San José State University

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San José State University
School: Lucas Graduate School of Business
Department: Accounting and Finance
Course Number: BUS 270
Title: Financial Management
Section: 1
Semester: Spring
Year: 2015
Instructor:
Dr. Marco Pagani
Office Location:
BT 859
Office Phone:
(408) 924-3477
Email:
[email protected]
Office Hours:
MW – 1:30-2:30PM (BT 859) or by appointment
Class Day/Time:
Tuesdays: 3/3, 3/10, 3/24, 3/31, 4/7, 4/14, and 4/21 6:00-10:00PM
Saturdays: 3/7 and 3/14 – 10:00AM-2:00PM
Classroom:
Lucas Business Complex
Prerequisites:
BUS 220
Course Description
The course provides students with the analytical techniques underpinning the two most important
decisions taken by financial managers in order to maximize the value of a business entity: the
investment decision and the financing decision. The investment decision includes cash flow
estimation, asset pricing and risk analysis in capital budgeting. The financing decision focuses on
optimal capital structure and the cost of capital.
Course Content Learning Outcomes
Upon successful completion of this course, students will be able to:
LO1 – Demonstrate understanding of time value of money concepts by computing present values
and future values of different series of cash flows. (MBA program goals #2)
LO2 – Understand the return/risk measures of financial assets. (MBA program goal #1)
LO3 – Compute the required returns of securities using the Capital Asset Pricing Model (CAPM)
and other multi-factor asset pricing models. (MBA program goals #1 & #2)
BUS 270 Financial Management – Spring 2015
LO4 – Compute the price of fixed-income securities and measure price and interest risks. (MBA
program goals #2)
LO5– Compute the price of equity securities and understand how to perform corporate valuation.
(MBA program goals #1 and #2)
LO6 – Understand the structure of financial statements and how to compute the components of the
firm’s cash flows. (MBA program goals #1 and #2)
LO7 – Understand how to evaluate financial/accounting ratios, perform financial analysis and
analyze the drivers of value using the DuPont equation. (MBA program goals #1 and #2)
LO8 – Understand financial planning, construct Pro-Forma financial statements and forecast
additional financial needs. (MBA program goals #1 and #2)
LO9 – Understand how to determine the cost of capital sources and the WACC. (MBA program goal
#1)
LO10 – Understand how to perform capital budgeting and interpret the outcomes of the following
methodologies: Net Present Value, Internal Rate of Return, Profitability Index, Payback Period and
Discounted Payback Period. (MBA program goal #1)
LO11 – Understand how to compute the firm’s cash flows for capital budgeting purposes. (MBA
program goal #1)
LO12 – Understand how to measure the business and operating risk of a firm. (MBA program goal
#1)
LO13 – Understand the determinants of capital structure policies. Understand the impact on a firm’s
capital structure of corporate taxes, personal taxes, bankruptcy costs, agency costs, asymmetry of
information and capital constraints. Understand the trade-off and pecking order theories. (MBA
program goals #1 and #2)
Required Texts/Readings
(1) Textbook: Brigham E. and Daves P. (BD) “Intermediate Financial Management”, 11th
edition, Cengage Learning.
ISBN10: 1-111-53026-2
ISBN13: 978-1-111-53026-6
See more at: http://www.cengagebrain.com/shop/ISBN/9781111530266
BUS 270 Financial Management – Spring 2015
(2) Harvard Business Publishing Coursepack
https://cb.hbsp.harvard.edu/cbmp/access/35227404
a. “Do You Know Your Cost of Capital?” Michael T. Jacobs; Anil Shivdasani
Product #: R1207L-PDF-ENG; Price $3.95.
This article is used for class discussion during the lecture about Cost of Capital-WACC
(Chapter 10).
b. “Hola-Kola The Capital Budgeting Decision”, Lena Booth;
Product #:TB0343-PDF-ENG; Price: $3.95
This case is used for class discussion during the lecture about Capital Budgeting (Chapter
13).
c. “Hansson Private Label, Inc.: Evaluating an Investment in Expansion” Erik Stafford; Joel
L. Heilprin; Jeffrey DeVolder.
Product #: 4021-PDF-ENG; Price: $3.95
This case is used for the Team Assignment about Capital Budgeting.
d. “Midland Energy Resources, Inc.: Cost of Capital”, Timothy A. Luehrman; Joel L. Heilprin;
Product #:4129-PDF-ENG; Price: $3.95
Do NOT purchase this case until it is confirmed by the instructor. This case may be
used for the Team Assignment about Cost of Capital - WACC.
Other Readings
Class handouts, to be distributed via CANVAS.
Other equipment / material requirements
It is necessary that you have a financial calculator to use throughout the course. Bring your
calculator to each class! Many textbook problems require complex arithmetic operations, and a
financial calculator is necessary to solve these problems efficiently. This is especially true for
exams! Students can elect any financial calculator for the class; nevertheless, I personally
recommend you use the Texas Instrument BA II Plus
Classroom Protocol
Attendance is not mandatory. Nevertheless, each student is expected to attend all scheduled class
meetings for the entire duration of the class meeting. An attendance sign-up sheet may be circulated
each class period but not for grade. A consistent attendance is essential for your performance in this
course. Many students find finance concepts difficult to grasp. Missing classes will only make the
process of absorbing this material more difficult. I also present material in class that may not be
found in the text. If you find yourself falling behind or you are having problems with the material, I
encourage you to come to see me during my office hours. In addition, remember that your
classmates can be a very valuable resource. Ask them questions, share your thoughts and doubts,
study with them, and collaborate with them when solving the problems at the end of the chapters in
the textbook.
Cell phone use: Students will turn their cell phones off or put them on vibrate mode while in class.
They will not answer their phones in class. Students whose phones disrupt the course and do not
BUS 270 Financial Management – Spring 2015
stop when requested by the instructor will be referred to the Judicial Affairs Officer of the
University.
Computer use: in the classroom, faculty members allow students to use computers only for classrelated activities. These include activities such as taking notes on the lecture underway, following
the lecture on Web-based PowerPoint slides that the instructor has posted, and finding Web sites to
which the instructor directs students at the time of the lecture. Students who use their computers for
other activities or who abuse the equipment in any way, at a minimum, will be asked to leave the
class and, at a maximum, will be referred to the Judicial Affairs Officer of the University for
disrupting the course. (Such referral can lead to suspension from the University.) Students are urged
to report to their instructors computer use that they regard as inappropriate (i.e., used for activities
that are not class related).
Dropping and Adding
Students are responsible for understanding the policies and procedures about add/drops, academic
renewal, etc. Information on add/drops are available at
http://www.sjsu.edu/advising/faq/index.htm#add
Information about late drop is available at
http://www.sjsu.edu/aars/policies/latedrops/. Students should be aware of the current deadlines and
penalties for adding and dropping classes.
Assignments and Grading Policy
There will be two exams given during the semester: one Mid-Term exam and one Final exam. In
addition to these written exams, there will be team assignments. The exams (Mid-Term and Final)
are based on assigned readings, lectures, cases and homework-problems as indicated in the sessions.
A Financial Calculator is necessary during examinations.
Each team must be composed of 3 students (NO exceptions unless there is an insufficient number of
students, in which case at most two teams will have 2 students). The teams must be formed and a
team’s name must be chosen before the end of the third class (Tuesday, March 10). The assignments
will involve mostly empirical work and case study. Each team will be required to submit the
assignments online according to the procedure specified by the instructor on the due date listed in the
syllabus. All the assignments must be typed.
The Grade weights will be:
-Mid-Term Exam
35%
-Final Exam
35%
-Team Assignments
30%
There will be no possible make-up exam for the Mid-Term Exam. If you miss the scheduled
Mid-Term exam, you must notify the instructor as soon as possible, and provide a documented
reason for your absence. If the instructor deems that your reason is sufficient to warrant an absence
from the exam, the weight of the missed Mid-Term exam will be added to the Final exam (thus, your
final exam score will count toward 70% of your total course grade average). If the instructor does
BUS 270 Financial Management – Spring 2015
not consider your excuse sufficient to warrant an absence from the exam, you will be assigned a
grade of zero if you fail to take the exam.
Your final grade for the course is based on the distribution below and follows a standard 100
percent scale. A+ (98-100), A (92-97), A- (89-91), B+ (86-88), B (82-85), B- (79-81), C+ (76-78),
C (69-75), D (60-68), and F (below 60).
Bonus Points:
The Lucas College and Graduate School of Business is currently subscribing to 12 Bloomberg
Terminals. The Bloomberg Terminal is a computer system provided by Bloomberg L.P. that enables
professionals in finance and other industries to access the Bloomberg Professional service through
which users can monitor and analyze real-time financial market data. The system also provides
news, price quotes, and messaging across its proprietary secure network. Most large financial firms
have subscriptions to the Bloomberg Professional service.
Two Bloomberg Terminals are located in the College Computer Lab (front row) in BBC 301 and
available to all students during the semester as following:
MTWR
7:00AM - 10:00PM
F
7:00AM - 5:00PM
Sat
8:00AM - 5:00PM
Sun
12:00PM - 5:00PM
The remaining Bloomberg Terminals are located in a dedicated room, BBC 302D, which can be
accessed through BBC 304. The Terminals in this room are available to students as following:
MW
9:00AM – 1:00PM
TR
4:30PM – 7:30PM
Bloomberg Essentials (BESS) is often referred to as a Bloomberg Certification. Bloomberg has
enabled students to demonstrate their knowledge and skill when it comes to the product by offering
training and proof through its 'certification' program. After completing certain training and exam
requirements, Bloomberg will issue a Certificate that will provide evidence of the accomplishment.
Requirements for Certification:
Students must set up a Bloomberg Professional account (free of charge) and can access the
Bloomberg training videos and certification exams (<BESS> function). In order to be awarded a
Certificate a student must (1) watch all four core videos (15-30 min. each) and pass the core exam
and (2) watch one of the Market sector videos (20-30 min. each) and pass the corresponding exam.
The minimum passing score for the exam is 75% and a failed exam can only be repeated once. To
each Market Sector Video corresponds one Bloomberg Certificate. Hence, students can achieve four
certifications (Equity, Fixed-Income, Commodities and Foreign Exchange). After passing each
Market sector Exam, students can request a copy of their certificate which is sent by email usually
within 5 minutes.
*4 Core Videos are required and then you can select one other Market Sector Video
Core Videos (all 4 required)
Market Sector Videos (select one)
Getting Started
Equity Essentials
Bloomberg News
Fixed-Income Essentials
Market Monitors and Launchpad
Foreign Exchange (FX) Essentials
API
Commodity Essentials
BUS 270 Financial Management – Spring 2015
Each student submitting a proof of his/her Bloomberg Certificate will receive 2 BONUS points
that will be added to the average grade in the Team Assignments. A maximum of 4 bonus
points will be granted by submitting any two of the four Market Sector Bloomberg Certificates.
Hence, whether you submit two, three or four Bloomberg Market Sector Certificates you will receive
the same amount of bonus points (4). I suggest you focus on the Equity and Fixed Income
Certificates.
University Policies
Academic integrity
Students should know the University’s Academic Integrity Policy that is available at
http://www.sjsu.edu/studentconduct/Students/Student_Academic_Integrity_Process/
Your own commitment to learning, as evidenced by your enrollment at San Jose State University and
the University’s integrity policy, require you to be honest in all your academic course work. Faculty
members are required to report all infractions to the office of Student Conduct and Ethical
Development. The website for Student Conduct and Ethical Development is available at
http://www.sa.sjsu.edu/judicial_affairs/index.html
Instances of academic dishonesty will not be tolerated. Cheating on exams or plagiarism (presenting
the work of another as your own, or the use of another person’s ideas without giving proper credit)
will result in a failing grade and sanctions by the University. For this class, all assignments are to be
completed by the individual student unless otherwise specified. If you would like to include in your
assignment any material you have submitted, or plan to submit for another class, please note that
SJSU’s Academic Policy F06-1 requires approval of instructors.
Campus Policy in Compliance with the American Disabilities Act
If you need course adaptations or accommodations because of a disability, or if you need to make
special arrangements in case the building must be evacuated, please make an appointment with me as
soon as possible, or see me during office hours. Presidential Directive 97-03 requires that students
with disabilities requesting accommodations must register with the DRC (Disability Resource
Center) to establish a record of their disability.
MBA Program Goals:
(Not all program learning goals are covered in every course)
1. Conceptual grounding in business theory and practice
2. Analytic and decision-making skills
3. Cultural and ethical awareness
4. Ability to interact effectively with teams as both leader and member
5. Ability to understand and adapt to global market changes and industry dynamics
6. Effective oral and written communication and presentation techniques
BUS 270 Financial Management – Spring 2015
BUS 270 – Financial Management – Tentative Schedule
The course schedule provides a general plan for the course, deviations may be necessary.
Class
Dates
3/3
3/7
3/10
3/14
3/24
3/28
3/28
3/31
4/7
BD Chapters
1 – An Overview of Financial Management and
the Financial Environment
28 – Time Value of Money (Web Chapter)
2 – Risk and Return: Part I
3 – Risk and Return: Part II (omit Section 3.7)
4 – Bond Valuation
7 – Accounting for Financial Management (omit
Section 7.9)
7 – Accounting for Financial Management (omit
Section 7.9)
8 – Analysis of Financial Statements
9 – Financial Planning and Forecasting
Financial Statements
5 – Basic Stock Valuation
11 – Corporate Valuation and Value-Based
Management (omit Sections 11.4, 11.5 and 11.6)
Mid-Term Exam
11 – Corporate Valuation and Value-Based
Management (omit Sections 11.4, 11.5 and 11.6)
10 – Determining the Cost of Capital
12 – Capital Budgeting: Decision Criteria
12 – Capital Budgeting: Decision Criteria
13 – Capital Budgeting: Estimating Cash Flows
and Analyzing Risk (omit Sections 13.7, 13.10
and 13.11 )
4/14
4/14
15 – Capital Structure Decisions: Part I
16 – Capital Structure Decisions: Part II (omit
Sections 16.1c, 16.1d, 16.5 and 16.6)
4/21
Final Exam
BUS 270 Financial management - Spring 2015
Suggested Homework and
Team Assignment
Deadlines
Questions: 1-4
Problems: 1-35
Problems: 1-14
Problems: 1-9
Problems: 1-24
Problems: 3-6; 10-12; 14-15
Problems: 3-6; 10-12; 14-15
Problems: 1-12; 14-15
Problems: 1-10
Problems: 1-20
Problems: 1-10
Team Assignment #1 due by
9:00AM
Problems: 1-10
Problems: 1-18
Problems: 1-16; 21-23
Problems: 1-16; 21-23
Problems: 1-6; 9-10; 11 and
13
Team Assignment #2
(Hansson Private Label, Inc.:
Evaluating an Investment in
Expansion) due by 6:00PM
Problems: 1-11
Problems: 1-9
Team Assignment s#3 (#4)
(Midland Energy Resources,
Inc.: Cost of Capital and/or
other assignment) due by
10:00AM
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