UNIVERSITY OF SOUTHERN CALIFORNIA
MARSHALL SCHOOL OF BUSINESS
CORPORATE FINANCIAL STRATEGY
FBE 432
Monday, Wednesday 4:00 - 5:50 p.m.
HOH 2
Spring 2014
Please Use Blackboard
Duke K. Bristow, Ph.D.
Office: ACC 301C
Voice/Fax (213) 740-6513/ (213) 740-6650
Office Hours: 10:00 – 11:00 a.m. MW and by appt.
Email: dbristow@usc.edu
This course is modeled closely on similar courses taught by Profs. Dietrich and Ozbas - both of
USC. They are thanked for the use of their syllabi from which this syllabus comes. You may not
record the class without my prior written permission.
COURSE OBJECTIVES
The primary objective of “Corporate Financial Strategy” is for students to understand the
implications of financial theory in real situations. To stimulate your learning and class
discussion, we will utilize three sources of real situations: formal cases (most from HBS), the
real-life business experiences of the students and the professor, and current news from the Wall
Street Journal (and related business publications). A primary teaching objective is to improve
your ability to analyze and to communicate, simply and clearly, the implications of your analyses
to an informed audience. These audiences include Boards of Directors, CEOs, CFOs, Investment
Bankers, Commercial Bankers, Venture Capitalists, Lawyers, Accountants, Regulators, etc. A
second objective is for students to appreciate the demands and opportunities of pursuing careers
in different functional areas of finance, such as corporate financial management, commercial
banking, investing and investment banking, professional services and regulation. The course
outline is organized around specific finance functions, like corporate finance, treasury,
controllership, investment and commercial banking and venture capital investment, to emphasize
the different finance functions. A final objective is for students to refine and expand specific
skills and use of financial analytical tools in a real-world context, especially current events.
At the conclusion of FBE 432, hard-working students will be able to:
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Value companies and link capital structure to valuation;
Analyze motivations for mergers and acquisitions;
Understand issues from bank loans to venture-capital financing;
Appreciate the significance of ownership structure on value and performance;
Relate business and financial strategies using sustainable growth models;
Assess strategic factors affecting corporate investment;
Compare alternative sources of financing in international markets;
Use derivatives (e.g. futures, options, and swaps and others) to manage risk;
Integrate shareholder wealth creation in formulating corporate decisions.
PREREQUISITES
The basic requirement for “Corporate Financial Strategy” is BUAD 306, “Business Finance.” It
is assumed that students are thoroughly familiar with the contents of BUAD 306 and the assigned
text. FBE 421, “Financial Analysis and Valuation,” and other advanced courses in finance are
highly recommended as preparation for FBE 432.
REQUIRED AND RECOMMENDED READINGS
1. Higgins, Analysis for Financial Management, 10th revised ed., Irwin, McGraw-Hill (optional)
2. FBE 432 Case Reader [CR] available at the USC bookstore. (required)
3. Ross, Westerfield and Jordon, Essentials of Corporate Finance, 7th or 8th ed., Irwin, McGrawHill (whatever you used in in BUAD 215x or 306)
(It is acceptable but not recommended to use an older edition of the book. You are required to
know the differences in chapters and homework problems.)
Recommended background readings for class discussion and case preparation are provided in the
course schedule in the MBA-level text, Corporate Finance by Ross, Westerfield, and Jaffe, 8th
edition (RWJ). This best-selling text is similar to basic finance texts used at other business
schools (e.g. Brealey and Myers, Principles of Corporate Finance) and is the graduate-level text
corresponding to the book used in BUAD 306 (Fundamentals of Corporate Finance by Ross,
Westerfield, and Jordan, 8th edition). Students may review subjects in corresponding chapters of
texts other than RWJ if they choose. Finance majors at the Marshall School will benefit from the
more extensive and higher-level treatment of subjects in RWJ and I recommend they consider
using the MBA level text as a source for background reading in this course and as a reference for
other finance courses. Students are expected to follow business developments reported in the
business press, especially the Wall Street Journal (WSJ), and it is highly recommended that
students also read other periodicals, especially The Economist, Forbes or Fortune magazines.
You are expected to read WSJ before each class and be prepared to discuss What’s Newscolumns. If you are not interested in how current events impact corporate finance you should not
take this course. No one may sign you in except yourself; signing others in is cheating and will
not be tolerated. The class is taught in a discussion with the students being active participants. If
you don’t plan to come prepared please drop the course. You should post your short bio and an
updated resume on Blackboard by the end of the second week of classes.
STUDENT DISABILITIES
Any student requesting academic accommodations based on a disability is required to register
with Disability Services and Programs (DSP) each semester. A letter of verification for approved
accommodations can be obtained from DSP. Please be sure the letter is delivered to me as early
in the semester as possible. DSP is located in STU 301 and is open 8:30 a.m. - 5:00 p.m.,
Monday through Friday. The phone number for DSP is (213) 740-0776.
ELECTRONIC RESOURCES
FBE 432 has a course website on Blackboard. Using the discussion board in a productive fashion
will count toward class participation. Post thoughtful questions and answer others’ postings to
earn class participation credit. Some course materials are distributed through Blackboard. The
website may also contain links to useful financial information and data sources available on the
Internet. At times, I will also distribute materials and notify students through class discussions.
COURSE ORGANIZATION
Case discussions are scheduled to illustrate different finance functions. Lectures and
recommended readings covering some important issues and relevant material for each case will
precede the case assignments. Students in the class will be formed into groups of four or five
students after enrollment has stabilized to work outside of class to discuss, analyze, and write
group case memoranda. Students as individuals must also hand in write-ups for at least two
cases. Some cases do not require write-ups but students must be ready to answer questions and
discuss issues raised by these cases during the class discussion. I will distribute some questions
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for some cases to provoke thinking but these questions are not to be taken literally or as guides to
case solutions: the case analysis should be a coherent assessment of these and other issues.
All written case analyses must include a cover sheet listing the group members (alphabetically by
last name) for group write-ups or student’s name for individual write-ups, and date and the case
name. Write the analysis like a memo to a key decision-maker assuming that the reader is
financially sophisticated. Stick to the finance issues raised by the case, i.e. do not review a
corporation’s business or history.
Case memoranda should consist of analysis and
recommendations limited to one page typewritten in length. An appendix may contain one or two
pages of graphs, spreadsheets, or data, which are expected to make the case analysis clearer. No
credit will be granted for a case handed in after the beginning of the class; students should retain a
copy of their write-ups for use during the class discussion. BRING AT LEAST TWO COPIES to
class – hand in one and keep one for your use (and one each for other group members).
This class is likely to be the most work of any finance class you have taken. Case analysis is
time consuming and several readings of the case will be necessary. Students should allow plenty
of time to survey the case contents, digest case facts, and analyze issues raised. You may not be
able to identify a single theme or issue: cases may involve marketing and accounting and other
business disciplines as well and financial issues. Students should focus only on the financial
implications of business problems described in the case. There is sometimes no single right
answer to a case and none will be distributed. Analyses and discussion must be clearly related to
the corporate financial strategy issues in the case.
COURSE GRADING
The grade will be based upon class attendance and participation there will be case 5 write-ups
(collected at random), a first and a second examination. Two individual case preparations and
three group case preparations must be handed in before the case discussion for credit. These will
be called for before class begins and will be collected on random dates. Therefore, you must
prepare for each class because it may the one that is collected. There are no make up cases or
exams. Course grading will be based on the following weights:
Class Attendance & Participation
Blackboard & Quizzes
Case Analyses
Individual write-ups
Group write-ups
First (20) and second exams (30)
Total
10%
10%
30%
10%
20%
50%
100%
Class participation will be based on students’ ability to respond to cold-call questions (on a
random basis). Zero credit is given when a student is called upon and is absent. Good responses
will advance the discussion, not merely demonstrate attendance in class. There is no reward for
talking at length or repeating my or others comments. In this class, the truth is rewarded: If you
do not know saying “I do not know” gets higher credit than talking for 2 minutes and
demonstrating you have no idea what is being discussed. In addition, class participation will be
based on the general quality of a student’s contribution to the class discussion, their contributions
to the Blackboard discussion boards and the overall learning experience.
The individual and group case write-ups will be graded on brevity, clarity, and persuasiveness of
the written presentation. Each will be communicated via a formal letter of transmittal which
includes the summary action or your conclusion in one to three sentences. Grades will be check,
check plus, or fail. Case notes will not be distributed. If you are uncomfortable with the case
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method including cold calling you should not take this course. Individual team member’s grade
for the group case write-ups may be adjusted according to individual team member’s contribution
as determined by a peer evaluation form which may be used at the end of the semester.
Preliminary COURSE SCHEDULE subject to change
Topic
Dates
Readings
Week 1
Jan 13
Jan 15
Course Overview
Butler Lumber I (Individual)
Higgins Chap. 1, 2
Higgins Chap. 3
Week 2
Jan 20
Jan 22
Martin Luther King Day – no class
Butler Lumber II (Individual)
Higgins Chap. 4
Week 3
Jan 27
Jan 29
Lecture: Capital Structure I
Lecture: Continued - II
Week 4
Feb 3
Feb 5
UST Inc (Individual)
Massey-Ferguson, 1980 (Group)
Week 5
Feb 10
Feb 12
Lecture: Capital Structure III
MCI Communications Corp., 1983 (Group)
Week 6
Feb 17
Feb 19
President’s Day – no class
Lecture: Dividend Policy
Week 7
Feb 24
Feb 26
Intel Corporation, 1992 (Individual)
Lecture: Risk Management
Week 8
Mar 3
Mar 5
American Barrick Resources Corporation (Group)
Sample First Case Exam
Week 9
Mar 10
Mar 12
Capital Market History
First Exam
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RWJ on Capital Structure
RWJ on Dividends
RWJ on Risk
FST HBR 1994
RWJ on Capital Markets
4
Week 10
Mar 17
Mar 19
Spring Break – no class
Spring Break – no class
Week 11
Mar 24
Mar 26
British Satellite (Group)
Midterm Exam Review
Week 12
Mar 31
Lecture: Valuation
Apr 2
Dixon Corp Session 1 (Individual)
Week 13
Apr 7
Apr 9
Readings, RWJ on
valuation
Dixon Corp Session 2 (Group case with group
presentations)
Discussion of Real Options and introduction to the
MW Petroleum Corporation (A) (group case)
Week 14
Apr 14
Apr 16
MW Petroleum Corporation (A) (Questions 1 to 5)
MW Petroleum Corporation (A) (Questions 6 to 8)
Week 15
Apr 21
Apr 23
Lecture: Valuing a Company
The Southland Corporation (A) (Group)
Week 16
Apr 28
Apr 30
Flex Session & Review
Second Exam
May 7
Final Submission of Southland Project
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Readings on real options
Jensen, HBR
Cases and Multiple
Choice Questions
Board materials, memo
Final report & slides