CARNEGIE MELLON UNIVERSITY
Wednesday Evenings
FINANCIAL MANAGEMENT 91-855
INSTRUCTOR: Robert Bartolacci, M.S., CPA, CIA
Email: RBartolacci@Vanadium.Com
TEXTS: Essentials of Corporate Finance by Ross, Westerfield and Jordan (& Student Problem Manual)
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Asian Neighborhood Design Case (Stanford University). Some students will have purchased this case in the
Financial Analysis for Managers course.
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Harvard (HBS) & Darden School Case Studies (packaged and for sale in the bookstore)
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Additional Case Studies as defined in class may be required during the semester
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OPTIONAL:
Financial Management for Public, Health and Not-for-Profit Organizations by Finkler
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OPTIONAL:
Financial Management for Nonprofits by Shim and Siegel
WHO SHOULD TAKE THIS COURSE
Although there is usually a narrow list of an organization’s personnel titled Financial Managers, virtually anyone may at some point in a professional career be charged with the responsibility for making financial decisions. Moreover, it is incumbent on all executives within and organization to withhold the fiduciary responsibility presented with leadership. Financial Management is a course designed for students intending to pursue a career requiring financial practice or expertise (e.g. senior management or member of the finance department in a corporation, non-profit, etc., or the corporate finance group of an investment bank). Also, the course provides executives, or executives in training, with the necessary tools to understand the balance-sheet value implications associated with necessary policy, and short or long-term decisions. And lastly, the course is recommended for students that need to deepen their understanding of the analytical tools and financial concepts not addressed in the Accounting Foundations, or Financial Analysis courses. Most of the principles and management techniques described in this course can be applied to financial decisions in both for-profit and nonprofit organizations.
COURSE PURPOSE/OBJECTIVE and OVERVIEW
There is a twofold goal desired for this course. First is to provide the required tools to objectively frame financial management issues. Second is the ability to synthesize and incorporate these tools and other academic and professional experiences into a standard yet flexible model for solving financial management problems.
Decisions regarding financing, raising capital, managing investments and other short-term assets, and management of liabilities are critical functions within any organization regardless of profit motives. Therefore it is important to understand the financial environment and be able to navigate the fiduciary terrain towards the most objective decisions. This course will discuss and teach the tools to objectively make: capital budgeting, capital structure and working capital decisions.
Through case studies, lectures, videos, readings and exams, students learn structured techniques and how to apply them in financial decision making. The course addresses the three fundamental questions of Business
Finance: What, Where and How. More specifically: what assets will be needed to support the lines of business, where will the financing for those assets come from, and how will we fund the daily operations of those lines of business. As the course progresses, new topics and skills are integrated into a more sophisticated framework of financial understanding. Students develop and evaluate standard techniques such as:
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Discounted cash flow valuation models, Capital budgeting, Pro forma statements & Forecasting
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Social Return on Investment
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Stock & Bond Valuation

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Scenario and Sensitivity Analysis
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Security Market Line and Weighted Avg. Cost of Capital
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Short and Long Term funding sources and Working Capital Management
Nonprofit focus
In accordance with the Heinz School’s non-profit and governmental focus, relevant topics presenting the dichotomy of for-profit versus social goals will be used to provide in-class discussion. Course content and discussions will relate for-profit financial management tools to non-profit organizations. Most specifically, the concept of Social Return on Investment will be highlighted. This concept, a derivative of for-profit management techniques is characteristic of the ever-growing application of for-profit tools in the non-profit world.
Short videos will present real-life discussion topics relating to financial management goals and decisions and their socio-economic impacts. Students will have the opportunity to identify constraints, formulate and synthesize alternatives, and present solutions that maximize the resources of stakeholders. Discussions include:
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Management towards the Social Good vs. Shareholder Wealth
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Resource Maximization in every organization type
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Stakeholders vs. Shareholders (and Shareholders vs. debt-holders)
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Creditors & Lessors vs. Organizations
REVIEW SESSIONS , TEACHING ASSISTANTS (TA) and THEIR ROLES
Review Sessions: Are to be arranged with the Instructor
Teaching Assistant(s): TBD
Role of the TA (if applicable): The TA acts as a study guide, a resource to be used for course content clarification, translator of course information, and liaison to the instructor. The TA can provide assistance in completing difficult homework assignments, help explain confusing course topics, or provide insights into the general nature of the subject matter. The TA will not: provide homework or exam answers, previous or anticipated exam questions, assist students that haven’t attempted to resolve issues independently, or provide any information in an inappropriate or unfair manner.
The TA(s) will provide the class with a weekly schedule of office hours of when and where the students may address course questions. Students are to turn all homework assignments into the TA(s) only and not the instructor. The student is responsible to ensure that the TA receives the respective assignments, and the TA is responsible to update the student’s course scores to reflect homework completion. Students should always address course-related questions to the TA(s) prior to making inquiries of the instructor.
STANDARDS OF CONDUCT
The school clearly defines the ethical and academic standards expected of its students and faculty. This syllabus adds to that definition. Working together on homeworks is strongly encouraged. Cheating (looking at another student’s documents) on exams however will not be tolerated. Collaboration or plagiarism on nonhomework assignments is strictly prohibited. If these offenses are detected, the students in question will be removed from the course. Any expenses associated with the dropped or failed course will be the student’s responsibility.
“Faculty can impose penalties based on the circumstances with the most severe penalty being failure on the assignment or in the course. Instructors can recommend to the Dean that more severe penalties be imposed, such as suspension or dismissal from the program.” Excerpt from the HEINZ SCHOOL POLICY ON CHEATING AND PLAGIARISM
INSTRUCTOR RESPONSIBILITIES PER THE HEINZ SCHOOL
(SUMMARIZED)
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Detailed Syllabus
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Defining course goals, content and procedures
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Clear standards for assignments, tests
Describe prohibited types of collaboration

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Ensure fair and confidential grading
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Will determine how grades are assigned
HOMEWORK Homeworks and answers are found in the Student Problem Manual and are due the class following its assignment. Late homeworks will receive a grade of zero. Students are encouraged to read assigned chapters prior to class, then review again after class for reinforcement, and attempt both the Graded and Suggested problems. Students are to turn all homework assignments into the TA(s) (when applicable) only and not the instructor. The student is responsible to ensure receipt of the respective assignments.
SLIDES The slides used during each class are in Microsoft PowerPoint, and are available from the Blackboard.
GRADING and EXAMINATIONS
Quizzes/exams can include cases, multiple choice, problems, essays, and/or a combination of each. All questions and problems are based on the course’s textbooks, articles or lectures. The instructor reviews each quiz/exam. Confidentiality is ensured through a single grade book.
Grade Weight Your Score % Weighted Score
Chapters 1 & 2 Quiz
Chapters 4, 5 & 8 Quiz
Chapters 6 & 7 Quiz
Chapters 12, 13 & 14 Quiz
Graded Homeworks
5%
7.5%
7.5%
10%
5%
X
X
X
X
X
=
=
=
=
=
AT & T Executive Analysis
Investment Detective Case
Daycare - Northville Case
Pioneer Petroleum Corp. Case
Ocean Carriers Case
Duke Corp. Case
2.5%
10%
12.5%
12.5%
12.5%
15%
X
X
X
X
X
X
=
=
=
=
=
=
TOTAL 100%
GRADING SCALE
97% TO 100% A+
94% TO 96% A
90% TO 93% A-
87% TO 90% B+
84% TO 86% B
80% TO 83% B-
77% TO 80% C+
74% TO 76% C
70% TO 73% C-
Below F
This schedule is only a guide. All examinations and cases follow the completion of preceding subject
material, not the calendar. Please see the blackboard for notices of any homework changes.
CLASS 1 8/31/05

Objectives: Intro to Financial Management, brief review
Objectives: Stakeholders vs. shareholders, seeking the social good
Objectives: Taxes and Cash Flow
Readings: Chapter 1, Chapter 2
Slides: New First Class.ppt
Readings: Chapters 1 and 2
Topic: Forms of business organization, forms of nonprofits
Topic:
Topic:
Goal of Financial Management
The agency problem and control of the organization
Topic:
Topic:
Relevant tax topics
Cash Flow and the Cash Flow Identity
Film: AT & T (Shareholder vs. Stakeholder)
Suggested Homework: Chapter 2’s Concept tests
Graded Homework: Chapter 1’s Concept tests, Chapter 2 #’s 1 thru 11
CLASS 2 9/7/05
Objectives: Review of Time Value of Money
Objectives: Continuation of previous week’s topics
Objectives: Discounted Cash Flow Valuations, Net Present Value and Other Investment Criteria for For-profit and Non-profit applications
Readings: Chapters 4 & 5
Readings:
Readings:
Slides:
Chapter 8
Asian Neighborhood Design Case
FMClass2
Slides:
Topic:
Topic:
FMCH8
Future and Present Value (compounding and discounting), and Annuities
Loan types and amortizations
Net Present Value and Internal Rate of Return Topic:
Topic: Payback, Accounting Return and Profitability Index
Topic: Social Return on Investment
Film: Rightsizing
Suggested Homework: Concept tests (all problems not assigned for grading)
Graded Homework: Chapter 4 #’s 1 thru 4, 8 thru 10, 13 Chapter 5 #’s 1, thru 6, Chapter 8 #’s 1 thru 7, 9
CLASS 3 9/14/05
Chapters 1 & 2
Objectives: Interest rates and Bond Valuation
Objectives: Continuation of Time Value of Money as nec.
Readings:
Slides:
Chapters 6
Int&bonds
Topic:
Topic:
Topic:
Bond valuation
Protective covenants
Bond Issuances
Bond Ratings Topic:
Film: Steering the course , Bonds
Suggested Homework: Concept tests
Graded Homework: Chapter 6 #’s 1 thru 12
CLASS 4 9/21/05
Chapters 4, 5 & 8

Objectives: Equity Markets and Stock Valuation
Objectives: Continuation of Bonds as nec.
Readings:
Slides:
Chapter 7
Int&bonds
Topic:
Topic:
Common Stock Valuation
Features of Common and Preferred Stock
Topic: The Stock Markets
Film: How low can it go?
Suggested Homework: Concept test
Graded Homework: In-class case due (to be reviewed in class and turned in as homework)
Graded Homework: Chapter 7 #’s problems 1 thru 9
CLASS 5 9/28/05
Chapters 6 & 7
Objectives: Catch-up of previous weeks’ discussions if necessary. Time permiting, Chapter 9 will begin.
CLASS 6 10/5/05
Objectives: Making Capital Investment Decisions – Capital Budgeting
Objectives: Continuation of Discounted Cash Flow Valuations, Net Present Value and Other Investment
Criteria as nec.
Readings: Chapter 9
Slides:
Topic:
FMCH9
Project Cash Flows
Topic:
Topic:
Forecasting
“What if,” Scenario, and Sensitivity analysis
Film: Capital Budgeting, EVA
Suggested Homework: Any problems not graded
Graded Homework: Chapter 9#’s 1 thru 5 or 6 thru 8
CLASS 7 10/12/05
Objectives: Capital Market History
Readings:
Slides:
Chapter 10
FMCH10
Topic:
Topic:
Returns
Return Variability
Topic: Capital Market Efficiency
Suggested Homework: All problems not graded
Graded Homework: Chapter 10 #’s 1 thru 8
Graded Homework: In-class case due (to be reviewed in class and turned in as homework)
CLASS 8 10/19/05
Objectives: Continuation of Capital Market History as nec.
Objectives: Capital Market History, and Risk and Return
Readings:
Slides:
Chapter 11
FMCH11
Topic:
Topic:
Expected Returns and Variances
Portfolios, Diversification and portfolio risk
Film: Day on Wall Street, Portfolio Management
Suggested Homework: All problems not graded
Graded Homework: Chapter 11 #’s 1 thru 12, any of the last 6 problems

CLASS 9 10/26/05
Objectives: Cost of Capital
Readings:
Slides:
Chapter 12
FMCH12
Topic:
Topic:
Cost of equity
Cost of debt and preferred stock
Topic: Weighted Average Cost of Capital
Topic: Divisional, project, or opportunity cost of capital
Film: Financial Markets
Film: International Finance
Suggested Homework: Concept test
Graded Homework: Chapter 12 #’s 1 thru 8, 10 thru 12
Graded Homework: In-class case due (to be reviewed in class and turned in as homework)
CLASS 10 11/2/05
Objectives: Leverage & Capital Structure
Readings:
Slides:
Chapters 13
Chapter 13
Topic:
Topic:
Optimal Capital Structure
Modigliani & Miller Propositions (I & II)
Topic: Risks & Bankruptcies
Film: Leverage Legacy
Suggested Homework: Concept test
Graded Homework: Chapter 13’s #’s 1 thru 9
CLASS 11 11/9/05
Objectives: Dividends and dividend policy
Readings:
Slides:
Chapters 14
Dividends
Topic:
Topic:
Cash dividends and payouts
Stock dividends, splits and repurchases
Topic:
Topic:
Does policy matter?
Establishing a policy
Film: TBD
Suggested Homework: Concept test
Graded Homework: Chapter 14’s #’s 1 thru 4, 8, 10 thru 14
CLASS 12 11/16/05
Chapter 12, 13 & 14
Objectives: Raising Capital
Readings:
Slides:
Chapters 15
Raisingcap
Topic:
Topic:
Financing Life Cycle – from Bootstrap through Venture Capital to the exit plan and beyond
Selling securities
Topic:
Topic:
Underwriting
IPO’s
Film:
Film:
Going Public
Mergers
Film: Derivatives (may be moved to different night)
Suggested Homework: TBD
Graded Homework: TBD

CLASS 13 11/23/05 NO CLASS – THANKSGIVING HOLIDAY
CLASS 14 11/30/05
Objectives: Short-term Financial Planning
Readings:
Slides:
Chapters 16
FM16
Topic:
Topic:
Cash & Net Working Capital
Short-term financial policy
Topic:
Topic:
Short-term borrowing
Short-term planning
Film: TBD
Suggested Homework: TBD
Graded Homework: TBD
CLASS 15 12/7/05
Objectives: Working Capital Management
Readings:
Slides:
Chapters 17
FM17
Topic: Float and cash management
Topic:
Topic:
Cash management – collections, disbursements, and investing
Credit and receivables
Topic: Inventory management
Film: TBD
Suggested Homework: TBD
Graded Homework: TBD
CLASS 16 12/14/05
Objectives: Synthesis of course topics, review of case study in class