CORPORATE FINANCE
MF 127
Boston College
Spring 2000
Tu, Th 9:00 – 10:15; 3:00 – 4:15
Mike Barry
Office: Fulton 224D
Phone: (617) 552-0238
Office Hours: M 5:30 – 6:45,
Tu 1:00 – 2:00,
Th 4:30 – 5:30 &
by appointment
email: barrymj@bc.edu
COURSE OBJECTIVES: The overall intent here is to develop students’ understanding of corporate finance.
Within that broad goal, we’ll examine four specific objectives:
1. Financial statement analysis
a. interpretation of ratios
b. generating cash budgets
c. preparing pro forma financial statements
2. Discuss issues related to a firm’s investment decision
a. capital budgeting (buying fixed assets)
b. the cost of capital
c. mergers and acquisitions
3. Discuss issues related to a firm’s financing decision (how does the firm pay for its investments?)
a. issuing new securities
b. payouts to shareholders
c. capital structure (how much debt should a firm have?)
4. Apply corporate financial theory and analytical tools covered in this course
a. solving assigned problems from the textbooks and problem sets
b. preparing case studies
MILESTONES: Below are key dates throughout the semester:
Event
First Case write-up
First exam
Second Case write-up
Second exam
Problem set
Final exam*
Approximate Date
Grade Weight
February 17
10%
February 29
20%
March 23
10%
April 13
20%
April 27
10%
May 6 (9:00 section; exam at 9:00)
30%
May 10 (3:00 section; exam at 12:30)
Notes: There will be a number of suggested problems drawn from the textbooks. While these won’t be graded,
understanding how to solve the problems will be necessary to complete the case analyses and do well on the exams.
If you can’t make it to an exam, you MUST provide me with either a note from the infirmary informing me you were
too ill to take the exam or a similar note from the Dean in order to take a make-up exam. Note that make-up exams
will likely be more difficult than the in-class exams.
*
You MUST take the final exam at the scheduled time. Please note this when making end of semester flight plans.
PREREQUISITE: MF021 (Basic Finance)
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Textbooks:
1.
Ross, S.A, Westerfield, R.W. and J.F. Jaffe , Corporate Finance, 5th edition (Irwin/McGraw-Hill 1999).
2.
Course pack of handouts available in the bookstore.
Calculator: You will definitely need a calculator for this course. The calculator must be able to calculate the
answer to yx such as (1.10434)1.222 . It also must be able to compute internal rates of return (IRR). It will make life
easier if you buy a financial calculator. Many students in the past have bought the Sharp EL-733A. It costs about
$30 at the BC bookstore or at Staples (or Service Merchandise). I’ve used the Hewlett-Packard (HP) 12-C since
1990. The HP 17BII is good, but more sophisticated than I (or likely you) need and is quite expensive. Whichever
calculator you buy, IT’S YOUR RESPONSIBILITY TO LEARN HOW TO USE IT.
Miscellaneous:
1.
2.
While I don’t take attendance, you’ll probably find it helpful to make it to class. I don’t teach this
course by following the textbooks verbatim.
If you can’t make it to class, please be sure to get the notes from a classmate or from me. Caution: my
lectures often contain explanations not spelled out explicitly in my notes. Your classmates probably
have more written down than I have.
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MF 127 COURSE OUTLINE
Note: these dates are approximate. For exams, I’ll make it explicit what you are responsible for in class.
Week of
Topics and Assignments
January 17
Ratio Analysis, Cash Budgeting
Readings
Chapter 2, Appendices 2A & 2B
Jan. 24 and Jan. 31
Cash Budgeting (concluded), Pro Forma Statements
Problems
Supplementary Problems 4 – 6
Feb. 7 and Feb. 14
Capital Budgeting
Case 1 Due February 17
Readings
Problems
Chapters 6 - 8
Supplementary Problems 7 – 16
Chapter 7, #s 6, 7, 9, 20, 27
Chapter 8, #s 13 and 14
February 21
Valuation
February 28
Efficient Market Hypothesis
Exam 1 February 29
Reading
Chapter 13
March 6
No Class – Spring Break
March 13
Security Issues
Readings
Problems
March 20
Leasing
Case 2 Due March 24
Reading
Problems
March 27
Chapter 24
Chapter 24, #s 3 and 9
Mergers and Acquisitions
Reading
Problems
April 3
Chapters 14, 19 – 20
Chapter 19, #s 10 and 11
Chapter 30
Spreadsheet problem, parts (a) and (b) only (follows M&A
lecture notes in course pack)
Chapter 30, #s 8, 9, 11
Mergers and Acquisitions (concluded)
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MF 127 COURSE OUTLINE (concluded)
Week of
Topics and Assignments
April 10
Payouts to Shareholders
Exam 2 April 13
Reading Chapter 18
April 17 and April 24
Payouts to Shareholders (concluded)
Capital Structure and Cost of Capital
No Class April 20 (Easter Break)
Problem Set Due April 27
Readings
Problems
Chapters 15 – 17
Supplementary Problems 17 and 18
Chapter 15, #s 4, 7, 16, 20
Chapter 16, # 12
Chapter 17, #s 1, 5, 13
May 1
Class held on Tuesday, May 2 only. Final exam review.
May 6
May 10
Final Exam (9:00 section at 9:00 a.m.)
Final Exam (3:00 section at 12:30 p.m.)
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