Solvay Business School
Université Libre de Bruxelles
GEST-D-408 ADVANCED FINANCE (5 ECTS)
2007-2008
Professor André FARBER
Objective
The purpose of this course is to analyze financing decisions by corporations.
Reference for this course:
Brealey, R.,Myers, S. and Allen, F. Principles of Corporate Finance, 8th ed.,
McGraw Hill 2006 (a previous edition is also acceptable) – BMA8e. The Ninth
Edition has just been published [BMA9e]
Other references:
ROSS, S, WESTERFIELD, R. and JAFFE, J. Corporate Finance Mac Graw Hill,
7th edition, 2005(il existe une traduction française)
BERK, J., DE MARZO, P. Corporate Finance Pearson; 2007
Slides
Copies of my slides are available on my website:
www.ulb.ac.be/cours/solvay/farber
Additional readings
See course outline below. Package of readings will be available at GES.
Cases
Part of the course will be devoted to the analysis of short cases. You should
prepare them before the course.
ECTS
The course has 5 ECTS which means that you should devote roughly 125 hours to
it.
Classes:
25 h.
Cases:
30 h
Readings:
30 h
Preparation exam: 40 h
Grade
Final grade = Final exam (100%).The final exam is a closed book exam.
Grade carry-over
Grades are carried-over to the second session according to the rules set by SBS.
Prerequisites
I suppose that you are familiar with the following topics:
1. Present value
2. Bonds and stocks valuation
3. Capital budgeting (Net Present Value and Internal Rate of Return)
4. Portfolio theory
5. Capital Asset Pricing Model
See BMA8e Chap 1 to 9 [BMA9e Chap 1 to 10].
Past exams and exercises
Past exams and solutions for end-of-chapter are available on my website.
Course outline
06/02/2008 1. Introduction – Asset pricing models
BMA8e 13, 14 [BMA9e 14, 15]
13/02/2008 2. MM 1958 – Debt and taxes
Review case: Daucus Carrota 2007
BMA8e 17, 18.1 to 18.3 [BMA9e 18]
20/02/2008 3 WACC
BMA8e 19, 26 [BMA9e 20]
27/02/2008 4. Adjusted present value / Leasing
BMA8e 19, 26 [BMA9e 20.4, 26]
05/03/2008 5. Risky debt: binomial model
Review case: Belgacom IPO
BMA8e 24 + 21.1, 21.2 [BMA9e 24 + 22.1, 22.2]
12/03/2008 6. Capital structure: Merton’s model
BMA8e 24 + 21.3, 21.5 [BMA9e 24 + 22.3, 22.4]
19/03/2008 7. Optimal Capital Structure Calculation: Leland
Review case: EuroTech (A)
16/04/2008 8. Convertible bonds and warrants (H. Pirotte)
BMA8E 25 + BMA8E 21 Appendix [BMA9E 25.6]
23/04/2008 9. IPO/Seasoned Equity Issue (H. Pirotte)
Review case: EuroTech (B)
30/04/2007 10. Review session 1 (B. Dewaele)
07/05/2007 11. Review session 2 (B. Dewaele)
Readings
1. Malkiel, B., The Efficient Market Hypothesis and Its Critics, Journal of Economic
Perspective 17, 1 (Winter 2003) 59-82
2. Miller, M., The MM Propositions 40 years later, European Financial Management, 4,
2 (1998) 113-120
3. The Economist, Debt is good for you, Jan 25th 2001
4. Myers, S., Capital Structure Journal of Economic Perspective 15, 2 (Spring 2001) 81102
5. Barclay, M.and C. Smith, The Capital Structure Puzzle: The Evidence Revisited,
Journal of Applied Corporate Finance, 17, 1 (Winter 2005) 8-17
6. Crobie, P. and Bohn, J. Modeling Default Risk, Moodys’|K.M.V. December 2003
7. Ritter, J. and I. Welch, A Review of IPO Activity, Pricing and Allocations, Journal of
Finance 57, 4 (August 2002) 1795-1828
8. The Economist, The dividend puzzle, Jan 9th 2003