CALIFORNIA STATE UNIVERSITY, SAN BERNARDINO
Department of Accounting And Finance
Finance 680
Financial Strategy
Spring 1999
Office Phone : 880 5713
Khan
Office: JBH 239
Office Hrs:
T Th. 2:30-4:30
SYLLABUS
SCOPE:
The objective of the course is to explore issues that arise in formulating and implementing
corporate financial strategy and policy. Focus will be on current topics in the field with
particular emphasis on problems, practices, and innovations that impact on formulation of
financial strategy. Issues considered may include information analysis, forecasting, mergers
and restructuring, acquisitions, debt capacity, implementation of financial strategy, and
social ethical issues.
CONTENT AND ORGANIZATION:
The course will begin with basic issues and then will move on to confront the more
complex and strategic issues. Cases and readings will be used when appropriate. Topics
to be covered include strategic analysis of cashflows, consequences of debt and equity
financing, design of acquisition programs, assessment of acquisition value, leveraged
buyouts, ethical issues of investment policy and strategy.
REQUIRED MATERIAL:
Case Studies In Finance; Bruner. Irwin, Third Edition
The New Corporate Finance: Where Theory Meets Practice:
Chew,Jr. Donald, McGraw-Hill, 1998
SUPPLEMENTAL:
Lowenstien, Louis. "No more cozy Management Buyouts." Harvard Business Review
(Jan/Feb 1986): 147 - 56.
Rock, Milton R. The Merger and Acquisition Handbook. New York: McGraw-Hill,
1987. Especially "Discounted Cash Flow Valuation" by Rappaport.
Stewart, Bennett G. "Market myths" A Quest for Value: A guide for Senior
Management; Harper & Row, 1990
Mergers, Restructuring And Corporate Control; Weston, Chung & Hoag, Prentioce
Hall, 1990
Damodaran on Valuation; Damodaran, Wiley, 1996
ASSESSMENTS:
Cases
Term Paper
Quizzes
Midterm & Final Examination
Class Participation
40%
15%
15%
20%
10%
Cases:
Cases will be researched and presented by the assigned group in class.
While researching the company make sure that you take into consideration economic
environment at the time the case was written. After evaluating the case within that
context, offer your conclusions. Then comment on what actually happened and what
actions were taken by the company. If your conclusion is different than the company’s,
comment on why you think they made such a decision.
Presentation will be made in professional manner utilizing overheads or
power point. No reading of the paper will be allowed.
Term Paper:
Students will choose a current merger /acquisition /divestiture for analysis.
You must consult with the instructor before launching on your research.
Quizzes:
There will be a quiz each week on the readings assigned for that week.
Students will be tested on the substance of the readings rather than regurgitation of the
printed matter.
General questions pertaining to the case to be
presented during the class period will also be included.
Final Examination:
Case will be used to test the ability of students to evaluate certain concepts
learned during the quarter.
Class Participation:
It is imperative that students read the case and participate in the discussion
of the case.
STUDENTS NOT TAKING PART IN THE DISCUSSION WILL
AUTOMATICALLY LOOSE 10 PERCENT OF THE GRADE.
There will be no exception to this rule.
In your discussion please refrain from old stories or wasteful comments. You will be asked
to shut up if you do so.
Finance 680
COURSE OUTLINE
September 30
Introduction and Case Assignments
October 6
Quiz #1 on Week 1 Readings
Massey-Ferguson Ltd. (#1)
October 11
Hospital Corporation of America (Case #2)
Anheuser-Busch (Case #3)
October 13
Quiz #2 on Week 2 Reading
Systems Engineering Laboratories, Inc. (Case #4)
October 18
Tiffany & Co. - 1993. (Case #5)
MCI Communication Inc. (Case #6)
October 20
Quiz #3 on Week 111 Reading
MSCI - Alchala de Henares, Spain (Case #7)
Read Note on Fundamental Parity Conditions Pp.471
October 25
American Chemical Corporation (Case #8)
Cooper Industries (Case #8)
October 27
Quiz #4 on Week IV Readings
Netscape’s IPO (Case #9)
November 1
Philip Morris and Kraft (Case #10)
RJR Nabisco (11)
November 3
Quiz #5 on Week V Readings
Time Incorporated (Case #11)
November 8
John M. Case (Case #12)
RJR Nabisco (Case #13)
November 8
Quiz on Week VI Readings
Friendly Cards, Inc.(Case #14)
November 10
Handout Case - 1 (Case 15)
Handout Case - 2 (Case 16)
November 15
Quiz on Week VII Readings
Handout Case - 3 (Case 17)
November 17
Examination
Khan
November 22
November 24
November 29
December 1
December 6
Quiz on Week VIII Readings
Presentation of Individual term project
Presentation of Individual term project
Presentation of Individual term project
Presentation of Individual term project
Wrap-up
Finance 680
READINGS
Khan
Text: The New Corporate Finance
Week 1
Part IV - Raising Capital
#22 - An Overview of Corporate Securities Innovation
#26 - The Growing Role of Junk Bonds in Corporate Finance
#31 - Seciritization : A Low Cost Sweetener to Lemons
Week 11
Raising Capital (contd.)
#24 - Are Banks Loans Different
#32 - Using Project Finance To Fund Infrastructure Investments
Week 111
Part 11 - Capital Budgeting Decisions
#9 - Finance Theory & Financial Strategy
#11-The EVA Financial Management System
Week IV
Part VI - Corporate Restructuring
#46 - The Corporate Restructuring Of The 1980s - Its Import for
The 1990s.
#52 - Some New Evidence That Spinoffs Create Value
#54 - LBOs - The Evolution of Financial Structures & Strategies
Week V
Part VI Contd.
#47 - The Methods & Motives for Corporate Restructuring Part 1
#48 - "
"
"
“
Part 11
Week VI
Part VI Contd.
#49 - Reversing Corporate Diversification
#51 - Leveraged Recaps And The Curbing Of Corporate
Overinvestment
Week VII
Part V - Risk Management
#37 - Identifying, Measuring, And Hedging Currency Risk At Merck
#38 - Rethinking Risk Management
Week VIII
Part 1 - Man & Markets
#4 - The Theory of Stock Market Efficiency
#5 - Market Myths
#6 - An Analysis of Trading Profits: How Trading Rooms Make Money