DEPARTMENT OF FINANCE
THE UNIVERSITY OF TEXAS AT AUSTIN
Austin, Texas 78712-0217 • (512) 471-4368 • FAX (512) 471-5073
FINANCE 357: BUSINESS FINANCE SPRING 2014
03440:
03445:
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TuTh 8:00am-9:30am UTC 4.132
TuTh 9:30am-11:00am UTC 4.132
TuTh 12:30pm-2:00pm UTC 4.132
TuTh 2:00pm-3:30pm UTC 4.132
Overview of the Course
Instructor:
Dr. Robert C. Duvic
Distinguished Senior Lecturer
Department of Finance
Office: GSB 5.176D
Office Hours: Monday, Wednesday, 10:00am-11:30am and by appointment.
Phone Number: 471-6026
E-mail: robert.duvic@mccombs.utexas.edu
Textbook: McGraw-Hill Connect+ using Corporate Finance: Core Principles and Applications, Fourth
Edition, Ross, Westerfield, Jaffe, Jordan, McGraw-Hill Irwin.
Course Objective:
The firm is an economic entity that strives to create wealth. Its success depends on the skills of its managers in
making decisions that determine the firm's interaction with its economic environment. This course examines these
decisions:
The investment decision: How managers look into an uncertain future and decide what assets the firm will
acquire based on their view of their competitive markets.
The financing decision: How managers obtain the capital necessary to purchase the assets they require.
The working capital decision: How managers manage their cash to pay their short-term obligations.
These decisions are made in a market framework. You must therefore understand the major aspects of markets and
how they influence these decisions.
Prerequisites:
As Dr. Hadaway’s email stressed, we build on concepts from accounting, statistics and economics. I will
help you refresh these concepts, but will not re-teach this material.
Syllabus appendices
A: Class Schedule
B: Course Evaluation Structure
C: Course Evaluation Procedures
D: Course Materials
E: Study Guidelines
F: Course Policies
G: Course Assignments
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APPENDIX A: CLASS SCHEDULE
Course structure: The course is organized into 22 Topics. Each topic is divided into specific skills developed
which provide the structure of the course, and assignments from LearnSmart, the text and supplemental readings.
These assignments are contained on our BlackBoard site under Assignments.
The dates in this schedule are approximate and will be adjusted as appropriate during the semester.
Part I: The Economy
Jan 14
Course Introduction
Jan 16
Topic 1: Human nature and economic activity
Jan 21
Topic 2: Human nature and the ethics of decision making
Jan 23
Topic 3: Structuring the business firm
Jan 28
Topic 3: Structuring the business firm (Continued)
Part II: The Accounting Framework
Jan 30
Topic 4: Accounting value and statements
Feb 4/6
Topic 5: Understanding accounting information
Part III: Economic Value
Feb 11
Topic 6: Economic value: riskless assets
Feb 13
Topic 7: Economic value: risky assets
Feb 18
Topic 8: Basic structure of time value calculations
Feb 20/25
Topic 9: Applying time value techniques
Part IV: Valuing Financial Securities
Feb 27
Topic 10: Valuing the corporation
Mar 4
Mid-term exam
Mar 6
Topic 11: Valuing long-term debt
Mar 11/13
Spring Break
Mar 18/20
Topic 12: Valuing equity
Part V: Valuing non-financial assets
Mar 25
Topic 13: Capital budgeting: Investment decision rules
Mar 27/Apr 1 Topic 14: Capital budgeting: Cash flow analysis
Apr 3
Topic 15: Capital budgeting: Strategy and analysis
Part VI: Risk and the opportunity cost
Apr 8
Topic 16: Risk and return: Single asset and portfolios
Apr 10
Topic 17: Risk and return: Diversification
Apr 15
Topic 18: Risk and return: Opportunity cost and CAPM
Part VII: The cost of capital, capital Structure and working capital decisions
Apr 17
Topic 19: Cost of capital
Apr 22
Topic 20: Market efficiency
Apr 24
Topic 21: Capital structure and firm value
Apr 29/May 1 Topic 22: Working capital management
May 10
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Final Exam 9am-12noon
APPENDIX B: EVALUATION STRUCTURE
The course evaluation is at the heart of your learning efforts. You will have the opportunity to test yourself via
LearnSmart exercises on-line tests and exams during the semester.
Major elements

LearnSmart assignments: LearnSmart is an adaptive learning program that contains and integrates the course
text. These assignments will be completed prior to the appropriate class meeting.

Class performance: Each class will have from 10 to 20 questions that will be directed at random to individual
students.
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Three on-line tests: Parts I, II, Part IV and Part V of the course have an associated on-line tests consisting of
verbal and quantitative questions, and will be approximately one to one and one half hours to complete. The
scheduled dates and times will be announced as the semester progresses.

Mid-term exam: One in-class mid-term exam, conducted on Tuesday, March 4, covers Part III of the course
and consolidates the important concepts of economic decision making.

Final exam: The final exam emphasizes Parts IV through VII of the course and helps you to consolidate your
skills at applying value to the investment and financing decisions involved in running a corporation. This is a
consolidated final for all of my sections of Finance 357 and will be given on Saturday, May 10, 9am-12noon.
Grade distribution
Evaluation
Percent of course grade
LearnSmart assignments
10%
Class performance:
10%
On-line Tests
Part I: the Business Firm; Part II: Accounting Value
10%
Part IV: Valuing Financial Securities
10%
Part V: Valuing Non-financial Assets
10%
Mid-term exam Part III: Economic Value
20%
Final exam
30%
Grading
The final course letter grade will be based on a curve set by the McCombs School of business to produce an average
GPA of 3.0 for the course. Course letter grades will be based on the relative frequency distribution (percentile
ranking) of the total points accumulated over the entire course weighted by the above percent allocations. This
approach implies that your final grade will be determined by the relative performance of the entire class. That is,
there is no predetermined standard as to what constitutes an A, A- B+, B, etc. .
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APPENDIX C: EVALUATION PROCEDURES
LearnSmart
LearnSmart is an adaptive learning tool that maximizes productivity and identifies the most important learning
objectives for each student to master at a given point in time. LearnSmart also knows when students are likely to
forget specific information and brings that content back so students can advance the knowledge from their short-term
to their long-term memory. Data-driven reports highlight the concepts with which individual students are struggling.
LearnSmart assignments are connected with each text chapter and must be completed before the assigned class.
Class Performance
In each class session I will ask between 10 and 20 questions concerning the material. These questions may be a
review of text material, student opinion of a relevant situation, or answer to a quantitative question. These will be
asked in a random basis, with the following grades assigned. Not present-0 points; no relevant answer/don’t know-1
point; good answer-2 points.
On-line Tests
Venue: The tests will be conducted online using Blackboard/Connect
Content: The tests will contain a mix of multiple choice, essay/short answer, and quantitative problems. The general
content and structure of each test will be announced in advance.
Scope: The three on-line tests cover all Parts I and II, Part IV, and Part V, respectively.
Procedure: The tests will be scheduled after we’ve covered each part of the course, with the specific date announced
several days in advance of the test. Each test will be available at 7:00pm on the scheduled day. Each test will be
available for two days. You will have approximately from one to two and one half hours to complete each test.
Absences: Individuals missing a test without my permission will receive the lowest grade of anyone who did take the
test. Students with special situations that would make taking these tests difficult should contact me at least two days
before the test begins.
Mid-term Exam
Venue: The mid-term exam will be a paper exam given in class on Tuesday, March 4.
Content: The mid-term exam will contain a mix of fill-in-the-blank, matching, essay and or short answer and
quantitative problems.
Scope: The mid-term exam covers Part III of the course.
Supporting documents: Formula sheets and time-value tables will be provided with the mid-term exam. You need
bring only writing instruments and your calculator. The only calculator allowed is the HP 10B. No other materials
will be allowed.
Absences: As this is exam is given during a regularly scheduled class session, only special situations will allow a
make-up exam. Please see me early if a situation does come up. Individuals missing the mid-term exam with my
permission will at my discretion take a make-up exam or have the points of that exam added to their final.
Individuals missing the exam without my permission will receive the lowest grade given in the exam.
Final Exam
Venue: The final exam will be a paper exam given in a classroom scheduled by The University Registrar.
Content: The Final Exam will contain a mix of fill-in-the-blank, matching, essay/short answer, and quantitative
problems.
Date: The final exam is a consolidated final for all four of my Fin 357 sections and will be on Saturday, May 10,
9am-12noon. The alternate final exam will be on Thursday, May 8, 7pm-10pm. You must have my written
permission to take this alternate exam.
Scope: The final exam is a comprehensive exam that concentrates on the latter half of the course and evaluates your
comprehensive understanding of economic decision making.
Supporting documents: Formula sheets and time-value tables will be provided with the final exam. You need bring
only writing instruments and your calculator. No other materials will be allowed.
Absences: Missing the final exam is a serious issue. Students missing the final exam without my permission will
receive the lowest grade of anyone taking the final exam. Students facing a major problem must contact me by email
prior to the exam and be ready to submit independently verifiable documentation as to why they are unable to take
the final exam at the scheduled time.
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APPENDIX D: COURSE MATERIALS
Supplemental Materials
Text: The text is an excellent one, and provides a well-written, detailed support for your efforts. It covers the
materials in more depth than we can cover in class and provides many definitions, descriptions and examples that
provide a comprehensive treatment of each topic.
Connect+: Connect/LearnSmafrt contains many items that will make the course more efficient. Please see this
video for an overview of Connect+.
http://www.youtube.com/playlist?list=PLqmcJVdRMoi2vH6bg19WbdDp5_T-RIHmf
Technical help: There are some items that will help you if you have difficulties in seeing your grades or in
assessing Connect. These items are contained in our BB site under Course Documents/Technical Help.
Mediasite: The 9:30am class will be record using Mediasite. These will be available to all of my Fin 357 sections
for review. The links to each presentation will be available on our BB site, under Course Documents/Mediasite.
The Class Lectures and Discussions. Each Topic is supported by class notes. These are modified copies of the
PowerPoint slides used in class.
To access these documents go to our BB site, click on Course Documents/Class Notes.
Class content will be modified as the semester unfolds, so the notes will be posted as we approach each part
of the course.
Solutions to End-of-Chapter Questions. The solutions to all assigned end-of-chapter concept questions and
problems are provided to enable you to check your work. They are under Assignments,/Solutions to Text Questions.
Supplemental Readings. These are readings from the business press that elaborate on points made in class. The
readings are available in Assignments, Supplemental Readings. During the course of the semester I will distribute
additional readings that support our class discussions. You should study these readings before the topic is covered in
class.
Finance Lab
The Finance Department sponsors a Finance Lab for students enrolled in all sections of Finance 357. The staff in
this lab can answer many of the questions concerning the end-of-chapter questions and other textbook related
questions. This is a major resource and I encourage you to take full advantage of it! Details of the labs operations
will be announced.
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APPENDIX E: STUDY GUIDELINES
Important concepts
Business decisions are made in a market framework. You must understand the major aspects of markets and how
they influence these decisions.
 Market values: Managers must value projects from the viewpoint of those outside of the company whose
choice determines the company’s survival and profitability: investors and customers.
 Cash flow: Cash is king—we need to understand what that means.
 Time value of money: Our decisions need to unify time, money and interest rates.
 Risk: We do not know the future.
 Opportunity cost: All projects must provide an acceptable rate of return. This return, often called the
required rate of return, the discount rate, the hurdle rate, cost of capital, is the opportunity cost: the basis for
all decisions. This is the most important concept in our course!
Study Guidelines
You need to integrate the course information, understand what you are studying, whether it is conceptual or
analytical, and apply it not only within the context of the course, but also to current business issues and topics
covered in your other courses.
The skills developed are the building blocks of the course. Topic by topic, they build an understanding of economic
decision making. Every element of the course is built on them, so please use them as the guide for your efforts.
Be an active student.
Ask yourself such questions as:
i)
What is the purpose of this concept or formula?
ii)
Why is it important?
iii)
How does the instructor or author demonstrate its importance?
How does it "fit" with what you have studied so far--either in this class or in an earlier class? Rephrase the
information in your own words. Develop your own examples.
Before each class you should complete the LearnSmart assignment, read any supplemental readings assigned, and
review the class notes. Our discussion in class assume that you have accomplished these assignments and will build
on them and integrate your understanding of the material. After class you should integrate the material and work on
the assigned text questions and problems. Be sure that you connect these problems with what we discussed in class
and what is contained in the chapter. If you are having trouble with a concept/problem, see me or visit the Finance
Lab as soon as possible.
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APPENDIX F: COURSE POLICIES
Course policies
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There is no make-up or extra credit work to improve your grade. Your final letter grade is determined solely by
your scores on LearnSmart, class performance, on-line tests, mid-term and final exam. No special
considerations concerning your general academic situation can be offered. The final grade in the course, once
assigned, will not be changed except in the event of a recording error.
You are responsible for all material assigned. Do not construe any guidance that I give as limiting what you are
responsible for except as I explicitly state in an email to the class that certain material will not be covered on a
test.
No cheating! You are to do your own work individually.
If you do not attend a class it is entirely your responsibility to determine what you have missed, including any
administrative announcements I may have made.
To be fair to all of my students, I will answer questions concerning the test only in class where all students can
benefit from the answer.
Any student missing any test or exam without my prior approval will receive the lowest grade of anyone taking
that assignment.
Special University Notices
Students with Disabilities
Students with disabilities may request appropriate academic accommodations from the Division
of Diversity and Community Engagement, Services for Students with Disabilities, 512-471-6259,
http://www.utexas.edu/diversity/ddce/ssd/.
Religious Holy Days
By UT Austin policy, you must notify me of your pending absence at least fourteen days prior to
the date of observance of a religious holy day. If you must miss a class, an examination, a work
assignment, or a project in order to observe a religious holy day, you will be given an opportunity
to complete the missed work within a reasonable time after the absence.
Policy on Scholastic Dishonesty
The McCombs School of Business has no tolerance for acts of scholastic dishonesty. The
responsibilities of both students and faculty with regard to scholastic dishonesty are described
in detail in the BBA Program’s Statement on Scholastic Dishonesty at
http://www.mccombs.utexas.edu/BBA/Code-of-Ethics.aspx. By teaching this course, I have
agreed to observe all faculty responsibilities described in that document. By enrolling in this
class, you have agreed to observe all student responsibilities described in that document. If the
application of the Statement on Scholastic Dishonesty to this class or its assignments is unclear
in any way, it is your responsibility to ask me for clarification. Students who violate University
rules on scholastic dishonesty are subject to disciplinary penalties, including the possibility of
failure in the course and/or dismissal from the University. Since dishonesty harms the
individual, all students, the integrity of the University, and the value of our academic brand,
policies on scholastic dishonesty will be strictly enforced. You should refer to the Student
Judicial Services website at http://deanofstudents.utexas.edu/sjs/ to access the official
University policies and procedures on scholastic dishonesty as well as further elaboration on
what constitutes scholastic dishonesty.
Campus Safety
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Please note the following recommendations regarding emergency evacuation from the Office of
Campus Safety and Security, 512-471-5767, http://www.utexas.edu/safety:
 Occupants of buildings on The University of Texas at Austin campus are required to
evacuate buildings when a fire alarm is activated. Alarm activation or announcement
requires exiting and assembling outside.
 Familiarize yourself with all exit doors of each classroom and building you may
occupy. Remember that the nearest exit door may not be the one you used when
entering the building.
 Students requiring assistance in evacuation should inform the instructor in writing
during the first week of class.
 In the event of an evacuation, follow the instruction of faculty or class instructors.
 Do not re-enter a building unless given instructions by the following: Austin Fire
Department, The University of Texas at Austin Police Department, or Fire Prevention
Services office.
 Behavior Concerns Advice Line (BCAL): 512-232-5050

urther information regarding emergency evacuation routes and emergency procedures can be
found at: http://www.utexas.edu/emergency.
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APPENDIX G: COURSE ASSIGNMENTS
The assignments for the course are contained in our BlackBoard site under Assignments/Course
Assignments. These assignments are a formal part of the course syllabus. Assignments will be posted for
each Part of the course as the semester progresses.
Initial guidance:
Main Issue: This is the major question highlighting the focus of the topic and indicating why it is important to you
as a business decision-maker.
Study Comments: These comments will help you as you place the various elements of the assignments
into a coherent whole.
Skills developed:
Your customers, the companies that will hire you, expect you to do things. The skills developed are the
specific understanding, connections and quantitative skills that you must master in the course. These
learning objectives form the basis of the class discussions, assignments and test.
Assignments:
These are the specific assignments for each topic. Each assignment has the following
elements:
Text assignments: Each chapter in the text is organized into logical sections. Read the text for its
content and logic, not just as pages assigned.
LearnSmart assignments: These exercised help you read through the major elements of the text
assignment and through integrated exercises develops your proficiency in the content. Please review this video
introducing you to Connect and LearnSmart:
http://www.youtube.com/playlist?list=PLqmcJVdRMoi2vH6bg19WbdDp5_T-RIHmf
Supplemental Readings: A few topics have additional supplemental readings. These are
supplemental readings from the business press. You should read these articles prior to class.
Questions and Problems: These are end-of-chapter items that you do not have to turn in, but
which are crucial for your understanding of the material and success in the course evaluations. Make sure
that you understand the logic involved in the problem, not just its mechanics: there is a difference between
working a problem and understanding how to quantify and make a decision.
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