Vancouver Island University Faculty of Management, Business~~www.viu.ca/management/ FNCE 330-Financial Management Fall 2013 Faculty Office E-mail Telephone Website Office Hours Judy Palm Building 250, Room 423 [email protected] 250-753-3245 local 2693 http://web.viu.ca/jpalm Monday, Wednesday 2:30 – 4:00 pm, Thursday 11:30 am – 12:30 pm Students are also welcome to make an appointment at a time of mutual convenience. Prerequisite FNCE 130 and ACCT 100 Text Brigham, Ehrhardt, Gessaroli, Nason, Financial Management Theory and Practice, Second Canadian Edition Central Objective: In today’s competitive business environment, the financial manager must have a broad understanding of the world of finance. The course, FNCE 330, will present the student with a variety of quantitative models, viewpoints, and tools to aid in the decision making process as the finance manager strives to maximize shareholder’s wealth. Specific Objectives: After completion of the course, the student should be able to: 1. Understand the structure and terminology of the financial environment. 2. Distinguish between accounting and financial views of cash flows. 3. Apply present value and future value techniques to cash flow analysis. 4. Describe different types of bonds and determine the value of a bond. 5. Explain how interest rates and risk factors affect the value of a bond. 6. Use statistical measures such as expected return, standard deviation, and coefficient of variation to analyze stand-alone and portfolio risk. 7. Describe the relationship between risk and return as portrayed by the capital asset pricing model (CAPM) and the security market line (SML). 8. Use appropriate growth models to put a valuation on common and preferred shares. 9. Define various forms of the efficient markets hypothesis. 10. Calculate the weighted average cost of capital for various scenarios. 11. Identify factors which affect the cost of capital. 12. Employ techniques such as NPV, IRR, MIRR, payback period, and discounted payback period to the capital budgeting problem. 13. Set up cash flows taking CCA and tax shields into consideration. 14. Identify tools for incorporating project risk into capital budgeting. 15. Define and give examples of a real option. 16. Perform calculations dealing with financial and operating leverage and relate the concept of leverage to capital structure theory. 17. Evaluate various dividend policies available to the firm. 18. Do an analysis involving the Lease versus Purchase Decision. 19. Describe the cash conversion cycle and issues associated with short-term financing. 20. Identify various approaches to cash management and receivables management. 21. Understand hybrid securities, put options, and call options and their role in finance. 22. Explain how the derivatives market can be used to manage risk. Assigned Readings Assigned readings from the text are indicated for each block. The test times are only approximate. The actual dates for the exams and material covered in each exam will be set as the course progresses. It is the student’s responsibility to come to class to find out the date each test will be given. If you have to be away from class, keep in touch by email or the telephone voice messaging service. BLOCK TOPICS TEXT 1 Review : Financial Environment Time Value of Money Chapters 1, 4 2 Bonds and interest rates 6--1,3,7,9,11,13,15,17 3 Statistical measures of risk 4 Capital Asset Pricing Model and Security Market Line 5 Exam #1, Valuation of common and preferred shares Weighted average cost of capital Capital budgeting techniques Cash flows, risk analysis, real options Exam #2, Leverage and Capital Structure Chapter 6,16 Chapter 7 (pp. 189205) Chapter 7 (pp. 205217, pp. 229-231) Chapter 8 Chapter Chapter Chapter Chapter 9 10 11 12 Chapter Chapter Chapter Chapter 12 13 15 17 9—1,3,5,7,9,11,13 10—1,3,5,7,11 11—1,2,3,5 12— 1,2,3,4,5,6,7,9ab,11abc,12,15 See above for Chapter 12 13—1,3,5,7,9 15—1,2,3,4,5 17—1,2,3,4,5,7,8 Chapter Chapter Chapter Chapter 18 19 21 21 6 7 8 9 10 11 12 13 Leverage and Capital Structure Dividend Policy Lease vs. Purchase Cash conversion cycle, short-term financing Cash and Receivables Management Exam #3 , Put and call options Derivatives Derivatives Exam #4 Note: Chapters 1, 2, 3 and 4 will be useful references . Additional problems may be assigned as the course progresses. Assigned Problems 7—1,3,5,7,9,11,15,18 See above problems for Chapter 7. 8—1,3,5,7,9,11,13,15 18—1,2,3,4,5 Will be assigned later. Grading Method Four exams will be given. The exam scores will be weighted as follows: Exam #1 Exam #2 Exam #3 Exam #4 30% 30% 30% 10% No make-ups will be allowed except in the case of EXTREME PERSONAL EMERGENCY as evidenced by a doctor’s certificate or other appropriate certificate. No excuse will be accepted if you have already written the exam. Upon presentation of appropriate documentation, you can make up the exam. If an emergency does occur, please phone or email me on or before the day of the exam giving notification of your absence. There is a voice messaging system for saving messages. My phone number at Vancouver Island University is 250-753-3245-2693. It is the student’s responsibility to contact me as soon as he/she arrives back at the university so that a make-up exam can be written immediately upon return. A make-up exam may be different than the in-class test given on the exam date. The student should be prepared to write the make-up exam as soon as he/she returns to class. Partial credit will be assigned for correct logic in solving problems; therefore show all work in solving problems found on the exams. Using correct logic is important. If you use incorrect logic in solving a problem, you will not get full credit for the problem. It is not sufficient to put down just a single number to get credit. Completion of assigned homework will help prepare the student for exams. Discussion on homework assignments will be expected in class. Grading Scale Grades will be assigned according to the following scale. A+ 90 – 100% C+ 64 - 67 A 85 – 89 C 60 - 63 A80 – 84 C55 - 59 B+ 76 – 79 D 50 - 54 B 72 – 75 F < 50 B68 – 71 Academic Misconduct Academic misconduct includes, but is not limited to, giving and receiving information during any test or exam, using unauthorized sources of information during any test; plagiarizing; fabrication, cheating, and misrepresenting the work of another person as your own, facilitation of academic misconduct, and under certain conditions, nonattendance. Plagiarism will not be tolerated. You must reference your work and acknowledge sources with in-text citations and a complete list of references. This includes direct and indirect quotes, diagrams, charts, figures, pictures and written material. For group projects, the responsibility for academic integrity, which can result in academic misconduct and its resulting penalties, rests with each person in the group and sanctions would be borne by each member. No electronic dictionaries, cell phones or other electronic devices will be allowed in exams/ tests/quizzes. Only the following approved calculators may be used in exams/tests/quizzes. No other materials will be allowed on the desktop apart from a pen/pencil unless specifically approved by the faculty member. Texas Instrument BAII Plus, BAII, BA35; Sharp EL-733A; Hewlett Packard 10 B English Standards Assignments must be free of spelling, punctuation, and grammatical errors. Assignments containing such errors will be penalized (i.e. mark deductions). Proper English is expected on exams. Referencing The Faculty of Business requires the Harvard style of referencing for academic papers. Please see Quote, Unquote Referencing, and a Speedy Guide to Harvard Referencing at http://www.viu.ca/business/resources.asp. Accommodation Students with documented disabilities requiring academic and or exam accommodation should contact Disability Services on the second floor of Building 200.