapter 5
Equity Analyst Report I: Getting to know
your companies (due on Feb 1)
6 January 2016. The schedule is subject to change. Please follow Latte for Updates to the Schedule throughout the semester.
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Date
2-Feb
4-Feb
9-Feb
Topic
Capital Budgeting Rules (cont’d)
Cost of Equity Capital
Cost of Equity Capital (cont’d)
Readings
RWJ: Chapter 5
RWJ: Chapters 9, 11, 13
RWJ: Chapters 9, 11, 13
11-Feb
Cost of Debt
RWJ: Chapters 8, 13
23-Feb
25-Feb
1-Mar
RWJ: Chapters 13
8-Mar
10-Mar
15-Mar
Weighted Average Cost of Capital
Case on WACC: TBA
Long Term Financing
Capital Structure: Modigliani-Miller
Theorems
Capital Structure: Modigliani-Miller
Theorems, Pecking Order Theorem
Capital Structure (cont’d)
Midterm Exam
Financial Distress (cont’d)
17-Mar
Financial Distress (cont’d)
22-Mar
Valuation and Capital Budgeting for RWJ: Chapter 18
the Levered Firm
Raising Long Term Capital
RWJ: Chapter 20
Initial Public Offerings (IPOs)
Seasoned Equity Offerings (SEOs)
3-Mar
24-Mar
Deliverables
Quiz 2 (incremental cash flows)
Case I: TBA (due on Feb. 8)
Review on your own: Risk, Return, CAPM
(Chapters 10, 11, 12. These chapters were
covered in Investments)
Quiz 3 (capital budgeting rules)
RWJ: Chapters 15, 16
Quiz 4 (cost of capital)
RWJ: Chapters 16, 17
Equity Analyst Report II: Calculating the
Cost of Capital (due on March 7)
RWJ: Chapters 17, 30
Quiz 5 (capital structure)
6 January 2016. The schedule is subject to change. Please follow Latte for Updates to the Schedule throughout the semester.
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Date
29-Mar
Topic
Raising Long Term Capital (cont’d)
Readings
RWJ: Chapter 20
31-Mar
5-Apr
7-Apr
Payout Policy: Dividends
Payout Policy: Stock Repurchases
Special Topic (TBA)
RWJ: Chapter 18
RWJ: Chapter 18
12-Apr
14-Apr
19-Apr
TBA
Special Topic (TBA)
Presentations
Presentations
FINAL EXAM
Presentations
Presentations
FINAL EXAM
Deliverables
Case II (Capital Structure): TBA
Equity Analyst Report III: Payout Policy
Teamwork: Submit planning grid, agenda
and meeting evaluation.
Quiz 6 (IPOs and Payout Policy)
Presentations
Presentations
FINAL EXAM
6 January 2016. The schedule is subject to change. Please follow Latte for Updates to the Schedule throughout the semester.
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