NEW ECONOMIC SCHOOL
MASTERS IN FINANCE
2011
Corporate Finance II
Prof. Sergey Sanzhar
London Business School
E-mail: ssanzhar@london.edu
Phone: +44 207 000 8286
Office hours: flexible
1. Course Description and Objective
The objective of the course is to provide a solid grounding in the principles and practice of corporate
finance. The course covers two broad themes: corporate financial policy and company valuation.
Specific topics covered in this course include: capital budgeting, cost of capital, capital structure,
corporate payout policy, and company valuation.
For all questions relating to class assignments, you should get in touch with the tutor.
2. Course textbook and readings
There are two textbooks for the course:
 Berk and DeMarzo, Corporate Finance, Pearson International Edition, First Edition, 2007.
 Brealey, Myers, and Allen “Principles of Corporate Finance” (9th edition).
We will be working together on a number of case studies to illustrate the practical application of the
principles and techniques covered in the course. Case solutions will be distributed during the lectures.
In addition to these books and cases, there will also be a number of other readings - including lecture
slides and case solution notes – that will be made available as the sessions progress. A full list of all
weekly readings is given in the detailed course outline below. As we progress through the term, you
should use this as a checklist to ensure that you have received and read all the relevant material.
3. Classes
Classes (as opposed to lectures) will be held by the tutor (TA). Classes are designed to help you
consolidate your understanding of the lectures. The emphasis will be on reinforcement rather than new
topics.
4. Course assessment and examination
The course grade is based on the individual assignment, case write-ups, a group valuation assignment,
and a final exam. The overall course grade will be made up as follows:
Assignment
Due date
Problem Set
3 Case Write-ups
Paramount Case
Final Exam
Fri, January 28
Beginning of the relevant lecture
February 19
TBD
Contribution to course
grade
15%
20%
20%
45%
Problem Set
There will be one individual Problem Set. The Problem Set is due to be handed in by the start of the
relevant lecture as hard copies or emailed to the TA. Late submission will be given a grade of 0.
Problem Set will be assigned in due course.
Case write-ups for 3 short cases
Each student must turn in an individual case write-up for all 3 of following cases: FPL, Intel, and
Arch. Turn in your write-up at the beginning of the relevant lecture. E-mailing to me
(ssanzhar@london.edu) is fine. The write-up should be (strictly) one page featuring a summary of the
case and a brief description of what you think should be the two or three key aspects of the analysis.
Grading of the write-ups is Pass/Fail. That is, you fail if your write-up has no analytical content at all.
Reading the case and writing up should take approximately two hours.
Paramount case
For Paramount case, the write up should be in groups of 4-5 people and with full analysis and
calculations. You must work in groups. Please select your groups now. Each group should submit one
report with the names of group members on the first page. Paramount case write-up should be strictly
no more than three pages in length with tables and figures put in appendix (no more than 5 additional
pages). Be clear and explicit about your assumptions and calculations.
Presenting your work well (e.g. a sales pitch to a potential merger client or results of your analysis to
your boss) is almost as important as the quality of your analysis. Therefore, each group should be
prepared to present the results of the Paramount case in class for 10-15 minutes. I will call on 1 or 2
groups to present and will not announce in advance who has to present. Each member of the group
should participate in the presentation.
Final exam
The final exam will assess your understanding of all concepts and ideas covered during the course. It is a
closed-book examination. A double-sided A4 cheat sheet is allowed. As a rule, there are no “make-up”
final exams. It is your responsibility to schedule the rest of your activities such that you are able to
attend the final exam which is on ______TBD___.
5. Detailed Course Outline (subject to change)

Lecture 1 (Jan 13)
A: Course Introduction. Modigliani-Miller Theorem and Trade-off Theory: Lecture
Preparation
Read Berk and DeMarzo, Chapter 14, Chapter 16 Sections 16.416.7
Brealey, Myers and Allen, Chapter 18 Sections 18.1, 18.2, Chapter
19 except 19.4
B: Modigliani-Miller and Trade-off Theory: UST Case
Preparation

Read UST Inc. Case
Lecture 2 (Jan 15)
A: Pecking Order and Market Timing: Lecture
Preparation
Read Berk and DeMarzo, Chapter 16 Sections 16.8-16.9
Brealey, Myers and Allen, Chapter 19.4
B: Additional Capital Structure Topics (Convertibles,Warrants, etc.): Lecture
Preparation
Read Brealey, Myers and Allen, Chapter 25 Section 25.6
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
Lecture 3 (Jan 20)
A: Equity Issuance- Rights/SEOs/IPOs/Underwriting: Lecture
Preparation
Read Berk and DeMarzo, Chapter 23
Brealey, Myers and Allen, Chapter 16 except 16.1
B: Equity Issuance- Rights/SEOs/IPOs/Underwriting: Lecture (cont.)
Preparation

Lecture 4 (Jan 22)
A: Payout Policy: Lecture
Preparation
Read Berk and DeMarzo, Chapter 17
Brealey, Myers and Allen, Chapter 17
B: Payout Policy: FPL Case
Preparation

Read FPL Case
Lecture 5 (Feb 3)
A: Wrap-up on Financial Structure: Intel Case
Preparation
Read Intel Case
B: Measuring the Cost of Capital: Lecture + Nike Inc. Case
Preparation

Read Nike Inc Case, Brealey, Myers and Allen, Chapter 10
Lecture 6 (Feb 5)
A: DCF Valuation Techniques: Lecture
Preparation
Read Berk and DeMarzo, Chapters 18-19
Brealey, Myers and Allen, Chapter 20
B: DCF Valuation Techniques: Lecture (cont.)+GM-Hugues Mini-case
Preparation

Read Harvard Business School, “Valuation techniques”
Read Harvard Business School, “Note on alternative methods for
estimating terminal value”
Read GM-Hugues Mini-case
Lecture 7 (Feb 19)
A: Valuing Companies Using Multiples: The Arch Case
Preparation
Read Arch Communications Case
B: Summary on Valuation: Paramount Communications Case
Preparation
Read Paramount case. Hand in written group case report.
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