NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY
FACULTY OF COMMERCE
DEPARTMENT OF FINANCE
BACHELOR OF COMMERCE (HONS) DEGREE IN ACCOUNTING, RISK &
INSURANCE, ACTUARIAL SCIENCE, BANKING, FINANCE
CORPORATE FINANCE [CFI 2101]
COURSE OUTLINE 2021-2022
LECTURERS- Mr. N MUNGWINI & Mr. D MUYECHE
COURSE OBJECTIVE
This course is designed to introduce students studying for a Bachelor of Commerce (Honors) Degree, to
the corporate finance process of assembling financial resources and utilizing them in order to add value to
shareholders-the ultimate risk bearers. This is meant to be an introductory course to Corporate Finance II.
TOPIC
Overview of
Corporate
finance
CONTENT
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Introduction to
financial
markets
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Time Value of
SECTION OBJECTIVES
Introduction
Role of the Financial ManagerCorporate structure or
Organogram
Goals/objectives of the firm
The theory of the firm:
Managerial behavior, agency
problem, agency costs and
ownership structure
By the end of this topic,
students
should be able to:
 Appreciate the role of financial
managers in a firm
 Understand the ultimate goal of a
firm
 Understand the objective of profit
maximization vs. shareholder
value maximization.
 Identify possible sources of
conflict between managers and
shareholders
 Appreciate the different ways of
reconciling
the
differences
between owners
Financial MarketsClassification, role of each
market
Financial market Instruments
and their classification
Issuance of securities and
raising capital- venture capital,
IPO, Private placements, etc
Role ad function of an
organized Stock ExchangeZimbabwe Stock Exchange and
Victoria Falls Stock Exchange
By the end of the topic,
students should be able to:
 Classify financial intermediaries,
financial institutions and financial
markets.
 Identify the instruments traded in
each market
 Understand the role and functions
of a secondary market.
 Underscore the need for
technological advancement in
global financial markets
Time value of money
By the end of this topic,
Money
• Computations of Future
Value and Present value
• Annuities
• Perpetuities
• Compounding periods
• Effective annual interest
rates

Risk and
Return
Valuation of
Bonds and
other Debt
Securities
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Risk and Return of a single
asset
Risk and return of a portfolio
Portfolio selection
CAPM
Extended CAPM
Bond fundamentals and bond
valuation
Valuation of preferred stock
students
are expected to:
 Discuss the role of time value of
money in finance
 Understand the concept of FV,
its calculation for a single
amount, compounding of
interest more frequently than
annually and FV of annuities
 Review the concept of PV, its
calculation for a single amount
and determine the PV of a
mixed stream of CFs, annuity
and perpetuity
 Describe procedures involved in
determining deposits to
accumulate a future sum, loan
amortisation and finding interest
on growth rates
 Develop further aspects of
application of compounding and
discounting techniques namely
effective and nominal rates of
interest and discount, PV of an
annuity , effective and flat rates
of interest
By the end of this topic, students should
be able to:
 Understand the fundamentals of
risk and return
 Describe procedure for assessing
and measuring the risk of a
single asset
 Review the procedure to assess
and measure the risk return of a
portfolio
 Discuss the selection of the
optimal portfolio based on
Markowitz model
 Explain the CAPM as a
framework for basic risk-return
trade-off
By the end of the topic,
students
are expected to:
 Explain the basic valuation model
to value bonds and preference
shares
 Apply the basic valuation model
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
Valuation of
Ordinary
Shares
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
Gordon growth model
Application of DCF techniques
in share valuation
Capital
Budgeting
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Portfolio
Theory
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The capital budgeting process,
Basic principles of capital
budgeting
Project classification and
identification of relevant cash
flows
Independent versus mutually
exclusive projects,
Capital budgeting techniques:
net present value (NPV),
internal rate of return (IRR),
payback period (PBP),
discounted payback (DPBP).
NPV profile, comparison of
NPV and IRR methods when
evaluating independent and
mutually exclusive projects,
Sensitivity and scenario
analysis
Project sequencing and
unlimited funds versus capital
rationing.
Risk in Portfolio context
Portfolio risk & Return-(two
asset portfolio, multi-asset
portfolio)
Diversification & risk-
to debt securities
Explain YTM, its calculation and
the procedure the procedure to
value bonds that pay interest more
once in a year
Discuss the valuation of perpetual
and redeemable preference shares
By the end of the topic,
students
are expected to:
 Understand basic share valuation
under each of the three cases –
zero growth, constant growth and
variable growth
 Discuss three other approaches –
book value, liquidation value and
p/e multiples that are used to
value shares
By the end of this topic,
students
should be able to:
 Appreciate the concept of limited
financial resources
 Understand the difference
between independent projects and
mutually exclusive projects
 Appreciate the steps in the capital
budgeting making process
 Familiarize with the different
capital budgeting tools and their
application in aiding decision
making.
 Appreciate the Pros and Cons
associated with each tool
 Calculate the relevant cash flows
associated with a particular cash
flow
After completion of this topic, the
students must be able to:
 Define portfolio theory
 understand how to calculate
expected returns, variance and

CAPM
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Leveraging
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diversifiable vs. nondiversifiable risk
Efficient portfolio-efficient
frontier and optimal portfolio
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standard deviation of the twoasset portfolio
Explain margin accounts
Explain portfolio frontier
Assumptions of CAPM
Concept of Beta-calculating
beta co-efficient(regression)
Capital Market Line(CML)
Security Market line (SML)under or over-valued assets
By the end of this topic, students should
be able to:
 Use CAPM to calculate the
required return for proposed
investment
Break-even analysis
Degree of Operating leverage
and Business Risk
EBIT-EPS analysis
Degree Of Financial Leverage
Financial Risk
Degree of Total Leverage and
Total firm risk
After studying this topic, students should
be able to:
 Define leverage Understand the
degree of financial and operating
leverage
 Establish EBIT-EPS
relationships
 Explain the degree of total
leverage
RECOMMENDED READING LIST
1.
2.
3.
4.
5.
Richard Brealey et al - Principles of Corporate Finance, McGraw Hill, latest edition
Richard Pike, & Bill Neile- Corporate Finance & Investment, latest edition
Lawrence J Gitman, Principles of Managerial Finance, Harper Collins, latest edition
Weston Fred J & Copeland, Thomas- Managerial Finance, latest edition,Dryden Press International
James C Van Horne- Financial Management and Policy, Prentice Hall, latest edition