Syllabus - Intro to Finance - Fall 2018 - BUSI PS5001-005

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Business Certificate Program
Fall 2018
BUSI PS5001_005 (Introduction to Finance)
Friday 12:10PM – 2PM, HAM 517
3 credits
Instructor:
Benedict O. Okoh, [email protected]
Office Hours:
By appointment. Please email me to setup a mutually convenient time.
Response Policy:
Generally, I endeavor to respond within 24 hours to emails that I receive during the business day.
Emails that arrive after the regular business hours shall be treated as having been received at the start
of the following business day. (Please note that I might be unable to respond to emails for up to two
days in the event that I am traveling).
TA:
________________________
Office Hours:
________________________
Response Policy:
________________________
Course Overview
This course is designed to introduce you to business finance (corporate financial management and investments) whether you are a
practitioner, simply curious, or seeking a career in the exciting and dynamic world of finance. The primary objective is to provide
frameworks, concepts, and tools for analyzing financial decisions based on fundamental principles of modern financial theory.
While the approach is rigorous and analytical, lectures will also blend what’s covered in the classroom with real world examples
and applications.
Topics covered in the course include time value of money concepts and applications; discounted cash flow (DCF) techniques;
valuing assets like bonds and stocks using DCF; capital budgeting techniques and how firms use cost-benefit analyses (CBAs) to
choose between or among projects; rates of return; different types of risk; portfolio theory; the capital asset pricing model; and the
quantification of the multifaceted relationship between risk and return in the financial markets.
Through this course, students wishing to enter diverse areas of finance, such as asset management, investment banking, portfolio
management, and risk management, will have the opportunity to acquire and develop critical work-related skills. These include
evaluating corporate performance based on an analysis of financial statements, estimating the present and future values of a wide
range of cash flows, and using these concepts as the basis for asset valuation, applying commonly used cost-benefit analysis
methods to evaluate investment decisions, and estimating the risk and return of individual securities and diversified portfolios.
The topics covered in this course provide students with the necessary background and preparation to take more advanced courses
in finance.
SPS students shall be given priority in registering for this course. But if there is space, this course is open to students from other
fields and/or Columbia University programs subject to any limitations placed by the University and/or SPS. Please note that if
you are not an SPS student, you are solely responsible for confirming that your program will accept this course.
Page | 1
Adapted from: The Course Syllabus: A Learning-Centered Approach, 2nd Edition, Judith Grunert O'Brien, Barbara J. Millis, Margaret W. Cohen. ISBN:
978-0-470-60539-4. Available as an E-Book by Jossey-Bass at: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470605391.html
Business Certificate Program
Prerequisites
An introductory course in economics and a firm grasp of high school algebra. Those without such a background should first take
ECON S1105 plus one of the following: MATH S1003 or W1007, or STAT W1001 or S1111:
Learning Objectives
Upon successful completion of this course, you will be able to:
1. Describe the principal characteristics of the different forms of business organization (L1).
2. Identify the basic types of financial management decisions and the role of the financial manager (L2).
3. Classify the core components of the three (3) principal financial statements: the balance sheet, the income statement, and
the statement of cash flows (L3).
4. Describe the applications and uses of common-size financial statement analysis (L4).
5. Identify commonly-used financial ratios to measure a firm’s financial performance (L5).
6. Apply the principal time value of money (TVM) concepts used in financial analysis and valuation (L6).
7. Determine the value of debt and equity securities using discounted cash flow methods (DCFs) and alternative valuation
techniques (L7).
8. Apply the Net Present Value (NPV) method and alternative decision rules such as the Internal Rate of Return (IRR) and
the Payback Method to evaluate investment projects (L8).
9. Analyze the tradeoffs between risk and return in capital markets (L9).
10. Estimate the risk-return tradeoff for diversified investment portfolios by applying the fundamental principles of portfolio
theory (L10).
Readings
Required Text, Online Resources, Calculator, and Software
Textbook:
Authors:
Publisher:
ISBN:
Preferred Version:
Fundamentals of Corporate Finance, 4th Edition
Jonathan Berk, Peter DeMarzo, Jarrad Harford
Pearson
9780134641690
None. You may use the e-book, loose leaf, hardcover, or softcover version of the required edition of
the textbook.
If you already have the required edition of the textbook, you don’t need to buy another one. Instead,
you’ll need to get only MyFinanceLab using the details below.
Online Resource:
MyFinanceLab (For Homework Assignments; see link below)
•
Signup directions are available via this link (or by pasting this into your browser
https://portal.mypearson.com/coursehome/handout/okoh15299/Student_Registration_Handout_okoh15299.pdf
•
A PDF file with the same information is also available in the files section of CourseWorks.
Page | 2
Adapted from: The Course Syllabus: A Learning-Centered Approach, 2nd Edition, Judith Grunert O'Brien, Barbara J. Millis, Margaret W. Cohen. ISBN:
978-0-470-60539-4. Available as an E-Book by Jossey-Bass at: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470605391.html
Business Certificate Program
Calculator:
A financial calculator of your choice.
•
•
•
You are entirely free to use whichever financial calculator you like.
Please have your financial calculator by the first day of class.
Financial calculators are allowed during exams.
•
Because different calculators use different programming languages, you are solely responsible
for understanding how your calculator works and how to use it. (“Chapter 4 Appendix” in the
required text above offers detailed directions for using two popular calculator models).
N.B.: I use the HP 17BII (it is similar to the HP 17BII+). Using this same calculator would
make it much easier for you to follow the lectures. However, I hasten to add that you do not
have to use this one. If you'd like to evaluate it, take a look at this link.
Software
Microsoft Excel 2016
•
Excel for Windows will be used in class. Students are expected to be proficient with Excel
basics.
•
For exercises (homework, in-class, or other assignments) that are required to be done in excel,
do not “hard-code” numbers into spreadsheets (i.e., do not type calculated numbers into your
spreadsheets). Rather, use Excel to do the calculations. This way, your reasoning/logic can be
followed. No credit shall be awarded for spreadsheets with hard-coded numbers.
Supplemental Readings
I will post supplementary articles, business cases, and Power Point Lecture Notes on our Canvas course site on a regular basis.
Recommended HBS Coursepack
I have curated and highly recommend this HBS Coursepack, which contains the following material:
• Finance Reading: Time Value of Money
• Finance Reading: NPV and Capital Budgeting
• Finance Reading: Introduction to Bonds and Bond Math
• Finance Reading: Risk and Return 1: Stock Returns and Diversification
• Finance Reading: Risk and Return 2: Portfolio Theory
Recommended Readings
The following are highly recommended (but not required) for the course:
Business Finance Online: http://www.zenwealth.com/businessfinanceonline/
Stephen Ross, Randolph Westerfield, & Bradford Jordan (2017). Fundamentals of Corporate Finance, 11th Edition. McGraw-Hill
ISBN: 978-0-07-786170-4
Douglas Lind (2017). Statistical Techniques in Business & Economics, 17th Edition. McGraw-Hill.
ISBN: 978-1-259-66636-0 (Available on reserve in the Business School library)
Page | 3
Adapted from: The Course Syllabus: A Learning-Centered Approach, 2nd Edition, Judith Grunert O'Brien, Barbara J. Millis, Margaret W. Cohen. ISBN:
978-0-470-60539-4. Available as an E-Book by Jossey-Bass at: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470605391.html
Business Certificate Program
Karen Berman, Joe Knight, & John Case (2013). Financial Intelligence, Revised Edition: A Manager's Guide to Knowing What
the Numbers Really Mean.
ISBN: 978-1422144114
Steven Finkler (2017). Finance & Accounting for Nonfinancial Managers.
ISBN: 978-0808046905
Newspapers, magazines, etc.
You should endeavor to read the financial press regularly (e.g., Financial Times, The Economist, Wall Street Journal, etc.).
Resources
Columbia University Library
Columbia’s extensive library system ranks in the top five academic libraries in the nation, with many of its services and
resources available online: http://library.columbia.edu/.
SPS Academic Resources
The Office of Student Affairs provides students with academic counseling and support services such as online tutoring and
career coaching: http://sps.columbia.edu/student-life-and-alumni-relations/academic-resources.
Course Assignments
Participation and attendance: I expect you to come to class on time and thoroughly prepared. I will keep track of attendance
and look forward to an interesting and exciting semester. If you miss an experience in class, you miss an important learning
moment and the class misses your contribution. More than one absence will adversely affect your grade.
Graded Homework Problems: Graded Homework Problems give you an opportunity to demonstrate your mastery of the topics
covered in the course, and solidify your knowledge of finance theory through the practical application of the concepts, models,
and theories discussed in class. Please note the following about the homework assignments: (L1-L10)
• All homework assignments are to be completed using MyFinanceLab.
• Each student’s Columbia UNI and/or Columbia email address will be used as unique identifiers. Not using your
Columbia UNI and Columbia email will make it impossible to transfer your homework grades from MyFinanceLab to
CourseWorks. Therefore:
o Please use your Columbia UNI as your Login Name when you sign up for MyFinanceLab. In addition,
please be sure to use your Columbia email address exactly as it appears in CourseWorks. (If your email in
CourseWorks is [email protected], then use [email protected] in MyFinanceLab. If your
email in CourseWorks is [email protected], then please use [email protected] in
MyFinanceLab. Unless the email address in BOTH places is EXACTLY the same, and unless you enter your
Columbia UNI where required, your homework grades shall NOT transfer to CourseWorks, and these grades
will be excluded in computing your final grade for the course.
• Unless otherwise specified, homework assignments shall be due at 11:59PM, NYC time, on the indicated dates.
Page | 4
Adapted from: The Course Syllabus: A Learning-Centered Approach, 2nd Edition, Judith Grunert O'Brien, Barbara J. Millis, Margaret W. Cohen. ISBN:
978-0-470-60539-4. Available as an E-Book by Jossey-Bass at: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470605391.html
Business Certificate Program
•
•
Only homework assignments that are submitted through MyFinanceLab shall be graded. Furthermore, only the grades
from MyFinanceLab shall count towards the Homework component of each student’s final grade. Homework
assignments that are not submitted via MyFinanceLab will not be graded and will therefore not be factored into the
calculation of the final course grade.
A note on deadlines for homework assignments: Initially, the deadlines listed for each assignment on this syllabus, in
CourseWorks/Canvas, and on MyFinanceLab shall be the same. However, as the semester progresses, it may become
necessary to adjust the deadlines for one or more homework assignments. If this happens, such changes shall be made
only on MyFinanceLab. Thus, in the event that deadlines change during the semester, the controlling deadlines shall be
those stated in MyFinanceLab.
Group Presentations: There will be Group Presentations during the course. Each class will begin with the group presentation for
that day. These presentations should be done in teams. Each student will be randomly assigned to a team. Furthermore, the
instructor shall not get involved in team dynamics or in managing teams. Each person on a team will get the same grade for that
team’s Group Presentation.
•
Each team will summarize and analyze a major economic event, regulatory action, news item, or other relevant event
that occurred during the immediately preceding week or two in the U.S. or in another country. Whatever you present
must be readily backed up by news media reports. For example, previous topics have included Tesla bonds, Payday
loans, Bitcoin, Amazon’s acquisition of Whole Foods, Goldman’s investment in PDVSA bonds, etc. You should try as
much as possible to relate your presentation to the material we cover in class.
•
Each team’s presentation should be limited to a maximum of ten minutes total, including about 3-4 minutes for Q&A.
Points will be deducted for each minute that the presentation exceeds the time limit. In addition, a one-page summary
indicating what you plan to talk about (NOT the entire presentation) should be emailed to me no later than 11:59 PM,
NYC time, on the Monday before your presentation. In addition, each team should hand in one bound/stapled hardcopy
of its presentation at the start of class on the day of the presentation. Not sending the summary ahead of time as
specified, not handing in a hardcopy at the start of class as specified, and/or a presentation that exceeds the stated time
limit, shall automatically result in a significant grade reduction.
Midterm and Final Exams: Both exams will be in-class. The Midterm Exam will be held on the date specified in the Course
Schedule below. The Final Exam will be held during Columbia University’s official Final Exam Period. Each exam will include
any combination of (theoretical and applied) multiple choice questions, short-answer questions, and comprehensive problems (or
exercises) requiring detailed analysis and calculations (performed using a Financial Calculator). (L1-L10)
Also, please note the following regarding both exams:
•
All exams shall be closed-book and closed-notes.
•
During exams, you are allowed to use your own “crib sheet” that is one sheet of paper measuring 8½ inches by 11
inches. Sharing of crib sheets during exams is expressly forbidden.
•
You may also use your own financial (or scientific) calculator. Sharing of calculators during exams is expressly
forbidden.
•
PCs, smartphones, tablets, and/or phablets are not allowed during the exams.
Page | 5
Adapted from: The Course Syllabus: A Learning-Centered Approach, 2nd Edition, Judith Grunert O'Brien, Barbara J. Millis, Margaret W. Cohen. ISBN:
978-0-470-60539-4. Available as an E-Book by Jossey-Bass at: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470605391.html
Business Certificate Program
•
The exams are mandatory. Thus, not taking either or both exams shall automatically result in a failing grade (“F”)
for the course. There are no makeup exams.
Evaluation/Grading
The final grade will be calculated as described below:
FINAL GRADING SCALE
Grade
ASSIGNMENT
Percentage
A+
98–100 %
A
93–97.9 %
A-
% Weight
Weekly Lectures (Attendance Only)
5%
90–92.9 %
Group Presentations
15%
B+
87–89.9 %
Graded Homework Assignments (MyFinanceLab)
25%
B
83–86.9 %
Midterm Exam
25%
B-
80–82.9 %
Final Exam
30%
C+
77–79.9 %
C
73–76.9 %
C-
70–72.9 %
D
60–69.9 %
F
59.9% and below
Total
100%
Course Policies
Participation and Attendance
I expect you to come to every class on time and thoroughly prepared. I will keep track of attendance and look forward to an
interesting and exciting semester. If you miss an experience in class, you miss an important learning moment and the class misses
your contribution. More than one absence will affect your grade. You are expected to communicate with me promptly if you are
encountering any difficulties with the course.
Late Homework Assignments
Late homework assignments shall automatically incur a 25% penalty. This penalty shall apply to only the portion of an
assignment that is late. (For example, if there are 10 questions on an assignment, and 6 are submitted on time while 4 are
submitted after the deadline, the penalty shall apply to only the 4 that are late, not to the entire assignment).
Course Etiquette
Using electronic devices during class for purposes other than note-taking can be very distracting. Thus, the use of phones during
class is expressly forbidden. Also forbidden is the use of electronic devices in class for purposes that are not directly related to
course material. Unless otherwise stated, laptops and tablets are permitted during class for note-taking only. If you are caught
using phones in class, or using electronics in class other than for note-taking, you will get a formal warning. If you are caught a
second time, I will reduce your course grade one-third of a grade (e.g., A+ to A, B- to C+). If you are caught a third time, I will
Page | 6
Adapted from: The Course Syllabus: A Learning-Centered Approach, 2nd Edition, Judith Grunert O'Brien, Barbara J. Millis, Margaret W. Cohen. ISBN:
978-0-470-60539-4. Available as an E-Book by Jossey-Bass at: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470605391.html
Business Certificate Program
reduce your grade by one full letter (e.g., A to B, B- to C-). If I catch you using them for a fourth time, I will Fail you from the
course.
Changes to Syllabus
This syllabus is subject to change at the discretion of the instructor. Such changes shall be announced, in advance, in class.
School Policies
Copyright Policy
Please note—Due to copyright restrictions, online access to this material is limited to instructors and students currently registered
for this course. Please be advised that by clicking the link to the electronic materials in this course, you have read and accept the
following:
The copyright law of the United States (Title 17, United States Code) governs the making of photocopies or other reproductions
of copyrighted materials. Under certain conditions specified in the law, libraries and archives are authorized to furnish a
photocopy or other reproduction. One of these specified conditions is that the photocopy or reproduction is not to be "used for any
purpose other than private study, scholarship, or research." If a user makes a request for, or later uses, a photocopy or
reproduction for purposes in excess of "fair use," that user may be liable for copyright infringement.
Academic Integrity
Columbia University expects its students to act with honesty and propriety at all times and to respect the rights of others. It is
fundamental University policy that academic dishonesty in any guise or personal conduct of any sort that disrupts the life of the
University or denigrates or endangers members of the University community is unacceptable and will be dealt with severely. It is
essential to the academic integrity and vitality of this community that individuals do their own work and properly acknowledge
the circumstances, ideas, sources, and assistance upon which that work is based. Academic honesty in class assignments and
exams is expected of all students at all times.
SPS holds each member of its community responsible for understanding and abiding by the SPS Academic Integrity and
Community Standards posted at http://sps.columbia.edu/student-life-and-alumni-relations/academic-integrity-and-communitystandards. You are required to read these standards within the first few days of class. Ignorance of the School's policy concerning
academic dishonesty shall not be a defense in any disciplinary proceedings.
Therefore, please note that all violations of Columbia University’s policies on Academic Integrity and Misconduct shall,
automatically and without exception, be reported to the Office of Student Conduct and Community Standards. Furthermore,
students suspected of Academic Misconduct will receive a grade of zero or a failing grade (“F”) for the assignment or exam in
question. The University’s policies on Academic Integrity may be found at
http://www.columbia.edu/cu/studentconduct/documents/StandardsandDiscipline.pdf#page=8.
For questions about the reporting process, please contact the Office of Student Services at [email protected]
Accessibility
Columbia is committed to providing equal access to qualified students with documented disabilities. A student’s disability status
and reasonable accommodations are individually determined based upon disability documentation and related information
gathered through the intake process. For more information regarding this service, please visit the University's Health Services
website: http://health.columbia.edu/services/ods/support.
Page | 7
Adapted from: The Course Syllabus: A Learning-Centered Approach, 2nd Edition, Judith Grunert O'Brien, Barbara J. Millis, Margaret W. Cohen. ISBN:
978-0-470-60539-4. Available as an E-Book by Jossey-Bass at: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470605391.html
Business Certificate Program
Course Schedule/Course Calendar
Session
1
Date
Module
Sep 7
Chapter
1
Module I:
Business
Basics
2
Sep 14
2
3
Sep 21
3
4
Sep 28
Module II:
Time Value
of Money
(TVM)
and
Valuing
Cash Flow
Streams
Class Topic and What’s Due Today
• Introduction, Course Requirements, Grading,
Expectations, Etc.
• Business Basics
o Forms of business organizations/entities
o Corporate leadership
o Roles of financial managers
• Stock Markets and Firm Ownership
o Primary vs secondary markets
o Privately-held vs. publicly-traded
• Financial Reporting – Overviews of The Three
Principal Financial Statements
o Annual Report
o Balance Sheet, Income Statement, Cash Flow
Statement
• Core Components of the Three Principal Financial
Statements
• Working with Financial Statements
o Some Basic financial ratios
o Common sizing
• Time Value of Money (TVM) – Basics
o Simple vs compound interest
o Visualizing cash flows with Timelines
• Time Value of Money (TVM) – Basics (Cont’d)
o Compounding and future value (FV)
o Discounting and present value (PV)
o Non-annual discounting/compounding periods
Assessed
Learning
Objectives
L1, L2, L3
L3, L4, L5
L6
Due Today: HW #0 – Business & Fin. Statement Basics
4
5
• TVM – Applications
o Perpetuities
o Annuities
o Valuing “complex” cash flow streams
o Solving for variables other than PV
• Comparing Interest Rates
o APR, EAR, APY
o Adjusting the discount rate to different time
periods
L6
Due Today: HW #1 (Time Value of Money)
Page | 8
Adapted from: The Course Syllabus: A Learning-Centered Approach, 2nd Edition, Judith Grunert O'Brien, Barbara J. Millis, Margaret W. Cohen. ISBN:
978-0-470-60539-4. Available as an E-Book by Jossey-Bass at: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470605391.html
Business Certificate Program
Session
5
Date
Module
Class Topic and What’s Due Today
• Group Presentations – Team 1
• Investment Decision Criteria
o Payback Period
o Net Present Value (NPV)
o Internal Rate of Return (IRR)
o Comparing investment decision criteria (NPV vs.
IRR vs. Payback period)
Oct 5
Module III:
Investment
Decision
Criteria
6
Chapter
Assessed
Learning
Objectives
L6, L8
8
Due Today: HW #2 (Perpetuities, Annuities, Rates)
• Group Presentations – Team 2
• Investment Decision Criteria (Cont’d)
o Choosing between mutually-exclusive projects
o Profitability Index – choosing among projects
when resources are limited
Oct 12
L6, L8
• Exam I (Midterm Exam)
o Covers material up to and including Session 6
7
Oct 19
Due Today: HW #3 (Investment Decision Criteria)
8
Oct 26
6
9
10
Nov 2
Nov 9
Module IV:
Valuation of
Debt
And
Equity
Securities
• Group Presentations – Team 3
• Review of Exam 1
• Corporate Bonds
o Overview of corporate bonds – how bonds work,
terminology, key features, ratings
o Prospectus reviews and some common bond
structures (time permitting)
o Bond valuation basics
• Group Presentations – Team 4
• Corporate Bonds (Cont’d)
o Bond valuation basics (Cont’d)
o Key relationships in bond valuation
7
• Group Presentations – Team 5
• Common Stocks
o Basic characteristics of common stocks
o Valuation using Dividend Discount Model
o Valuation using P/E ratios
L6, L7
L6, L7
L6, L7
Due Today: HW #4 (Bonds)
Page | 9
Adapted from: The Course Syllabus: A Learning-Centered Approach, 2nd Edition, Judith Grunert O'Brien, Barbara J. Millis, Margaret W. Cohen. ISBN:
978-0-470-60539-4. Available as an E-Book by Jossey-Bass at: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470605391.html
Business Certificate Program
Session
11
Date
Chapter
11
Nov 16
Nov 23
12
Module
NO CLASS – THANKSGIVING HOLIDAY
• Group Presentations – Team 7
• Risk and Return in Capital Markets (Cont’d)
o Expected return of a portfolio
o Evaluating portfolio risk
o Portfolio diversification
Nov 30
14
Dec 7
Dec
14**
• Group Presentations – Team 6
• Risk and Return in Capital Markets
o Capital markets historical returns
o Realized rates of return
o Geometric vs arithmetic average rates of return
o Expected rates of return
o Measuring risk
• Quick Review of Basic Stats (IF Time Permits)
o Variance, standard deviation, probability
distributions, expected values, correlation
Assessed
Learning
Objectives
L9
Due Today: HW #5 (Common Stocks)
Module V:
Risk and
Return in
Capital
Markets
12
13
Class Topic and What’s Due Today
L9, L10
Due Today: HW #6 (Risk & Return)
• Group Presentations – Team 8
• Risk and Return in Capital Markets (Cont’d)
o Systematic and Unsystematic risk
o βeta coefficient
o Capital Asset Pricing Model (CAPM)
L9, L10
• Exam II (Final Exam)**
o Cumulative, and With Primary Focus (But
NOT Exclusive Focus) on Material Not
Covered in Exam I
Due Today: HW #7 (Risk & Return, CAPM)
**
The Registrar schedules final exams and determines their location according to a University-wide Final
Exam Schedule. Please check their website (http://registrar.columbia.edu/content/exams) for the time and
location, or access your exam schedule in SSOL by clicking on "Schedule," then "My Exam Schedule.” (As
stated above, all exams in this course are mandatory. Thus, not taking the Exam I and/or the Final Exam
shall automatically result in a failing grade (“F”) for the course). The definitive schedule of final
examinations is usually available shortly after midterms.
Page | 10
Adapted from: The Course Syllabus: A Learning-Centered Approach, 2nd Edition, Judith Grunert O'Brien, Barbara J. Millis, Margaret W. Cohen. ISBN:
978-0-470-60539-4. Available as an E-Book by Jossey-Bass at: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470605391.html
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