Finance 7311
Corporate Financial Planning
Spring 2001
Prof. John Hall
Office: 507 Ross Hall
Office Hours: 10 - 12 M-F, 5-6 MW
Phone: 569-3355
e-mail: JRHALL1@ualr.edu
Texts: None; I will provide copies of cases and readings.
Additionally, you may find chapters in your FINC 7310 text (probably Ross, Westerfield,
and Jordan, 4th or 5th editions) helpful for review or further discussion. The course
outline references chapters in the 5th edition.
Course Description and Objectives: The course combines lectures and class discussion
with case studies to evaluate corporate financial strategies and decisions. The course is
intended to take the student past the fundamental questions of FINC 7310 to an analytical
and theoretical structuring of financial policies. That is, you will be working to apply
financial theory and tools to real life business situations. Specifically, the objectives of
the course are to prepare you to
1. Be able to perform financial statement analysis and corporate financial planning,
including preparation of cash budgets and pro-forma financial statements.
2. Be able to discuss theories of optimal capital structure and to explain the
determinants of a firm’s capital structure.
3. Be able to explain and apply valuation concepts, including analysis of specific
investment projects and valuation of the firm as a whole.
4. Be able to explain how agency problems affect the investment and financing
decisions of firms.
5. Be able to explain the market for corporate control.
6. Be able to explain corporate risk management.
Financial management involves defining the problem, gathering relevant facts, analyzing
the facts, making recommendations, and communicating those recommendations to
others (who may or may not know much about finance!). The lectures and class
discussions are intended to equip you with the economic foundations and analytical tools
needed to work through the first four steps in the case work you will do, while the case
process itself is intended to help you with the last step. NOTE: A major difference of this
course from other Finance courses, as well as a source of some frustration, is the apparent
lack of guidance and structure. The cases may appear quite open ended, with no clear
direction for solution provided. That is, if you expect a reductionist solution, you will
often be disappointed. This is similar to "real world" problems; they seldom come with
guidance or structure or a single solution. The only way to learn how to analyze cases is
by actually doing them.
Course Design: A major feature of the course is group presentations of cases, which is
discussed below. The case presentations will be preceded by either lectures on the
relevant financial theory or by working through a related case (or both). To enhance our
class discussions as well as to give you greater insights into modern business practice, I
will hand out articles from The Journal of Applied Corporate Finance (a premier
practitioner journal). Additionally, you will work through five cases individually (each
noted as "Practice Case" on the course outline) to discuss in class. For class discussions
to be as meaningful as possible, students are expected to read the material and work the
assigned cases prior to class. To provide you the incentive to work the individual cases,
I will assign two or three key questions from each case for you to provide written
solutions. Two exams covering about half of the course material each will be given in
class. Note that the course outline provides a schedule of all class meetings and exams topics, readings, assignments, and cases. Active class participation is expected and
encouraged.
Case Assignments and Presentations: As noted on the course outline, we will cover ten
cases over the term. Five cases will be discussed in class, based on individual work,
while the other five will be prepared in groups. (1) Each group will be responsible for
every presentation case; one group will present the case to the class. (2) Each group will
hand in a written analysis of each case; limit it to 5 pages, double-spaced, excluding
numerical analysis. Please note that effective communication of your recommendations
requires careful attention to style, grammar, and spelling. (3) The presenting group
should prepare a professional-quality presentation (schedule to use the PowerPoint
display, if desired). Numerical analysis slides should be reproduced for fellow
classmates.
Grading: Course grades will be determined bases on the following weighting:
Individual Practice Case Assignments
Group Cases
Exams
5 at 50 points
5 at 100 points
2 at 250 points
TOTAL
250
500
500
1150
Note: If you miss an exam you will be given a grade of 0 (zero) on that exam.
On academic dishonesty: Academic dishonesty will not be tolerated. Any student caught
cheating on a quiz, exam, or assignment will be given an F for the course. In addition, a written
report of the incident will be submitted to the Department of Economics and Finance and to the
Provost, who will decide if further disciplinary action will be taken.
Special Note: It is the policy of UALR to accommodate students with disabilities, pursuant to
federal and state law. Any student with a disability who needs accommodation, for example in
seating placement or in arrangements for examinations, should inform the instructor at the
beginning of the course. The chair of the department offering this course is also available to
assist with accommodations. Students with disabilities are encouraged to contact the Office of
Disability Support Services, Donaghey Student Center Room 103, 569-3143.
FINC 7311 - CORPORATE FINANCIAL PLANNING
COURSE OUTLINE
Week
1
2
Date
Jan. 17
Jan. 22
Jan. 24
Jan. 29
Jan. 31
Feb. 5
Feb. 7
Feb. 12
Feb. 14
Feb. 19
Feb. 21
Feb. 26
Feb. 28
Mar. 5
Mar. 7
Mar. 12
Mar. 14
Mar. 19
Mar. 21
Mar. 26
Mar. 28
Apr. 2
Apr. 4
Apr. 9
Apr. 11
Apr. 16
Apr. 18
Apr. 23
Apr. 25
Apr. 30
May 2
May 9
3
4
5
6
7
8
9
10
11
12
13
14
15
16
1
Topic
Introduction: Foundations
Financial Statement Analysis
Practice Case
Forecasting
Pro Forma Statements
Case Presentation One
Working Capital Management
NCF1
2,3
4
Oracle
18,19,20
Body Shop Int'l
6, 9
Practice Case
EXAM ONE
Corporate Securities
9,10,11
Empirical (A)
18, 20
Case Presentation Three
Cost of Capital
Cost of Capital, Capital Structure
Practice Case
RWJ3
*******
"
Case Presentation Two
Corporate Investment Decision
"
"
Case2
Financial Policy
Empirical (B)
Best Practices
12, 13, 14
Intro. to Debt Policy
15
14
16
16
Spring
Break!
Capital Structure and Dividends
Practice Case
Risk Management
17
Teletech
28, 29
Case Presentation Four
Practice Case
Corporate Control & Valuation
"
21
MCI
Merton
36
37
40,42
24
"
Case Presentation Five
McCaw Cellular
EXAM TWO
Wednesday, 6:00 - 8:00 p.m.
NCF is The New Corporate Finance, 3rd Edition. The numbers correspond to the article number in the
table of contents.
2
Case refers to the case for discussion or presentation on the assigned date. These materials will be
handed out.
3
RWJ is Ross, Westerfield, and Jordan, Fundamentals of Corporate Finance, 5th ed.