CORPORATE FINANCE
AND A TOUCH OF
RESPONSIBLE INVESTMENTS AND BEHAVIORAL ECONOMICS
Course Syllabus
Course code: SSC2009
Period: 5
Academic Year: 2022/2023
University College Maastricht (UCM)
Course coordinator: Sanne Jongen MSc.
© Sanne Jongen, School of Business and Economics, 2022-2023.
All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a
database or retrieval system, without any prior written permission of the author.
COURSE COORDINATOR
Sanne Jongen MSc, Finance Lecturer
Department of Finance, Maastricht University School of Business and Economics
In case of any questions, please send an email via s.jongen@maastrichtuniversity.nl. Check
carefully in Outlook whether you picked the right Sanne Jongen, it should say FINANCE and
not MUMC+. There is namely another Sanne Jongen.
COURSE PROFILE
Semester
Period
ECTS
Concentration
Spring
5
5
Social Sciences
PREREQUISITE
Students should have taken at least one of the following courses:
- Introduction to Business Administration (SSC2036)
- Principles of Economics (SSC1027)
- Accounting and Accountability (SSC2022)
BROAD COURSE OBJECTIVES
- You get a broad overview of the field of finance.
- You will be able to better understand financial articles in newspapers like the Financial
Times, the Wall Street Journal and the Economist.
- You will be able to apply your knowledge to understand basic financial information of the
firm or institution you will work for.
- You will deepen your financial knowledge by applying theoretical financial concepts to a
chosen listed company throughout the course period.
TARGETED COURSE OBJECTIVES
- You learn about the economics of shareholder value and the risk-return relation.
- You learn about market efficiency.
- You learn about the most important methods of valuing companies.
2
- You discern the influence of social values and corporate social responsibility on
investment decisions.
- You learn about the psychological decision-making biases of managers and individual
investors.
- You get insights into recent trends in finance research.
3
Table of Content
1 Introduction
5
2 Literature
2.1 Mandatory literature (exam relevant)
2.2 Additional interesting literature (not exam relevant)
6
6
6
3 Course Content
7
4 Course organization and schedule
9
5 Grading and Tasks
10
5.1 Determination of course grades
10
5.1.1 Individual written exam
10
5.1.2 Group assignments (company presentations)
10
5.1.3 Participation
10
5.2 Detailed Session Overview
11
Week 1, Session 1 – Lecture 1: Block opening
11
Week 2, Session 2 – Tutorial 1: Show the balance sheet and income statement of your
company
11
Week 2, Session 3 – Tutorial 2: Net Present Value (NPV), arbitrage and time value of money
12
Week 3, Session 4 – Tutorial 3: Valuing Stocks
15
Week 4, Session 5 – Tutorial 4: Pricing of risk and CAPM
17
Week 5, Session 6 – Tutorial 5: Value the stock and assess the risk/return of your company 23
Week 5, Session 7 – Lecture 2 by Dr. Roger Otten on Responsible Investing
23
Week 6, Session 8 – Tutorial 6: Score your company on Corporate Social Responsibility
24
Week 7, Session 9 – Lecture 3 by Dr. Thomas Post on Behavioral Finance.
24
Week 7, Session 10 – Tutorial 7: Recap and Exam preparation
24
4
1 Introduction
Today’s business environment is more complicated than ever. This is illustrated by financial
crises and emerging topics like climate change and corporate social responsibility which
increasingly affect corporate decision-making. The field of corporate finance deals with the
financing and investment decisions made by the management of companies in the pursuit of
shareholder wealth maximization and dealing with the preferences of stakeholders in a broader
sense. This course gives a broad overview of important issues in corporate finance and
combines insights from financial and behavioral economics. The economic side of corporate
finance deals with the maximization of shareholder wealth. Managers aim at securing the
greatest possible return in exchange for accepting the smallest amount of risk. For instance, a
company can finance itself by borrowing money from banks, by issuing bonds or through issuing
equity at the stock market. These types of decisions influence the expected return and risk of
the company.
Traditional economics assumes that managers and investors are rational, self-interested
people. However, there is a large body of evidence from social psychology and behavioral
economics that people often act irrationally and behave pro-socially by taking the social impact
of (investment) decisions into account. This course also shows how decision-making biases
managers and investors in their financial decisions and how social preferences of shareholders
and stakeholders impact corporate social responsibility. Investors in both equity and debt
claims of these companies have (heterogeneous) social preferences. Increasingly, large
institutional asset owners such as public pension funds exert pressure on the management of
companies with the purpose to increase the governance quality, and the environmental and
social performance of their investments.
The course is largely based on real-life company cases that we discuss in an interactive manner
during the tutorial groups.
Looking forward to meeting you and I hope you will enjoy the course!
Sanne Jongen
5
2 Literature
2.1 Mandatory literature (exam relevant)
-
Berk, J. & DeMarzo, P. (2021). Corporate Finance (5th global edition). New York:
Pearson Education Limited. It is recommended to buy a copy of the book (or e-book),
especially for students who are thinking about pursuing a Master in Finance or
Financial Economics. Despite the fact that we will only study (parts of) eight chapters
(1, 2, 3, 4 (4.1 up to and including 4.5), 5 (5.1 only!)) and 9-11 excluding appendices),
the other chapters that are not exam relevant give a great background when working
on the assignments during the course. The book also gives many examples in small
exercises that explain the content very well.
-
Edmans, A. (2021). Grow the Pie: How Great Companies Deliver Both Purpose and
Profit–Updated and Revised. Cambridge University Press. Chapters 1-3.
-
Scientific articles (only introduction and conclusion):
t.b.d.
2.2 Additional interesting literature (not exam relevant)
Check out these websites as they show my Finance colleagues’ research interests that are
closely connected to the guest lecture topics in the last few weeks of this course:

www.sustainable-finance.nl. ECCE (the European Centre for Corporate Engagement
based at the Maastricht University School of Business and Economics) is the hub for
research and education on sustainable investing, corporate governance, sustainable
banking, and sustainable real estate.

www.icpmnetwork.com. ICPM (International Centre for Pension Management) is a
global network of pension organizations that focuses on fostering long-term investing,
strengthening governance of pension investments, and improving design and
governance of pension schemes.

Regularly have a look at the websites of the Economist, the Financial Times, and the Wall
Street Journal. Maybe you see interesting articles that deal with the topics we discuss in
our tutorials.
6
3 Course Content
The first part of the course focuses on the basics of corporate finance, with topics such as the
functioning of capital markets, financial statement analysis, calculating the net present value of
a project or investment, the risk-return trade-off and the pricing and valuation of companies
(stocks). The second part of the course also draws on knowledge from other fields that relate
to important issues in (corporate) finance. We study how behavioral biases influence investors
and managers in their decision-making. Similarly, we discuss how extrinsic rewards such as
bonuses might crowd out intrinsic motivation. These factors can have a large influence on major
financial decisions and the returns achieved by investors. Moreover, we focus on the way social
values influence investment decisions and we specifically concentrate on the global trend of
socially responsible investments.
The course has three main building blocks:
1. Plenary Lectures (3 x)
In the opening lecture (April 13th), we will create subgroups (three subgroups per tutorial
group). Each subgroup picks a publicly listed company. I advise you to choose a well-known
blue-chip company as it will be easier to find relevant information. Alternatively, choose a
company that is in the picture in the newspapers right now (for example because of fraud or
climate change related topics). Note that the companies of each subgroup need to be from
different economic sectors (a few hints: understanding the balance sheet of a financial
institution is less intuitive and possibly a bit boring, so it is wise to choose a company that pays
dividends and makes profits ….). During the course, you will prepare and present four company
assignments with the members of your subgroup. The course also contains two topic lectures
on Responsible Investments (May 11th) and Behavioral Finance (May 22th).
2. Tutorial - Literature sessions (4 x)
A selection of chapters from the Berk and DeMarzo textbook and academic articles will be the
discussed in the tutorial sessions. Because of the small-scale nature of the course, each session
will be highly interactive. I expect you all to contribute significantly to the tutorial group
7
discussion and assume that you prepare these sessions well. Most sessions will be a blend of a
tutorial group session with extensive discussions and additional explanation of the literature.
Furthermore, the sessions focus on practical implications of the study material. Please read the
literature before the relevant session and prepare the learning goals / exercises.
3. Tutorial - Company assignment presentations (3 x)
To apply the knowledge from the chapters and articles, your subgroup will present and discuss
information on your company to the tutorial group. For instance, if we discuss the balance sheet
in the tutorial, your subgroup will present and discuss the balance sheet of the company you
track throughout the course.
As an additional service to students, chapter specific presentations (chapters 3, 4, 9, 10, 11) are
shared via Canvas.
8
4 Course organization and schedule
Week
Session
Topic
Datum
1
1
Lecture 1: Block opening (plenary) (Chapter 1, 2)
Thu 13 April
2
2
Tutorial 1: Company presentations on
Mon 17 April
Assignment 1: Show the balance sheet and income
statement of your company (Chapter 1, 2)
2
3
Tutorial 2: Literature discussion about Net Present
Thu 20 April
Value (NPV), arbitrage and time value of money
(Chapter 3, 4)
3
4
Tutorial 3: Literature discussion about valuing stocks
Mon 24 April
(Chapter 9)
4
5
Tutorial 4: Literature discussion about pricing of risk
Thu 4 May
(Chapter 10) and Capital Asset Pricing Model (CAPM)
(Chapter 11)
5
6
Tutorial 5: Company presentations on
Mon 8 May
Assignment 2: Value the stock and assess the
risk/return of your company
5
7
Lecture 2: Guest lecture by Dr. Roger Otten (plenary)
Thu 11 May
6
8
Tutorial 6: Company presentations on
Mon 15 May
Assignment 3: Score your company on Corporate
Social Responsibility (CSR)
7
9
Lecture 3: Guest lecture by Dr. Thomas Post (plenary)
Mon 22 May
7
10
Tutorial 7: Recap and Exam preparation
Thu 25 May
8
Exam
2-hour written Exam at UCM via Testvision
Thu 1 June
13.30-15.30
9
5 Grading and Tasks
5.1 Determination of course grades
There are three grading elements in the course:
1. Individual written exam (60%)
2. Group assignments: 3 x company presentations (30%)
3. Participation in tutorial group discussion and plenary sessions (10%)
To pass this course, the overall course grade must be 5.5 or higher and the exam grade must be
5.5 or higher. The exam is based on the material covered in the course. This comprises the
mandatory book chapters, the academic articles and the material from the lectures, all tutorials
and the guest lectures.
5.1.1 Individual written exam
The written exam will take place on Thursday June 1st, from 13.30-15.30, at UCM via Testvision.
The exam will consist of questions about the literature, tutorial sessions and guest lectures.
More information regarding the exam will be shared in due time. The last tutorial session will
be a rehearsal and Q&A session to help you prepare for the exam.
There will be a resit opportunity for the final exam. Depending on the amount of resits, the resit
might take the form of an oral exam.
5.1.2 Group assignments (company presentations)
The assignments have to be prepared and delivered in subgroups. The deliverable will be a 15
minute presentation. For each assignment the subgroups will receive one grade which will be
based on the content of the presentation as well as the presentation delivery quality. Not all
members have to present each time. Share the presentation workload efficiently. Every student
has to present at least 1 time.
5.1.3 Participation
This course has a minimum attendance requirement of 85%, which means that you have to be
present in at least 8 of the 10 sessions. You are expected to participate actively in the different
10
sessions. The participation grade is based upon your overall participation in the course. This
includes the company presentations, the (extra) articles and insights you bring to the tutorial
group and the contribution and feedback you give to the presentations of others / the guest
lectures. Quality rather than quantity is the main criterion for participation grades.
5.2 Detailed Session Overview
Week 1, Session 1 – Lecture 1: Block opening
This session will introduce the course and the topic of corporate finance and specifically zoom
into chapter 1 and 2. During this session, subgroups will be formed and each subgroup chooses
a company they prefer. So please all be present! During the course, the subgroup will follow
this company, study the balance sheet, its stock price, breaking news etc. We will use the
students’ company presentations to get a practical application of the book chapters and
articles.
Learning goal:
Understanding the basics about the organization of firms and understanding
financial statements of firms
Literature:
Chapters 1 and 2 of Berk and DeMarzo
The following topics will be the main focus of this session:
-
Four major types of companies
-
Ownership vs. control of corporations
-
Basics of the stock market
-
Balance sheet
-
Income statement
-
Financial statement analysis
Week 2, Session 2 – Tutorial 1: Show the balance sheet and income statement of your
company
Learning goal:
Get practical insights into financial metrics reported by companies.
Literature:
Chapters 1 and 2 of Berk and DeMarzo
Assignment 1:
Present the analysis of your company to the class. Discuss at least the following (but not
restricted to these) items:
11
1. Interpret the most important items of the balance sheet and income statement of your
company and compare these to three most closely related companies in the same
industry or sector.
2. What are the total assets of your company and what are they mainly composed of?
3. How do they compare to other firms in the same industry?
4. What are the total liabilities and stockholders’ equity of your company and what are
they mainly composed of?
5. How do they compare to other firms in the same industry?
6. How do the earnings per share, Return on Equity (ROE), and Price-Earnings-Ratio (PE
ratio) compare to that of other firms in the industry and what are the most important
reasons for these differences?
7. Give an overview of the most important (financial) news surrounding your company.
Prepare the analysis in an interactive 15-minute PowerPoint document that you will present in
class. Upload your PowerPoint via Assignments on Canvas before the start of your tutorial (one
upload per subgroup). After the presentation, fellow students as well as the tutor will provide
feedback on the presentation (content and style).
Hint: You might want to have a look at Google Finance and FactSet (access via library) to find a
broad set of company data.
Week 2, Session 3 – Tutorial 2: Net Present Value (NPV), arbitrage and time value of money
Learning goal:
Understand the concepts of Net Present Value, arbitrage and time value of
money
Literature:
Chapters 3 and 4 (4.1 up to and including 4.5) and 5 (only 5.1!) of Berk and
DeMarzo
Discussion:
This session introduces the most important tool that is used to make
investment decisions. This concept is the so-called Net Present Value (NPV)
rule and it involves discounting future cash flows to allow the comparison of
Euros today with Euros in the future. This NPV rule is the foundation for
evaluating projects and the valuation of assets (and hence companies).
12
Financial assets are priced in such a way that it is impossible to make a riskfree profit from exploiting mispricing in these assets, which is the idea of
arbitrage. We will discuss arbitrage and the law of one price. The law of one
price is used to derive a central concept in financial economics: the time value
of money. We will learn how to value a stream of future cash flows and learn
a few shortcuts for computing the NPV of various types of cash flows.
Below you will find several learning goals and exercises, which have to be prepared at home
prior to the tutorial. You can do this on your own or together with other students. The outcomes
of these learning goals and exercises will be discussed during the tutorial.
Learning goals
1. How can we compare costs and benefits when cash flows occur at different points in
time, are quoted in different currencies, or may have different risks associated with
them? What are the finance tools to express all costs and benefits in common terms?
2. What is the Valuation Principle?
3. What is the concept of net present value (NPV)? And what is the NPV decision rule?
4. What is the Law of One Price?
5. What is arbitrage?
𝐶
𝑡
6. Explain the following base formula to calculate the present value: 𝑃𝑉 = (1+𝑟)
𝑡.
7. Explain the following terms in your own words and by means of a formula: annuity,
perpetuity, growing annuity, and growing perpetuity.
8. Explain the difference between EAR and APR and why it is relevant for the sake of e.g.
annuity calculations.
Exercises
Please visualize the timing of cash flows by means of a timeline like they do in the book when
you have to calculate the present value or net present value of a stream of cash flows.
1. NPV to evaluate Real vs. Financial investments
13
Part A: Real investments
Johan is the new CFO of Omega, a high tech company that produces tools that can be used as
inputs for high tech machines. On his first working day he is asked to analyze the following
investment project. Omega has the opportunity to start a new line of production by developing
a machine that fabricates screws made from an ultralight metal. The machine costs €5,000 and
has an economic life of five years (start counting from next year on). After five years the residual
value of the machine will be €500. Johan expects that sales will amount to 10,000 screws per
year over the lifetime of the machine. One hundred screws cost approximately €2 and have an
expected market price of €10. The risk free interest rate is equal to 3%.
Assume that all cash flows take place at the end of each year. Depreciation costs do not have
to be taken into account. Should the investment project be undertaken?
Part B: Financial investments
Joan is the new portfolio manager of a small mutual fund. On her first working day she is asked
to analyze the stock of company Omega. The company is listed at the NASDAQ in New York, as
the firm is relatively young and characterized by high expenses for innovation (R&D). Omega
has 10,000 shares outstanding and the current market value is equal to €1,000,000. Joan has to
consider an investment of €10,000 in this stock. The mutual fund intends to keep the shares in
their portfolio for four years (start counting from next year on) and to sell them at the end of
this period. Joan forecasts next year’s dividend per share to be equal to €4 with a yearly growth
rate of 2% for the remaining 3 years. This year’s dividend has been paid out already before Joan
considered this company. The price of the stock is expected (forecasted) to be around €160 at
the time the shares will be sold. The risk-free interest rate is equal to 3%. Assume that all cash
flows take place at the end of each year. Should Joan buy shares of Omega?
2. Retirement saving
You are saving for retirement. To live comfortably, you decide that you will need $2.5 million
dollars by the time you are 65. Suppose today is your 30th birthday, and you decide, starting
today, that on every birthday, up to and including your 65th birthday, you will deposit the same
amount into your savings account. Assume an interest rate of 5 percent. What is the amount
14
that you must set aside each year on your birthday to make sure you end up with a value of
$2.5 million?
3. Mortgage loans
Mork and Mindy want to buy a house of €500,000. After screening their creditworthiness, the
bank decides to provide them with a €300,000 loan. The mortgage contract further stipulates
that the mortgage loan must be paid back over 20 years in equal amounts. The mortgage
interest rate equals 2% on an annual basis. What amount do they have to pay back to the bank
annually?
4. Bequests
A rich relative has bequeathed you a growing perpetuity. The first payment will occur in one
year and will be $2000. Each year after that, on the anniversary of the last payment you will
receive a payment that is 8% larger than the last payment. This pattern of payments will go on
forever. If the interest rate is 15% per year, what is today’s value of the bequest? What is the
value of the bequest immediately after the first payment is made?
5. Company valuation
You work for a pharmaceutical company that has developed a new drug. The patent on the drug
will last 17 years. You expect that the drug’s profits will be $4 million in its first year and that
this amount will grow at a rate of 6% per year for the next 17 years. Once the patent expires,
other pharmaceutical companies will be able to produce the same drug and competition will
likely drive profits to zero. What is the present value of the new drug if the interest rate is 8%
per year?
Week 3, Session 4 – Tutorial 3: Valuing Stocks
Learning goal:
Understand how you can value stocks using finance models.
Literature:
Chapter 9 of Berk and DeMarzo
Discussion:
One of the most fundamental ideas in the field of (corporate) finance is asset
pricing. In this session we deal with valuation of stocks. In theory this is simple:
the value of a stock equals the present value of all future cash flows. But, how
to determine future cash flows? The annual report of the company can be of
15
great help. Accounting figures are sometimes used to forecast cash flows. We
will discuss various methods of valuing stocks.
Below you will find several learning goals and exercises, which have to be prepared at home
prior to the tutorial. You can do this on your own or together with other students. The outcomes
of these learning goals and exercises will be discussed during the tutorial.
Learning goals
1. What techniques are there to value Stocks?
2. Discuss the different techniques
3. Why would you assess stock prices if they you can observe traded prices in newspapers,
or on online sources? Does the law of one Price have any implications?
Exercises
1. Determining Growth Rate
Franklin Enterprises’ common stock is currently trading for $25.00 per share. The stock is
expected to pay a $2.50 dividend at the end of the year and the Franklin Enterprises equity cost
of capital is 14 percent. What is the expected growth rate of Franklin Enterprises, if the dividend
payout rate is expected to remain constant?
2. Equity Investment Opportunity
Lincoln Corporation is expected to pay a dividend of $1.40 per share at the end of this year and
a $1.50 per share at the end of the second year. You expect Lincoln’s stock price to be $25.00
at the end of two years. The appropriate equity cost of capital is 10 percent.
a) What is the price you would be willing to pay today for a share of Lincoln stock?
b) Suppose you plan to hold Lincoln stock for one year.
i) What is the price one would expect to be able to sell a share of Lincoln stock for
in one year?
ii) What is the capital gain rate from holding Lincoln stock for the first year?
16
iii) What is the dividend yield from holding Lincoln stock for the first year?
iv) What is the total return from holding Lincoln stock for the first year?
3. Applying the dividend discount model
Proctor and Gamble paid an annual dividend of $1.72 in 2009. You expect P&G to increase its
dividends by 8% per year for the next five years (through 2014), and thereafter by 3% per year.
If the appropriate equity cost of capital for Proctor and Gamble is 8% per year, use the dividenddiscount model to estimate its value per share at the end of 2009.
Week 4, Session 5 – Tutorial 4: Pricing of risk and CAPM
Learning goal:
Understand the pricing of risk of financial investments and the CAPM, the
most widely used asset pricing model in finance
Literature:
Chapters 10 and 11 of Berk and DeMarzo
Discussion:
The idea of arbitrage implies that investors cannot make a risk-free profit
from exploiting mispricing in assets. Therefore, one can only make a profit
by taking more risk and is thus confronted with a risk-return trade-off.
However, investors can gain by diversifying away unsystematic risk that is
specific to a certain company, by “not putting all eggs in one basket”. Of all
the different models to value stocks, the Capital Asset Pricing Model (CAPM)
is the most widely used model. The key parameter of the model is the socalled “beta”. We will discuss the advantages and drawbacks of the model
and see how it is applied in practice.
Below you will find several learning goals and exercises, which have to be prepared at home
prior to the tutorial. You can do this on your own or together with other students. The outcomes
of these learning goals and exercises will be discussed during the tutorial.
17
Learning goals
Consider the Capital Market Line graph for questions 1-5
1. What do the curbed line and the straight line represent?
2. What is risk here?
3. What does the tangency point S represent?
4. Where can we situate stocks and large diversified portfolios in this graph?
5. Can the graph explain how risk is rewarded in financial markets?
18
Consider the Security Market Line graph for questions 6-12
6. What are the basic assumptions of the CAPM?
7. What is risk here?
8. What does the (straight) line represent?
9. What does the Market portfolio represent?
10. Where can we situate individual stocks and large diversified portfolios in this graph?
11. Can the graph explain how risk is rewarded in financial markets?
12. Discuss the cases β<0, β=0, β=1, β>1 and what it implies for the expected return and
systematic risk of these risky securities. Can you find examples of companies in the book
(or the web) for each value of β?
Exercises
1. Historical return and standard deviation of individual stocks
The last four years of returns for stock ABC are as follows:
Year
1
2
3
4
Return
-4.4%
27.8%
11.6%
3.9%
19
Calculate the average annual return and standard deviation.
2. Expected return and standard deviation of individual stocks
Probability
40%
20%
20%
10%
10%
Return
-120%
-85%
-40%
-30%
1000%
The table shows the one-year return distribution of stock DEF. Calculate the expected return
and standard deviation of the return.
3. Expected return and standard deviation of portfolios
A hedge fund has created a portfolio using two stocks. It has shorted $36,000,000 worth of
Oracle stock and has purchased $95,000,000 of Intel stock. The correlation between Oracle’s
and Intel’s returns is 0.65. The expected returns and standard deviations of the two stocks are
given in the Table below:
Expected return
Standard deviation
Oracle
12.38%
46.28%
Intel
14.42%
38.61%
Calculate the expected return and standard deviation of the hedge fund’s portfolio.
4. Determining the Risk Premium
Suppose Autodesk stock has a beta of 2.1, whereas Costco stock has a beta of 0.75. If the riskfree interest rate is 5.5% and the expected return of the market portfolio is 14%, what is the
expected return of a portfolio consisting of 70% Autodesk and 30% Costco stock, according to
the CAPM?
20
Consider the graph depicting the Capital Market Line (CML) and Security Market Line (SML)
below.
Assets A, B, M and rf are shown on the graphs above. Asset M is the market portfolio and rf is
the risk-free yield on government bonds, whereas  reflects the return.
Question 5-9 are questions about the graphs above:
5. Which of the below statements is false?
a) Asset A has the same systematic risk as asset B.
b) Asset A has more total variance than asset B.
c) Asset B has zero idiosyncratic risk. Asset B must be a portfolio of half the market
portfolio and half government bonds.
d) Asset A has the highest Sharpe ratio, which is defined as the slope of the capital
market line (CML) from the government bonds through the asset on the graph of
expected return versus total standard deviation.
21
6. What is the beta of asset B?
a) 0.25
b) 0.4
c) 0.5
d) 1.0
7. Imagine there exists another asset, namely asset C. Asset C has a beta that equals 1.75,
what is the expected return of asset C?
a) 13.75%
b) 15.00%
c) 17.50%
d) 10.00%
8. Which one of the below statements is correct?
a) Asset A is undervalued
b) Asset B is overvalued
c) Asset A is overvalued
d) Asset B is undervalued
9. Which one of the below statements is correct?
a) Asset B’s risk profile mainly consists of firm-specific risk.
b) Asset A’s risk profile only consists of market risk.
c) Asset A’s risk profile consists of firm-specific and market risk.
d) Asset B’s risk profile consists of firm-specific risk and market risk.
22
Week 5, Session 6 – Tutorial 5: Value the stock and assess the risk/return of your company
Learning goal:
Learn to apply stock valuation techniques to your company and to calculate
and interpret risk/return figures
Assignment 2:
-
Present a history of the stock price of your company, the beta, the trading volume and
other information you find relevant.
-
Calculate the current value of your company with the dividend discount model with
constant dividend growth and with the valuation based on comparable firms method
(hint: P/E ratio is most widely used). Compare the two valuation methods with each
other and with the actual stock price of your company.
-
Compare the beta of your company to that of 5 other companies. Interpret the
differences.
-
Calculate the Sharpe Ratio for your company and compare this to three other companies
in your industry. Which time period did you use and why?
Prepare the analysis in an interactive 15-minute PowerPoint document that you will present in
class. Upload your PowerPoint via Assignments on Canvas before the start of your tutorial (one
upload per subgroup). After the presentation, fellow students as well as the tutor will provide
feedback on the presentation (content and style).
Week 5, Session 7 – Lecture 2 by Dr. Roger Otten on Responsible Investing
Learning goal:
Understand
how
institutional
investors
integrate
corporate
social
responsibility (CSR) into their investment strategies.
Literature:
Chapters 1-3 from Edmans + T.B.D.
Discussion:
This guest lecture will be given by Dr. Roger Otten who is both an assistant
professor at the School of Business and Economics (SBE) at Maastricht
University as well as Senior Policy Advisor Investments at ABP Pension Fund
(largest Dutch Pension Fund). He conducts research on a wide range of
investment related topics. For instance, the impact of ESG on risk and return,
mutual funds, active/passive investing, manager selection and style analysis.
23
Week 6, Session 8 – Tutorial 6: Score your company on Corporate Social Responsibility
Learning goal:
Learn to analyse the CSR efforts of a company.
Literature:
Chapters 1-3 from Edmans, company information and knowledge gathered
during the guest lecture of Dr. Roger Otten.
Assignment 3:
-
Present an appealing summary of the CSR report of your company (if any) or
other sustainability / responsibility issues important for your company.
-
Did your company have any environmental or corporate governance
scandals? What was the reaction of the stock market? How did the company
respond? The longer the history, the more you will have to say….!
-
Do you see a development in the quality of the company’s CSR report (quality
and quantity) throughout the last years?
-
What else do you want to share about the company?
Prepare the analysis in an interactive 15-minute PowerPoint document that you will present in
class. Upload your PowerPoint via Assignments on Canvas before the start of your tutorial (one
upload per subgroup). After the presentation, fellow students as well as the tutor will provide
feedback on the presentation (content and style).
Week 7, Session 9 – Lecture 3 by Dr. Thomas Post on Behavioral Finance.
Learning goal:
Get an introduction into the field of behavioral finance
Literature:
T.B.D.
Discussion:
This guest lecture will be given by Dr. Thomas Post who is an associate
professor at the School of Business and Economics (SBE) at Maastricht
University. As a Behavioral Scientist, he researches the psychology of financial
decisions and nudging. He specializes in: Retirement Decisions, Annuitization
Decisions, Investor Behavior and Pension Communication
Week 7, Session 10 – Tutorial 7: Recap and Exam preparation
During this last session we will recap materials that are covered throughout the course. Make
sure to bring any questions that you have to class such that we can discuss them.
24