University of Puget Sound
School of Business and Public Administration
BPA 315 Introduction to Financial Management
McIntyre 303 M-W-F 10:00-10:50
Professor Alva Wright Butcher
Spring Semester 2002
Office:
Phone:
FAX:
Email:
Home:
Office Hours:
Mon and Wed 11:00-12:00
Thursdays 1:30 – 3:30
and gladly by appointment
Note that I check email frequently, so
email is also a good way to
communicate.
McIntyre 111 I
253-879-3349
253-879-3156
butcher@ups.edu
206-285-3990
Required Course Materials:
1. Ross, Westerfield, and Jordan, Essentials of Corporate Finance, Third Edition,
McGraw-Hill Irwin, 2001
2. Harvard Business School cases available in course packet in bookstore
Assessing a Firm’s Future Financial Health
Clarkson Lumber Company
Investment Analysis and Lockheed TriStar
Recommended:
Subscription to the Wall Street Journal
References: Please contact me for sources that provide other explanations of the material.
Calculator: A financial calculator is required. The calculator must have functions for bond
valuation, net present valuation (NPV), internal rate of return (IRR), present value (PV), and
future value (FV). One suitable calculator is the HP10-B. It is available in the bookstore for
around $30.
Course Objectives: The key objective of this course is to develop a conceptual and pragmatic
understanding of corporate finance. The topics and assignments are designed to prepare you to
apply both theory and techniques in the “real world” of corporate finance. Note that some of
these topics, such as the time value of money, are ones that you will also find invaluable in
handling your own personal finance. Assignments include end of chapter questions and case
analyses. You will create spreadsheets to model financial problems and will prepare professional
reports of your analyses.
The course builds upon concepts covered in Elements of Applied Statistics (Math 271) and in
Principles of Financial and Managerial Accounting (BPA 205). It is assumed that you are
proficient in the use of financial data as reported in financial statements. If you are not
comfortable with these concepts, please see me for some review problems. Since the application
of financial concepts also requires proficiency in basic algebra and geometry, we will frequently
address basic mathematical concepts and techniques.
After you have successfully completed this course, you will be able to:
 Work with financial statements to evaluate financial ratios and their implications
regarding the financial strengths of weakness of a firm.
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 Use historical financial statements and assumptions about future growth to prepare
pro-forma financial statements and estimate additional financing needed to support
that growth.
 Determine the value today of cash flows to be received later.
 Evaluate the cost-benefit trade-off of costs incurred today with cash inflows expected
in the future.
 Understand the effect of compounding periods on interest rates. (What interest rate
are you really paying on that loan?)
 Understand the basic features of bonds and how they are priced.
 Estimate the fundamental price of a common stock, using the two-stage discount
model.
 Identify the relevant cash flows for a proposed investment, and evaluate a complex
proposed investment using Net Present Value, Internal Rate of Return, and Payback
Period.
 Recognize the impact of diversification, and use the Capital Asset Pricing Model to
quantify the risk-return tradeoff.
 Use financial information to estimate the required rate of return on a proposed
investment. This is known as the firm’s weighted average cost of capital.
 Have a basic understanding of the Efficient Market Hypothesis and its implications
when you are presented with a “hot tip”.
 Read financial data as reported in the Wall Street Journal and have a basic
understanding of primary versus secondary markets.
 Evaluate your “stock pick” and reflect on your “virtual” gains or losses.
Class Preparation and Participation: Preparation for class is extremely important. Prior to
class, you are expected to have read the assigned reading material. You are also expected to have
analyzed any assigned discussion problems and to be prepared to participate in the class
discussion. If for some reason you are not prepared to participate in the discussion please let me
know prior to class.
Your presence and contribution to class discussion are important. There are three categories:
present, absent with leave, and AWOL.
Support Materials: The McGraw-Hill/Irwin online learning center provides excellent learning
support www.mhhe.com/business/finance/rwj/ess3e/student_index.mhtml . You can download
the Student Problem Manual in either MAC or PC format. For each chapter, the Student Problem
Manual includes a study guide, concept tests and answers, a problem set, and detailed solutions to
the problem set. In addition, the online learning center provides the following for each chapter:
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web links, an e-learning session that reviews key points (Note that this can be rather slow to
download.), and multiple-choice quizzes that are graded online.
Self-test problems and solutions at the end of each chapter also provide excellent review material.
Also note that in general, solutions to odd numbered end-of-chapter problems are available in the
back of the textbook.
Online Course Management Platform – Blackboard
We will be using an online course management platform this semester. The key benefit is that it
provides an excellent means of communication. You will be able to download the syllabus,
homework assignments, homework solutions, sample exam problems etc. from the internet at any
time. It also provides a platform for threaded discussion. Another feature allows discussion
among group members on their group project; access is restricted to members of the group.
You can access this at coursesites.blackboard.com. During your first contact, you will need to
create an account and specify your user-id and password. (Click on “Create Account.”) If you
have other courses on Blackboard, I would suggest that you use the same id and password for all
classes. During the enrollment process, you will be asked for additional information, such as
your name, email address etc. Please begin both your first and last name with a capital letter, and
enter the other letters in lower case. I will provide you with a password so that you enroll in my
course, UPS BPA315.
Once you have enrolled in Blackboard, subsequent contacts only require that you open
coursesites.blackboard.com and click on “Login”. You will be asked for your id and password.
Homework: Homework assignments are listed on the course outline, and are due on the class
date indicated on the outline. These assignments are designed to reinforce your familiarity with
the material, to train you in the use of your financial calculator and computer spreadsheets, to
identify areas in which you may be having difficulty, and to serve as a basis for classroom
discussion.
The end of each chapter includes Critical Thinking and Concepts Review and Questions and
Problems. Most homework questions are from the end-of-chapter Questions and Problems. A
critical thinking question will have the notation CT3, i.e. question 3 under Critical Thinking and
Concepts Review. The course outline notes two categories of homework: discussion and written.
Written homework assignments will be collected at the beginning of class, and a subset of these
problems will be selected on a random basis for grading. Solutions to homework assignments
will be available after class on the online course management platform,
coursesites.blackboard.com (under Assignments).
Late homework assignments will not be accepted.
Case Analyses and Projects: Several case studies and projects will be assigned during the term.
These are utilized to enable you to: 1) practice effective communication techniques, both written
and oral; 2) engage in an active learning situation; 3) perform data interpretation and analysis; 4)
gain experience in decision making under uncertainty. They are also designed to give you an
opportunity to use an essential tool in real world business finance - the application of computer
models in financial analyses.
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Each will require a written report. Some of these reports will be short memos; others will require
more lengthy exposition. Reports must be typed, with exhibits inserted in the narrative where
appropriate, or at the end of the report. One of these assignments, the Stock Project, will be a
team project. Additional details will be available on Blackboard, the online course platform.
(coursesites.blackboard.com Check under Assignments)
Each will be discussed in detail during a regular class session. You should be prepared to
respond to specific questions, and to the comments of other students. Grades for both written
reports and class discussions will be based on content, exposition, and clarity.
Late written reports will not be accepted. Reports are due at the beginning of the class period.
Please make an extra copy for your use during the class discussion.
Exams: There will be three midterm exams and a comprehensive final. Exams will be problem
oriented, but will also include short essay questions. Exams are closed book, but you may use
one side of an 8 by 11 paper for notes and formulae.
As a general policy, makeup exams will not be given.
Extra Credit Quizzes: During the term, there will be unannounced pop quizzes. These will
consist of a few multiple choice or true false questions, and will cover material presented in the
prior one or two class sessions. As with homework problems, these are designed to reinforce the
material, and to identify problem areas. By keeping current with the material, these quizzes also
provide you with a means of earning extra credit points.
Grades:
Grades will be based on the following weights:
Three Midterm Exams
45%
Comprehensive Final Exam
25%
Projects and Case Analyses
Stock Project (8%)
20%
Accessing a Firm’s Future Financial Health (3%)
Clarkson Lumber Company (5%)
Lockheed TriStar and Capital Budgeting (4%)
Homework and Class Discussion
10%
Total
100%
Unannounced Quizzes
5% (extra credit)
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Course Outline
Wed.
1/23
Introduction to Course
Chapter 1: Overview of Financial Management
Establish the Dartboard Portfolio
Fri
1/25
Chapter 2: Financial Statements, Taxes, and Cash Flow
Homework
Register on Blackboard, the online course platform.
Discussion
Chapter 2: 1, 2, 3
Note: Please bring your financial calculator to class.
Mon
1/28
Chapter 3: Working with Financial Statements
Math Concept: Review of Algebraic Manipulation
Homework
Discussion
Chapter 3: CT2, CT3
Written
Chapter 2: 22(a,b,d)
Submit names of 3 potential firms for your stock project. Please
list firms in order of preference.
Wed
1/30
Handout on Long Term Financial Planning and Growth
Homework
Discussion
Use the information in Problem 34 of Chapter 3 to prepare a
Statement of Changes in Cash Flow for Smolira Golf.
Written
Chapter 3: 2, 34 (Calculate ratios for 2000. Use the year end
information.)
Fri
2/1
Excel tutorial
Mon
2/4
Harvard Business School Case – Written Report and Case Discussion
Assessing a Firm’s Future Financial Health
Wed
2/6
Chapter 7: The Stock Markets (Section 7.3)
Working with the Wall Street Journal
Please bring a copy of the Tuesday edition, 2/5/02, or today’s edition
Fri
2/8
Chapter 4: Introduction to Valuation: The Time Value of Money
Stock Project: Report 1 -A Profile of Your Firm
Homework
Discussion
Chapter 4: CT1, CT2, CT3, CT4, CT8
Note: We will be working with your financial calculators.
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Mon
2/11
Chapter 4: continued
Homework
Written
Chapter 4: 6, 12, 14, 24
Wed
2/13
Chapter 4: continued
Homework
Discussion
AWOL Excel Financial Forecast Problem
(Details on this problem can be found on Blackboard under
Assignments.)
Fri
2/15
Chapter 5: Discounted Cash Flow Valuation
Homework
Discussion
Chapter 5: 1,4,5
Mon
2/18
Harvard Business School Case – Written Report and Case Discussion
Clarkson Lumber Company
Please submit your Excel file for this case via the Blackboard Drop Box. Your
excel file should be named “your name Clarkson”. A file with a virus will not be
accepted, and the grade for this project will be discounted depending on the
length of the delay
Wed
2/20
Discounted Cash Flow Valuation continued
Math Concept: Continuous Compounding
Homework
Written
Chapter 5: 2, 6, 8
Fri
2/22
Discounted Cash Flow Valuation continued
Homework
Written
Chapter 5: 14,16,18
Mon
2/25
Discounted Cash Flow Valuation continued
Homework
Written
Chapter 5: 20, 55
Wed
2/27
Chapter 6: Interest Rates and Bond Valuation
Homework
Discussion
Chapter 6: CT6, 1, 2
Fri
3/1
Review: Chapters 2, 3, 4, 5
Mon
3/4
Exam1: Chapters 2, 3, 4, 5
Wed
3/6
Interest Rates and Bond Valuation continued
Homework
Written
Chapter 6: 6, 7, 8
Fri
3/8
Interest Rates and Bond Valuation continued
Working with the Wall Street Journal
Please bring a copy of the Thursday edition, 3/7/02, or today’s edition
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Mon
3/11
Chapter 7: Stock Valuation (Sections 7.1 and 7.2)
Homework
Discussion
Chapter 7: CT1, CT2, CT6
Written
Chapter 6: 19, 25
Wed
3/13
Stock Valuation continued
Homework
Written
Chapter 7: 4, 14, 16, 19
Fri
3/15
Chapter 8: Net Present Value and Other Investment Criteria
(Skip sections 8.3 and 8.5)
Stock Project: Report 2- Examine Historical Daily Returns
3/18 - 3/22
Spring Break
Mon
3/25
Chapter 8: Net Present Value and Other Investment Criteria continued
Homework
Written
Chapter 8: 10, 22
Wed
3/27
Chapter 9: Making Capital Investment Decisions
Fri
3/29
Making Capital Investment Decisions continued
Homework
Written
Chapter 9: 2, 6, 20
Mon
4/1
Making Capital Investment Decisions continued
Homework
Discussion
Investment Analysis and Lockheed Tri Star
Questions 1 and 2
Wed
4/3
Harvard Business School Case – Excel Report and Case Discussion
Lockheed Tri Star and Capital Budgeting
Please submit your Excel file for this case via the Blackboard Drop Box. Your
excel file should be named “your name Lockheed”. A file with a virus will not
be accepted, and the grade for this project will be discounted depending on the
length of the delay
Fri
4/5
Review
Mon
4/8
Exam 2: Chapters 6, 7, 8, 9
Wed
4/10
Chapter 10: Some Lessons from Capital Market History (Skip section 10.5)
Math Concept: Sample Mean and Standard Deviation
Fri
4/12
Chapter 11: Risk and Return
Homework
Discussion
Chapter 11: CT3
Written
Chapter 10: 9, 10, 17
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Mon
4/15
Risk and Return continued
Math Concept: Linear Regression and Basic Inferential Statistics
Homework
Written
Chapter 11: 4, 16, 19(Assume that CAPM is true)
Wed
4/17
Risk and Return continued
Stock Project: Report 3 – How Risky is Your Firm?
Fri
4/19
Chapter 12: Cost of Capital
Mon
4/22
Cost of Capital continued
Homework
Discussion
Chapter 12: CT 8
Written
Chapter 12: 3, 6, 15
Wed
4/24
Review
Fri
4/26
Exam 3: Chapters 10, 11, 12
Mon
4/29
Guest Speaker
Wed
5/1
Chapter 10: Capital Market Efficiency (Section 10.5)
Homework
Discussion
Chapter 10: CT9, CT10
Fir
5/3
Chapter 15: Raising Capital
Mon
5/6
Bulls and Bears Ball
Stock Project: Report 4 – Present Your Virtual Profit or Loss
Place and time to be determined
Wed
5/8
Integration and Review
Comprehensive Final Exam
The final exam will be given as scheduled by the University
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