ADVANCED CORPORATE FINANCE
Spring Term 2006
Denis Gromb
Room P225, dgromb@london.edu, (Ext.3545).
COURSE OBJECTIVE:
This elective’s main aim is to enable you to use the ideas and techniques of Financial Economics
to deal with applied Corporate Finance issues. You are already familiar with the material from
prerequisite (!) Finance courses (capital structure, valuation, CAPM, option pricing, etc.).
Therefore, we will mainly focus on practical applications, discussing the usefulness as well as
the limits of these concepts and tools.
COURSE FORMAT:
• Lectures (6 to 8): Information, financial tools and frameworks useful to discuss case studies.
• Case studies (8 to 9): Different events, times, locations, and industries. Many classics!
• Invited speakers (2 to 4): Presentations on industry practices and current developments.
READINGS:
• Case studies and some readings are in the course pack. Additional material will be
distributed in class. I can direct students to further information on specific topics.
• R. Brealey and S.C. Myers, Principles of Corporate Finance, Irvin, McGraw-Hill.
• Suggested: R.C. Higgins, Analysis for Financial Management, 7th ed., Irvin, McGraw-Hill.
According to me, this small paperback is a gem. It covers basic Corporate Finance in a clear
and no-nonsense way, and it will fit in your handbag!
REQUIREMENTS/GRADING:
• Class participation: 20%.
• Group work: 40%.
• Individual work: 40%.
OPEN DOOR POLICY:
Feel welcome to drop by P225 and talk about the course, assignments, career plans, etc. If you
want to make sure I am in, send me an email (dgromb@london.edu) to set a time. Bad days to
find me: I teach Monday and Tuesday all day. If you come, I will stay until student exhaustion or
midnight whichever comes first.
MY ASSISTANT:
Janet Chater (jchater@london.edu) is in P227.
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C STREAM SCHEDULE
Mondays, 6:00pm-9:00pm, LT 4.
Week 1.
a) Case: Clarkson Lumber (Parts 1+2).
Assignment: Before class, read Clarkson and think about the study questions. No write-up.
Reading: After the class, read Higgins’ “Financial Forecasting” and “Managing Growth.”
Week 2.
a) Case: MCI Communications (exhibits on the course web page).
b) Lecture: Capital Structure: Where Do We Stand?
Before working on the case, read: “Understanding the Design of Convertible Debt” and your
previous courses’ notes on Capital Structure.
Readings (over some time): “How Do CFOs Make Capital Budgeting and Capital Structure
Decisions?” “Estimating the Tax Benefits of Debt,” “Raising Capital: Theory and Evidence.”
Week 3.
a) Case: Intel Corporation.
b) Lecture: Corporate Risk Management.
Before working on the case, read “How Much Cash Does Your Company Need?” and “An
Interview with Microsoft’s CFO”, and your previous courses’ notes on Dividends.
Readings: “A Framework for Risk Management,” “Reducing Volatility in Earnings and CF.”
Week 4.
a) Case: Paramount.
Review: Previous courses’ notes on valuation.
Readings: “Best Practice in Estimating the Cost of Capital,” “Using APV”, “What Determines
Comparability When Valuing Firms with Multiples?”
Week 5.
a) Lecture: Valuation: EVA (depending on time)
b) Speakers: Mr. Adrian Crockett and James Ballingall (Deutsche Bank).
Readings: Before Adrian and Jamie’s presentation, read “Ratings and Ratios”, “Toward a More
Complete Model of Optimal Capital Structure”, “How To Choose a Capital Structure”.
Week 6.
a) Case: Gulf Oil Corp.
b) Lecture: Valuation: Equity Cash Flow Method.
Read: “All P/Es Are Not Created Equal,” “The Market Pricing of Cash Flow Forecasts.”
Week 7.
a) Case: Shawmut.
b) Lecture: Real Options.
Readings: “Investment Opportunities as RO”. After class, you can (but need not) read “Valuing
Banks”.
Week 8.
a) Case: Arundel.
b) Lecture: VC Valuation of Start-ups.
Readings: “The Venture Capital Revolution”
Week 9.
a) Case: ZEFER.
b) Lecture: VC Financing
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