BMA 5312: Advanced Corporate Finance
Semester 2, 2008/2009
Contact Information
Instructor:
Office:
Phone:
Email:
Dr. Gurmeet Singh Bhabra
BIZ2 03-19
65166815
BIZGSB@nus.edu.sg
Office Hours: Thursdays 1 pm to 3 pm.
Course Objective
BMA 5312: Advanced Corporate Finance is designed to be a capstone class in corporate
finance. We will explore various issues in corporate finance including capital structure,
payout policy, financing policy, managerial compensation and aspects of restructuring. The
course will be a mixture of lectures and cases and you will also be exposed to academic
research. The course will require you to read a substantial amount outside class in addition to
preparing for case submissions.
Required Material:
Case material, information for handouts and documents will
be posted on the course website.
Recommended Books:
Corporate Finance: Theory and Practice, 2nd Ed.
By Ashwath Damodaran
John Wiley and Sons Inc.
Corporate Finance, 7th edition (RWJ)1
By S. A. Ross, R. W. Westerfield and J. Jaffe
Irwin/McGraw Hill
Pre-requisites:
BMA5008 (Financial management)
The textbook used in the Introductory Finance class will help you in figuring out where each
component of the course fits in. It will also allow you to review fundamental concepts that
you have seen earlier but may not recollect fully.
Assessment:
Classroom contribution to case discussions
Case summaries
Group case written report
Test
1
20%
20%
20%
40%
If you have used Brealey and Myers (BM) as your text, you may use that in place of RWJ.
Course Structure and Classroom Procedure
This course consists of two parts. In the first part, basic finance principles and techniques are
reviewed. In the second part of the course, cases are used, requiring a higher level of analysis
and business judgment. Discussion of cases is led by you and your fellow class members.
You should have access to a standard corporate finance text in order to prepare the assigned
cases effectively. Each member of the class assumes a responsibility for preparing each case
and for contributing ideas to the case discussion. To be effective, you must think the problem
through to a decision, be able to explain your analysis to classmates, and then defend your
position. Typically, there is no one right answer to a case. In many ways, the process by
which answers are sought is as important as the answers themselves.
Students are required to work in groups for the assigned cases. Groups will be formed within
the first two weeks of the semester. Working in groups improves the quality of analysis,
develops interpersonal and time management skills, and illustrates the benefits of dividing
work so that each group member contributes in the areas where that person has a relative
advantage.
Course Policies and General Information
1. Class participation will count for 20% of the overall course grade.
2. A three-hour Test will be given at the end of the term (time TBA). This will be an open
book test and will involve analysis of a finance case. This test will count for 40% of the
overall course grade.
3. Group case summaries. Each group will prepare a summary report on 5 cases (to be
assigned by the lecturer). These reports should be no more than four typewritten pages in
length (double-spaced, 12-point font) per case. Essentially, this exercise is designed to
expose you to a variety of case situations beyond the one comprehensive case analysis
that you will conduct (as a group). These summaries will be graded for written expression
and presentation and these are collectively worth 20% of the course. In preparing written
reports you should pay particular attention to the assumptions you make, the method of
analysis you employ, and the recommendations you make. The report should be readable
as a freestanding document and should make clear the nature of your qualitative analysis.
You may assume that the reader has read the case and is familiar with conceptual material
presented in the course’s textbooks and lectures. Summaries are due by 5:00 pm on the
Friday of Week 10.
4. Group case written report and presentation. Each group will be assigned a case. The
group will then prepare a written report on the case and also make an in-depth
presentation in class on the assigned date. Every member in the group has to contribute
towards the presentation. 50% of the marks for the written case report will be based on
the quality of the presentation and every presenter will be graded individually on the
presentation (only the group case report, which constitutes the other 50% of the marks for
the report, will be graded as a group).
The group case written report should be no more than ten typewritten pages in length
(double-spaced, 12-point font) plus any exhibits. The group report will be graded by the
course lecturer for both form and content.
The group case written report will be worth 20% of the overall course grade. Submission
Date: Only groups for the first four presentations will be allowed to submit their reports
in the third week of presentations i.e. week 9. From that day every group will submit the
written case report on the day of the presentation.
Class Schedule
Week
Topic/Case
1
Estimating Hurdle Rates for Firms & Projects
2
Estimating Earnings and Cash Flows
2
Investment Decision Rules
3
Investment Analysis: Project Interactions, Side Benefits and Side Costs
3
Financing Mix: Tradeoffs and Theory
4
Financing Mix: Choices and Optimal Mix
4
Dividend Policy
5
Acquisition Valuation
6
Real Options
Group Case Presentations
Cases used in the course broadly attempt to cover the following topics:
Financial analysis and forecasting
Estimating the cost of capital
Capital budgeting and resource allocation
Management of corporate capital structure
Valuing the enterprise (mergers, acquisitions, restructurings)
Setting corporate financial policy
Risk Analysis and Real Options
Week 7 :
E.I. Du Pont de Nemours and Company (1983)
Week 7:
American Home Products Corporation
Week 8:
Dividend Policy at FPL Group Inc. (A)
Week 8:
Sampa Video, Inc.
Week 9:
Marriott Corporation: The Cost of Capital (Abridged)
Week 9:
Radio One, Inc.
Week 10:
Cooper Industries
Week 10:
Interco
Week 11:
Philip Morris Companies and Kraft, Inc.
Week 11:
Laura Martin: Real Options and the Cable Industry
Week 12:
Vodaphone Airtouch’s Bid for Mannesmann
Week 12:
Pinkerton (A)
Week 13:
Review
Week 14:
Test