CORPORATE FINANCE
MF 807
Boston College
Spring 2000
M 7:00 – 9:30
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 and valuation analysis
a. interpretation of ratios
b. valuation of corporations – useful for IPOs and for takeovers
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 exam
First case write-up
Second exam
Second case write-up
Problem set
Final exam
Approximate Date
February 21
March 13
April 3
April 10
May 1
May 8
Grade Weight
20%
10%
20%
10%
10%
30%
Note: Makeup exams will be given only for very extenuating circumstances. Since students taking makeup exams
will have had more time to prepare for the exam, the makeup exams will be more difficult than the in-class exams.
PREREQUISITE: MF 704 or MF 722 (or equivalent)
1
Textbooks:
1.
Damodaran, Aswath, Corporate Finance: Theory and Practice, (Wiley, 1997).
Note that solutions to the end of chapter problems can be downloaded from Prof. Edie Hotchkiss’ web
page (http://www2.bc.edu/~hotchkis, then find the link to the MF 807 class page).
2.
Course pack of notes 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.
2
MF 807 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 24
Financial Statement Analysis, Intro to Discounted Cash Flow Valuation
Readings
Problems
Chapters 1 – 4
Chapter 4, #3
January 31
Discuss Oracle Case, DCF Valuation Intro (concluded)
February 7
Risk/Return, CAPM and Beta
Readings
Problems
February 14
Chapters 5 and 6
Chapter 5, #s 11, 13, 14; Chapter 6, #s 5, 8, 11
Capital Budgeting
Readings
Problems
Chapters 7 – 9
Chapter 8, #s 11, 12; Chapter 9, #s 3, 4
February 21
Exam 1
February 28
Capital Budgeting (concluded)
Readings
Problem
Chapters 10 and 11
Chapter 10, #5
March 6
No class – Spring Break
March 13
Valuation Analysis
Case 1 Write-Up Due
Reading
Problem
March 20
Chapter 23
#21
Efficient Market Hypothesis, Leasing
Readings
Problems
Chapters 16 and 13
Chapter 13, #s 4 – 6
3
MF 807 COURSE OUTLINE (concluded)
Week of
Topics and Assignments
March 27
Types of Securities, IPOs
Reading
Problems
Chapter 15
#s 8, 17, 18
April 3
Exam 2
April 10
Mergers and Acquisitions
Case 2 Write-Up Due
Reading
Problems
Chapter 25
#s 12, 17
April 17
No class – Patriot’s Day
April 24
Payouts to Shareholders
Readings
Problems
May 1
Capital Structure
Problem Set Due
Readings
Problems
May 8
Chapters 20 – 22
Chapter 20, #s 11, 23; Chapter 22, #12
Chapters 17 and 18
Chapter 18, #s 1, 6
Final Exam
4