FIN 405 – Capital Investment and Financing Decisions
Summer 2012 Course Syllabus
__________________________________________________________________________________
Instructor:
Di Kang
445H Gatton College
di.kang@uky.edu
Class:
MTWRF 10:00 – 12:00 (B&E 301)
Office Hours:
Tuesday and Thursday from 12:00 – 1:00, and by appointment
Course Description:
This is an advanced course in corporate finance. We will focus on two essential activities/decisions for
the firm – capital investment and financing decisions. Mastering the theoretical foundations for these
decisions and learning to apply critical concepts when dealing with ambiguity is the heart of the
course.
Prerequisites:
Any student failing to satisfy the prerequisites for this course (FIN300 (grade of C or better), ACC300
(or ACC301 and concurrent enrollment ACC302), and ECO391) will be dropped from the class roll
without further notice unless the correct prerequisite waiver process has been satisfactorily completed.
Class Materials:
Ross, Westerfield, and Jordan: Fundamentals of Corporate Finance (9th or 10th alternate edition)
Course Notes: There will be handouts as we begin each topic that will also be available electronically
on Blackboard
Coursepack of HBS cases: available at http://cb.hbsp.harvard.edu/cb/access/13978930
Tentative Topics:
Part I: Capital Investment
Lecture 1: Review of Basics of Corporate Finance
Lecture 2: Cost of Capital
Lecture 3: Mergers and Acquisitions
Lecture 4: Leasing
Part II: Financing Decisions
Lecture 5: Equity Financings
Lecture 6: Debt Financings
Lecture 7: Capital Structure
Lecture 8: Payout policies
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Homework:
There will be two homework assignments. Each of the assignments will count equally toward the
homework grade. The main purpose of homework is to prepare you for exams by providing
information about format and content. A student with a firm grasp of the homework problems should
perform well in this class. You should start working on your homework as we cover each topic. It is
not a bad idea to work in group, but each student must turn in his/her own homework. A good practice
is to complete your homework on your own first, then verify answers with other students.
Exams:
There will be two exams, plus an optional (cumulative) final exam. Each of the exams will count
equally toward the exam grade. Any student that is pleased with his/her grade after the 2nd exam may
choose to skip the final and count only the first two exams toward their exam grade. Each exam will be
in-class, and will cover topics covered in class. Any student that is displeased with their exam score
prior to the final exam may take the final, and I will drop your lowest exam score.
Students missing an exam for a university approved reason must take the final exam as the make-up.
Any student missing an exam should notify me in advance. Any student failing to notify me within 2
days of the exam will not be allowed to take a make-up exam.
Case Studies:
Case studies offer an opportunity for class members to analyze real-life corporate situations. You will
work in small teams (3 – 4 people) assigned by me before the class begins. Classroom time will be
provided to start analyses when related content has been covered. On assigned dates, all teams will
give presentations covering their understanding of the case materials, their suggestions on the key
issues raised by the cases, and, most importantly, their reasons to support the decisions they propose.
There will be two case studies for the semester. The first case, Nike, Inc.: Cost of Capital will make
you familiar with the calculation of the firm’s weighted-average cost of capital (WACC). The case
provides a WACC calculation that contains errors based on conceptual misunderstandings. The task of
each team is to identify and explain the mistakes in the analysis. In the latter part of the class, you will
be introduced to the second case: Pacific Grove Spice Company. This case is more comprehensive, and
requires each team to analyze the opportunities faced by Pacific and consider their individual and
combined impacts on the company's financial position. In this case study, we will observe the close
interaction between investment and financing decisions.
There are no required write-ups for the case studies, but all teams must submit their hard-copy slides
before the presentation begins. I will grade each case study based on the content of discussion (70%)
and the presentation performance (30%).
Guidelines for Case Presentations
1. Target about 15 – 20 minutes for the length of the presentations.
2. One person can do the entire presentation or every member of the group can participate (or anything
in between). Each member of the group will receive the same grade as a minimum.
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3. The computer in the classroom and the overhead machine are available for your use, should you
choose. Save your slides on the web or email me the slides two hours before the class if you are
using the computer.
4. The suggested structure (more details will be provided):
A) Brief introduction and indication of the discussion agenda
B) Some discussion of the context and the challenges facing the company
C) Indication of the issues/questions you identified and the results of the analysis you performed
D) Conclusions.
5. I will be happy to answer questions about each case prior to the presentation.
Cheating:
Any evidence of cheating will be dealt with using the rules of the UK University Senate.
Grading:
Homework:
Case Study:
Exam:
10% (5% each)
30% (15% each)
60% (30% each)
Final grades:
90-100 = A
80-89 = B
70-79 = C
60-69 = D
<60 = E
Other Suggestions for the class
1. Attend class.
2. Be on time. The beginning of class is when I answer any questions from the day before and go over
the plan for the day.
3. Have a reliable study partner who can take notes for you in the case of absences. My office hours
are intended to be a time for answering specific questions not for repeating lectures.
4. Reread lecture notes. Look back over your notes from class and rework examples.
5. Start homework early. It gives you an idea of how I test, and then you can ask questions sooner
rather than later.
6. Come to my office hours with questions.
7. Check Blackboard and your UK email every day.
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