SMU Classification: Restricted
The Lee Kong Chian School of Business
Academic Year 2022/23
Term 1
FNCE101
Instructor Name:
Title:
Tel:
Email:
Office:
FINANCE
Dr. David K. Ding
Associate Professor of Finance (Education)
6828-0245
davidding@smu.edu.sg
LKCSB #4064
COURSE DESCRIPTION
The course helps students understand the various financial activities undertaken by a firm to create value for its
shareholders. Students will be taught key financial tools and concepts relevant managers and investors, and
stakeholders in making sound financial decisions. The topics covered include time value of money, investment
appraisal techniques, working capital management, cost of capital, risk-return tradeoff, diversification, asset
pricing, capital raising, and options. The foundational knowledge acquired here will enable students to understand
finance from the perspective of company managers as well as finance from the perspective of investors.
LEARNING OBJECTIVES
By the end of this course, students will be able to:
• Describe the important role of financial management decisions for business, society, and sustainability
• Interpret financial statements and understand how working capital is managed
• Solve time value of money problems
• Know and use different investment appraisal techniques and understand cost of capital concepts
• Estimate the values of bonds, common stocks, and preferred stocks
• Understand investment returns, diversification, the risk-return tradeoff, and the capital asset pricing model
• Explain the basic processes for capital raising
• Understand fundamentals of the Modigliani and Miller (MM) theory of capital structure
• Define options and understand their pricing and payoffs
PRE-REQUISITE/ CO-REQUISITE/ MUTUALLY EXCLUSIVE COURSE(S)
Please refer to the Course Catalogue on OASIS for the most updated list of pre-requisites/co-requisites for this
particular course.
Do note that if this course has a co-requisite, it means that the course has to be taken together with another
course. Dropping one course during BOSS bidding would result in both courses being dropped at the same time.
ASSESSMENT METHOD
Class Participation (including homework discussion):
Project:
Online Quizzes (5 sets):
Assurance of Learning (AoL) Quiz:
Midterm Exam:
Final Exam:
Total:
10%
20%
10%
5%
15%
40%.
100%
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SMU Classification: Restricted
INSTRUCTIONAL METHODS AND EXPECTATIONS
Class Participation (10%)
Class participation is a central part of the learning process at SMU and is strongly encouraged. Your participation
mark reflects your contribution to your classmates’ learning. You are expected to attend all class meetings,
prepare reading materials and other assignments before class, and participate actively in class discussions. Note
that you are evaluated based on the quality of your contribution and on earnest attempts to help the rest of the
class learn the material. If you actively answer questions and solve problems in class, I reserve the right to raise
your grade. Please be mindful of not hogging class participation time. Note that participation grades are not
awarded based on mere class attendance.
Group Project (20%)
A group project is to be completed by groups of 5-6 students each. The group project will be graded based on
a group presentation and submission. Members in a group by default get same grade for the project. However,
if someone has very little contribution to the project, he/she may receive lower marks than the others. Details
will be provided in class and on eLearn.
Online Quizzes (10%)
For additional practice, five sets of exercises have been assigned for completion online at your own time and
convenience. These are aimed at helping you better understand the class materials and prepare for exams. You
are allowed an unlimited number of attempts at each exercise, up till the stipulated deadline, where the highest
mark is recorded. All online quizzes are open book in nature and should be completed within 30 minutes per
attempt.
Assurance of Learning Assessment (AoL) Quiz (5%)
The Lee Kong Chian School of Business (LKCSB) is accredited by the Association to Advance Collegiate Schools
of Business (AACSB). To maintain our accreditation, we need to provide evidence that our students have a good
grasp of basic finance concepts. There will be a closed-book quiz at the end of the semester. The quiz accounts
for 5% of your course grade. No make-up quiz will be allowed.
Examinations (55%)
There will be two main individual assessments – a midterm exam (15%) and a final exam (40%). Both assessments
are closed-book and closed-notes in nature, focusing mainly on material covered in class. A common formula
sheet is provided for both exams. The midterm, which consists of several multiple-choice questions, will be held
online via the Respondus Lockdown Browser with webcam monitoring on your personal computer. The twohour final exam consists of multiple-choice questions and several written response/computational questions.
Calculators (any type/model, programmable/non-programmable with no internet connection) are allowed in
each exam. The final exam will be cumulative of all content covered in the course. No make-up exams are
available.
Homework Problems (Class Discussion)
Eight sets of homework problems have been assigned for you to work on after the relevant topic has been covered
in class. These ungraded exercises are to be submitted on a group basis by the scheduled date and discussed in
class. All students are expected to have attempted the problems. I will go through selected questions in class should
anyone have any difficulty in solving them.
Self-test problems are available at the end of each chapter of your text with fully worked out solutions provided
in the appendix. Please include these as part of your study program.
CLASS TIMINGS, CONSULTATIONS AND TEACHING ASSISTANTS
Teaching Assistants (TA):
G8: Mr. Avi Tripathi (avit.2020@accountancy.smu.edu.sg); Class: Wednesday, 8:15-11:30am; LKCSB SR3.8
G9: Ms. He Zehong(zehong.he.2020@economics.smu.edu.sg); Class: Wednesday, 3:30-6:45pm; LKCSB SR3.9
G10: Ms. Yong Qing (qing.yong.2020@accountancy.smu.edu.sg); Class: Thursday, 8:15-11:30am; LKCSB SR3.9
Please contact your TA in the first instance for queries and further explanations of material taught, etc. Consultations may
occur via email, Zoom or any other platform that you are comfortable with. Each TA will also be available for Zoom
consultation for one fixed hour each week during the semester. Please refer to eLearn announcement for details.
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SMU Classification: Restricted
This course is taught in one 3-hour session on the days and times shown above. I am available by appointment in
my office (LKCSB #4064) or on Zoom for student consultation. I am also readily available by email.
FINANCIAL CALCULATOR
A financial calculator is essential for various materials covered in class and for the exams. The Texas Instruments
BA II Plus is highly recommended. Brief instructions on its operations are provided on eLearn. You are
encouraged to purchase or borrow this model. You may also use other brands/models if you know how to use
them appropriately.
RECOMMENDED TEXTS AND READINGS
(RWJ) Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan, Fundamentals of Corporate Finance, 13th
Edition, McGraw-Hill.
(BH) MindTap e-version of Brigham, Eugene F. and Joel F. Houston, Hsu, Kong, Bany-Ariffin, Essentials of Financial
Management, 4th Edition, Cengage, 2018. Note: Homework problems are taken from this text.
(CDH) Chiyachantana, Chiraphol N., David K. Ding, and Jack J. Hong. A Practitioner’s Guide to Digital Platform
Business. World Scientific, 2022. Available in digital format from SMU Library at: https://www-worldscientificcom.libproxy.smu.edu.sg/worldscibooks/10.1142/12754#t=toc.
The BH textbook’s publisher has provided limited free access to MindTap online from 15th August to 11th
September 2022. Please check it out using the following course key: MTPN-344Z-3RXH or by clicking on this
link: https://login.cengagebrain.com/cb/entitlement.htm?code=MTPN-344Z-3RXH. Continued access is available
when you purchase your own access card from the SMU bookstore via an online link provide on eLearn.
Instructions on how to access the MindTap course are provided on eLearn. MindTap is a valuable online resource
that includes your text in eBook format. It contains animations, practice problems, activities for test preparation,
and video clips of concepts and step-by-step solutions to selected problems. I strongly recommend that you
purchase this product especially if you would like more practice opportunities and/or additional guidance in
understanding fundamental concepts.
Additional readings will be assigned. Students are expected to keep abreast of current developments in the AsiaPacific region by reading leading business dailies/weeklies like the Asian Wall Street Journal, The Economist,
Business Times, and Business Week.
Students can now go to SMU’s Booklink URLs to make their purchase online!
MindTap Access Code Only (Recommended)
ISBN: 9789814792097
PAC MINDTAP 2-SEM ESSENTIALS OF FINANCIAL MANAGEMENT 4E
Student Price: $38
Booklink’s URL: https://www.blinks.com.sg/product/productdetails/oc-MAIN/ii-11357
Print Textbook + MindTap Bundle
ISBN: 9789000024513
BUNDLE: ESSENTIALS OF FINANCIAL MANAGEMENT 4E + PAC MINDTAP
Student Price: $67
Booklink’s URL : https://www.blinks.com.sg/product/productdetails/oc-MAIN/ii-11803
Students will need to register and login to https://www.blinks.com.sg/ with their SMU email address to enjoy
the discounted student prices.
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SMU Classification: Restricted
UNIVERSITY POLICIES
Academic Integrity
All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication, facilitation of acts
of academic dishonesty by others, unauthorized possession of exam questions, or tampering with the academic
work of other students) are serious offences.
All work (whether oral or written) submitted for purposes of assessment must be the student’s own work.
Penalties for violation of the policy range from zero marks for the component assessment to expulsion,
depending on the nature of the offense.
When in doubt, students should consult the instructors of the course. Details on the SMU Code of Academic
Integrity may be accessed at https://oasis.smu.edu.sg/Pages/DOS-WKLSWC/UCSC.aspx.
Copyright Notice
Please note that all course materials are meant for personal use only, namely, for the purposes of teaching,
studying and research. You are strictly not permitted to make copies of or print additional copies or distribute
such copies of the course materials or any parts thereof, for commercial gain or exchange.
For the full copyright notice, please visit: https://smu.sg/Copyright-notice or OASIS -> CAMPUS LIFE &
EXCHANGE -> CONDUCT & DISCIPLINE -> UNIVERSITY COUNCIL OF STUDENT DISCIPLINE
Accessibility
SMU strives to make learning experiences accessible for all. If you anticipate or experience physical or
academic barriers due to disability, please let me know immediately. You are also welcome to contact the
university's disability services team if you have questions or concerns about academic provisions:
included@smu.edu.sg. Please be aware that the accessible tables in our seminar room should remain available
for students who require them.
Emergency Preparedness for Teaching and Learning (EPTL)
As part of emergency preparedness, instructors may conduct lessons online via the Zoom or WebEx platform
during the term, to prepare students for online learning. During an actual emergency, students will be notified
to access to the Zoom or WebEx platform for their online lessons. The class schedule will mirror the current
face-to-face class timetable unless otherwise stated.
LESSON PLAN1
Week
1
Topic
Introduction
Overview of Corporate Finance
▪ Describe important financial management decisions
and forms of business organizations; explain the goal
of financial management; explain how different
stakeholders impact on corporate objectives (e.g.,
agency problems, ethical and sustainability
concerns); describe the characteristics of a wellfunctioning securities market.
2
Review of Financial Statement Analysis
▪ Interpret balance sheet income statement; compare
and contrast cash flows from operating, investing, and
financing activities; conduct basic ratio analyses.
▪
1
Readings Readings
(RWJ)
(BH)
Ch 1
Ch 1, 2
CDH Ch 5 (Savour!)
Ch 2, 3
Ch 3, 4
Brief Discussion of Savour! case
The schedule is tentative and subject to change. Any change will be announced in advance.
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SMU Classification: Restricted
3
Working Capital Management
▪ Understand how working capital is managed, such as
components of the operating cycle and cash cycle
(inventories, account receivable, account payable)
and the cash budget.
▪
Ch 18
Ch 17
Homework 1 Discussion
Ch 3 Problem: 14
Ch 4 Problems: 11, 13, 14,
15, 19
Butler Lumber Case Discussion (includes forecasting)
Do Online Quiz 1 (Due 4 September, 1900 hrs)
4
Time Value of Money and Its Applications
▪ Solve time value of money problems for single and
multiple cash flow with compounding; understand
the calculation of fixed-payment amortization.
▪
5
Ch 5, 6
Ch 5
Homework 2 Discussion
Ch 17 Problems: 1, 2, 3, 4
Solve time value of money problems for single and
multiple cash flow with compounding; understand
the calculation of fixed-payment amortization.
Bond Valuation
▪ Explain contractual properties of bonds and bond
quotations; calculate and interpret various types of
bond yields; explain the steps in the bond valuation
process; explain the difference between nominal and
real rates; explain factors driving bond yields;
explain the interest rate risk and the term structure
of interest rates.
Ch 7
Ch 7, 9
Homework 3 Discussion
Ch 5 Problems: 10, 17, 18,
19, 24, 26, 37, 39, 41
Do Online Quiz 2 (Due 18 September, 1900 hrs)
6
Risk and Return
▪ State the various forms of investment returns;
calculate the mean and standard deviation of returns
on a single asset; explain risk-return tradeoffs across
asset classes based on historical evidence.
▪
7
Ch 12, 13 Ch 8
Homework 4 Discussion
Ch 9 Problems: 5, 6, 8, 10, 21
Calculate the mean and standard deviation of returns
on portfolios; understand the correlation between
assets and diversification benefits; differentiate
systematic vs. unsystematic risk; explain the capital
asset pricing model (CAPM) and beta and their effects
on expected returns and risk; explain various forms
of the efficient market hypotheses and their practical
implications.
Raising Capital
▪ Explain the basic processes for capital raising, such as
venture capital, IPOs, SEOs, and rights offerings.
Ch 15
Lecture notes
Homework 5 Discussion
Ch 8 Problems: 6, 7, 12, 13,
19, 20
Review for Midterm Quiz
Midterm Quiz (30 September 2022, 7:00-8:30pm; Covers materials from weeks 1-6)
Do Online Quiz 3 (Due 2 October, 1900 hrs)
8
9
Recess
Stock Valuation
▪ Estimate the values of common stocks and
preferred stocks using the discount dividend models
(DDM); explain free cash flow valuation models.
Ch 8
Ch 10
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SMU Classification: Restricted
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Cost of Capital
▪ Calculate and interpret the cost of equity, cost of
debt, and the weighted average cost of capital
(WACC) of a company; explain the effect of tax
subsidy on the cost of debt and WACC; calculate
and interpret flotation costs; explain the pure-play
approach of estimating WACC for multi-sector
companies.
Ch 14
Capital Structure
▪ Explain the Modigliani and Miller (MM) theory of
optimal capital structure choice under various tax
and bankruptcy costs scenarios; understand capital
structure theories and practical considerations.
Ch 16
Ch 11, 15
Homework 6 Discussion
Ch 10 Problems: 12, 15, 17,
18, 20
Do Online Quiz 4 (Due 23 October, 1900 hrs)
11
12
Capital Budgeting and Investment Criteria
▪ Know and use the following investment appraisal
techniques: payback period, discounted payback
period, net present value (NPV), internal rate of
return (IRR), and profitability index; explain specific
investment decisions; identify various types of costs
such as sunk costs, opportunity costs, and other side
effects (such as social responsibility, ethical or
environmental costs).
Ch 9, 10,
11
Derivative Securities: Introduction to Options
▪ Define European options, American options,
moneyness, compute and interpret option payoffs;
explain option valuation using at least a one-period
model and factors that influence the price of
options; understand the equity portion of the
company as a call option on its total assets.
Ch 24, 25 Ch 18
Review for Final Exam
13
Ch 12, 13
Homework 7 Discussion
Ch 11 Problems: 6, 8, 9, 12,
20, 21
Homework 8 Discussion
Ch 12 Problems: 6, 8, 10, 17
Ch 13 Problems: 1, 2, 3, 4, 5
In-class Exercises
Ch 18 Problems: 1, 2, 3, 4, 7
Project Submission (6 November) and Presentation
Do Online Quiz 5 (Due 13 November, 1900 hrs)
14
Revision and Self Study
15
Final Examination (21 November 2022; Covers materials from weeks 1-13)
AoL Quiz (Same day as Final Exam)
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