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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 2015
03130: TuTh 8:00am-9:30am UTC 4.104
Overview of the Course
Instructor:
Dr. Robert C. Duvic
Distinguished Senior Lecturer
Department of Finance
Office: GSB 5.176D
Office Hours: Monday, Wednesday, 9:00am-10:00am and by appointment.
Phone Number: 512-471-6026
E-mail: robert.duvic@mccombs.utexas.edu
Textbook: 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:
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 Procedures
C: Course Materials
D: Study Guidelines
E: Course Policies
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APPENDIX A: CLASS SCHEDULE
Course structure: The course is organized into 20 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 20
1
Course Introduction
Jan 22
2
Topic 1: Human nature and economic activity
Jan 27
3
Topic 2: Human nature and the ethics of decision making
Jan 29
4
Topic 3: Structuring the business firm
Part II: Economic Value
Feb 3
5
Topic 4: Economic value: riskless assets
Feb 5
6
Topic 5: Economic value: risky assets
Feb 10
7
Test 1 Topics 1 through 5
Feb 12
8
Topic 6: Basic structure of time value calculations
Feb 17
9
Topic 7: Applying time value techniques
Part III: Valuing Financial Securities
Feb 19
10
Topic 8: Valuing the corporation
Feb 24
11
Topic 9: Valuing long-term debt
Feb 26
12
Topic 10: Valuing equity
Mar 3
13
Topic 10: Valuing equity (Continued)
Mar 5
14
Topic 11: Capital budgeting: Investment decision rules
Part IV: Valuing non-financial assets
Mar 10
15
Test 2 Topics 6 through 10
Mar 12
16
Topic 11: Capital budgeting: Investment decision rules (Continued)
Mar 16-20
Spring Break
Mar 24
Mar 26
Mar 31
Apr 2
Apr 7
Apr 9
Apr 14
17
18
19
20
21
22
23
Topic 12: Capital budgeting: Cash flow analysis
Topic 12: Capital budgeting: Cash flow analysis (Continued)
Topic 13: Capital budgeting: Strategy and analysis
Topic 14: Options
Test 3: Topics 11 through 14
Topic 15: Risk and return: Single asset and portfolios
Topic 16: Risk and return: Diversification
Part V: Risk and the opportunity cost
Apr 16
24
Topic 17: Risk and return: Opportunity cost and CAPM
Apr 21
25
Topic 18: Cost of capital
Apr 23
26
Topic 18: Cost of capital (Continued)
Part VI: Using the opportunity cost
Apr 28
27
Topic 19: Market efficiency
Apr 30
28
Topic 20: Capital structure and firm value
May 5
29
Topic 20: Capital structure and firm value (Continued)
May 7
30
Test 4 Topics 15 through 20
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APPENDIX B: EVALUATION PROCEDURES
Grade distribution
Evaluation
Class performance:
Test 1
Tuesday, February 10
Test 2
Tuesday, March 10
Test 3
Tuesday, April 14
Test 4
Thursday, May 7
Percent of course grade
10%
20%
20%
20%
30%
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.
In-class tests
Venue: The Four in-class tests will be paper tests given in class on the days specified in Appendix A: Class
Schedule..
Content: These tests will contain a mix of fill-in-the-blank, matching, essay and or short answer and quantitative
problems.
Scope: The tests cover all aspects of the assigned materials: class materials, text and assigned reading.
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. No other materials will be allowed.
Absences: As this is exam is given during a regularly scheduled class session make-up tests are not available.
Please see me early if a situation does come up. Individuals missing the mid-term exam with my permission will
have the points of that test added to their final. Individuals missing the exam without my permission will receive the
lowest grade of the students who took the test.
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: COURSE MATERIALS
Supplemental Materials
Textbook: Corporate Finance: Core Principles and Applications, Fourth Edition, Ross, Westerfield, Jaffe,
Jordan, McGraw-Hill Irwin. 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. The Third Edition is also acceptable.
Mediasite: The class will be record using Mediasite. The links to each presentation will be available on our Canvas
site, under the Module Course Documents.
The Class Lectures and Discussions. Each Topic is supported by class notes. These are modified copies of the
PowerPoint slides used in class. Class content will be modified as the semester unfolds, so the notes will be posted
as we approach each part of the course. The class notes are in each topic’s module.
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 contained in each topic’s module.
Supplemental Readings. These are readings from the business press that elaborate on points made in class. The
readings are available in each topic’s module. 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 are
below.
Basic Skills Workshop. The Finance Lab has an excellent workshop on basic finance skill such as the time value of
money and basic accounting. These are optional programs, but well worth the time.
Event
Time
Dates
Room
TVM Workshop
6-7:30
January 22
UTC4.122
TVM Workshop
6-7:30 or 7:30-9 January 26, 27, and 28 UTC4.122
The Finance Lab has regular office hours during the semester. Thus far we have the evening hours, given here. I
will post the day-time hours when they are set.
Finance Lab
5-9 pm MT*
February 2- May 7
GSB 5.154
6:30-9 pm. Wed February 2- May 7
GSB 5.154
Daytime hours will be announced at a later date.
*Note exception-Time for Tuesday March 10 is 6:00-9:00.
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APPENDIX D: 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 read any supplemental readings assigned, and review the class notes. Our discussions
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 E: 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 a 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.
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Campus Safety
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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