Syllabus - Spears School of Business

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OSU COLLEGE OF BUSINESS ADMINISTRATION, Department of Finance
FIN 4550 Cases in Corporate Finance --Course Syllabus Fall, 2005
Instructor:
Dr. Betty J. Simkins
Office and Phone:
336 Business Building; (405) 744-8625
Office Hours:
Mondays, 3:00-5:00pm and Tuesdays, 2:00-4:00pm or by appointment.
E-Mail:
[email protected]
Webpage:
spears.okstate.edu/~simkins
Class Webpage:
spears.okstate.edu/~simkins /fin4550.htm
Required Texts/Materials:
1)
Case Studies in Financial Management, by Eugene F. Brigham and Linda Klein,
Harcourt College Publishers, 2005.
2)
Fundamentals of Fin. Mgmt., by Eugene F. Brigham and Joel Houston: The Dryden
Press, Contemporary Fin. Mgmt Fundamentals by Moyer, McGuigan, & Rao,
Intermediate Financial Management by Brigham, et. al. or equivalent textbook.
3)
Materials on course webpage.
Important Materials: I expect you to use your primary text from your first corporate finance class
(preferable item 2 above) as a backup. You will need to refer to the background reading area by topic, as
listed on the schedule, and look it up in the index and/or table of contents. This is after all, the way you
will be using your reference books in the future, so it will be good training. For some classes I will
duplicate specific material. Also, you will need a financial calculator. (Note: I prefer the TI BA II Plus
and will use it to demonstrate calculations in class.)
Course Prerequisite: FIN 3113
Course Description: In this “case-study” course, the theory of finance meets the reality of corporate
strategy, decision making and value creation. Students will analyze case problems in financial
management and learn to apply finance theories to “real world” practice.
Course Objectives:
This case study course will be highly useful to you upon graduation, in that you
will be better prepared to handle decision-making in a business environment. In this course, we will be
taking the perspective of the financial manager. You may be wondering just what is a “case study”? A
case study is a description of a management issue or problem, that involves an important decision(s) to be
made. Case classes are unusual in that for some situations, there may be no fixed right or wrong answers.
An answer that can be justified, based on sound assumptions and factual information, can be viewed as
correct. A supposedly right answer that is not justified or backed up might as well be wrong. Cases
require assumptions because sometimes critical information is left out. They require clear decisions and
specified plans of action. Overall, cases are considered valuable since they replicate real business
situations, help students learn finance and how to work in groups, and encourage students to use
technology to improve their analysis and communication skills.
To summarize, in this course you will develop increased self-learning skills (an very important
part of the course), team-based learning, presentation skills, and writing skills. In essence, you will be
better prepared a career in the business world.
Grading Procedures:
3 Major Case Analyses (Group)
Homework Assignments, individual case work, etc.
Group Presentation
Class Participation
Midterm & Final Exams
Total
25%
15%
5%
10%
45%
100%
1
Grading will be based on the following scale: 90% or above = A; 80-89%=B; 70-79%=C; 60-60%=D.
Below is failing.
Course Format: This is a case study class. Students will form groups of no more than 3 students and be
required to analyze 3 cases as a group in depth. (See the course schedule included in this syllabus for
more details.) Each group will present one case. The presentations will be evaluated by the class, but I
will assign the overall presentation grade. Your group must also turn in a written case report for the case
your group presents. It counts as one of your group’s three major case analyses. [Please note: At the
end of the semester, each group member will evaluate his/her other group members using a form posted
to the class website. If a group member does not perform to the satisfaction of the other group members,
his individual case grades may be lower at the discretion of the instructor. If a group member does not
help with a case, this member will receive a 0% on that case.]
Understand and follow the important/critical “4Ps” of student involvement in case discussions:
1. Preparation: If you do not read and analyze the case, and then formulate an action plan, the case
discussion will mean little. Do not wait until the last minute to do the case. Start early and ask
questions! Visit me during office hours whenever you need assistance! Read all reading
assignments and refer to the background readings. I cannot emphasize this enough!
2. Presence: If the student is not present, she or he cannot learn and, more important, cannot add her or
his unique thoughts and insights to the group discussion.
3. Promptness: Students who enter the classroom late disrupt the discussion.,
4. Participation: Each student’s learning is best facilitated by regular participation. More important,
the case student has the responsibility to share his or her understanding and judgement with the class
to advance the group’s collective skills and knowledge. Participation in all aspects of the course is
very important and consists of 10% of the grade.
We will also be covering articles that relate to the material. These articles will be discussed in class as
time allows. The midterm and final exam will include questions from the cases, topics covered, and
readings.
Course Policies: You are expected to attend and take part in each class period. It is part of the grading
procedure. You are expected to read all cases and be familiar with the material when your group is not
analyzing a particular case. You are expected to arrive in the classroom before the scheduled starting
time. If you arrive late, enter the room quietly and do not disturb the other class participants. Behavior
that is unacceptable during scheduled class time: (1) talking to classmates concerning matters unrelated
to the presentation, (2) reading the school newspaper during presentations, and (3) sleeping during
presentations.
It is essential for you to present material on the day assigned. In the event you are unable to make a
presentation on the assigned day, prior arrangements must be made with the instructor early enough so
the schedule can be adjusted. Late homework will be accepted if turned in by the following class period
it was due, but will be counted off ½. Late cases will be counted off 25%. Work not turned in during
class the day it is due is considered late.
Students with Disabilities: If any member of the class believes that s/he has a physical, emotional, or
psychological disability and needs accommodations of any nature, the instructor will work with you and
the university Office of Student Disability Services (Stillwater: SU 315, 744-7116 v/t; Tulsa: 103 North
Hall, 594-8354) to provide reasonable accommodations to ensure that you have a fair opportunity to
perform in this class. Please advise the instructor of such disability and the accommodations as soon as
possible. You will need to also contact the Student Disability Services office in order to receive
accommodations. No accommodations will be made without prior notification.
2
Academic Dishonesty: University policy will be followed and strictly enforced.
Overview of the Case-Study Approach
Overall, I want you to get “turned on” to the excitement of bringing all the elements of financial
management together by studying actual case situations. The tools and knowledge you have learned so
far will be applied in this course. This case-study course will help you understand the world around you
much better. I also want you to have a lot of fun as we work through difficult but very relevant practical
problems together!
I utilize the case method of teaching and learning in this class. It is designed to bring the real world to
the classroom. In fact, we will be studying some “live cases” in this class. Academia is known for its
theoretical approach in dealing with problems while industry is known for its real-world approach. The
case method intends to bring the two ends of the spectrum closer together. This method exposes the
students to the real world and prepares them for that purpose, even before they graduate and have to face
it. The case method attempts to alleviate problems faced by some students graduating from programs
that use alternative methods of instruction.
The cases were selected to include a wide variety of
financial decisions and company types, thus assuring that at least some of them would be relevant along
those dimensions.
The use of the case method in instruction is based upon the belief that financial decision making is a skill
rather than a collection of techniques or concepts. The best way to learn a skill is to practice in a
simulation-type process. Just as the swimmer learns to swim by swimming, and the pianist learns piano
by playing, so too the skills of financial decisions are learned by actively participating in making
decisions – not just by readings or lectures. Hence, the case study approach provides a vehicle for
simulation in financial decision making.
The total case process consists of four steps ordered as follows:
1. individual analysis and preparation
2. optional informal small-group discussions
3. classroom discussion, and
4. end-of-class generalization about the learning.
If I could think of the ideal case situation, this is how it would be: The professor (me) walks into the
room and calls upon the group present their analysis. Students from the group then define the problem,
list alternatives, give a recommendation and defends it in a oral presentation that lasts about 15-20
minutes. Next, a vigorous and relevant debate by people in the class follows for the next 5-10 minutes.
At this point, I would cut off the discussion and summarize the issues -- taking about five minutes to do
this.
Case discussions depend upon the active, effective participation of the students. The student must get
involved and take a great deal of – in fact, the primary – responsibility for his or her learning. This is
vital to the case class. You must be self-motivated in a case class, or else your performance will suffer
greatly!
3
FIN 4550: CASES IN CORPORATE FINANCE
FALL 2005 TENTATIVE SCHEDULE
GROUPS – HOW TO CHOOSE YOUR CASES: Cases listed in BOLD are choices for group analysis. Groups are to choose 3 cases as follows:
select 1 cases listed in BOLD from weeks 5-8, select 1 case listed in BOLD from weeks 9-12, and select 1 case listed in BOLD from weeks 13-15.
Week
Date
Topic
1
Aug. 22
Course introduction
Part I: Fundamental
Concepts
2
Aug. 29
3
Sept. 12
Part II: The Cost of Capital
4
Sept. 19
Part III: Capital Budgeting
CASE READING
ASSIGNMENT
ARTICLE READING ASSIGNMENT
BACKGROUND
READING
Articles are available on the course webpage, unless otherwise
indicated.
Background
Readings are from
textbooks
Course Handouts (Syllabus and “Note to the Student: How to Study
and Discuss Cases”)
Read materials on my web site related to written case reports and
presentations.
“The Theory of Stock Market Efficiency: Accomplishments and
Limitations” by Ray Ball
Risk and Rates of
Return
Time Value of Money
“Best Practices” in Estimating the Cost of Capital: Survey and
Synthesis (This reading provides a very good discussion of the
cost of capital.)
“Cost of Capital” Teaching Note
Cost of capital
“Capital Budgeting” Teaching Note
Capital budgeting
Case 6: Randolph Corp. (Due Sept.
26)
Capital Budgeting -- continued
Case 53 Prairie Winds Pasta (Due
Oct. 3)
“Corporate Strategy and the Capital Budgeting Decision” by Shapiro
Capital budgeting
Case 70: Potato Best Products (Due.
Oct. 10)
Risk analysis in capital budgeting handout – to be announced
3: Peachtree Securities, Inc. (A)
(problems 1-6, 10)
49. Bond and Stock Evaluation:
Beatrice Peabody (problems 1-9)
4A: West Coast Semiconductor,
Inc. (DUE Sept. 19) -- Homework
assignment – to be announced
Concept of Valuation
(Stocks and Bonds)
Review of Capital Budgeting
5
Sept. 26
6
Oct. 3
7
Oct. 10
Capital Budgeting -continued
Risk Analysis in Capital
Budgeting
Complete unfinished material &
review for midterm exam
8
Wed, Oct.
19
Oct.17 is Fall Break
Midterm Exam
Begin Dividend Policy
4
Capital budgeting
Risk Analysis in
Capital budgeting
9
Oct. 24
Part IV. Dividend Policy
Go over Midterm exam results
Dividend Policy
“Dividend Policy” Teaching Note
Dividend Policy
10
Oct. 31
Dividend Policy -- continued
Case 19A Floral Fragrance, Inc.
(Due Oct. 31)
“Evidence on How Companies Choose Between Dividends and OpenMarket Stock Repurchases” by Bartov, Krinsky & Lee
Dividend Policy
11
Nov. 7
Part V: Special Topic:
Valuation and IPOs
“The Dividend Cut Heard Round the World: The Case of FPL Group
by Soter, Brigham and Evanson
Valuation Teaching Note and other materials
Case 20: Bessemer Steel
(Due Nov. 7)
Case: Seward & Simkins Petroleum
(Due Nov. 7)
12
Nov. 14
Valuation and IPOs-continued
13
Nov. 21
Part VI: Special Topic: Real
Options and Advanced
Topics in Risk Analysis
14
15
Nov. 28
Dec. 5
Part VI -- continued
Case: The IPO of Google (Due Nov.
21)
Teaching note and videostreaming presentation on Relative
Valuation by Dr. Bill Elliott
“The Market’s Problems with the Pricing of Initial Public
Offerings” by Roger G. Ibbotson, Jody L. Sindelar, and Jay
R. Ritter, Journal of Applied Corporate Finance, Spring
1994, Vol. 7 (No. 1), pages 66-74.
“The Dark Side of Valuation: Firms with no Earnings, no
History and no Comparables: Can Amazon.com be
Valued?” by Aswath Damodaran
Valuation – Relative
and Fundamental
Reading: "Do Fundamentals or Emotions Drive the Stock
Market" by The McKinsey Quarterly, 2005 Special Edition:
Value and Performance
Valuation – Relative
and Fundamental
“Are Dutch Auctions Right for Your IPO”
"The Pricing of Internet Stocks” by Estrada and Blakely
"A Question of Value", by Don Durfee, pages 27-28, CFO,
March 2005
Case: Netscape Communications
(Due Nov. 28)
BROWN FORM CASE HOMEWORK – Answer questions 3 &
4 for the case (see separate posting of questions on the website).
Case: BrForman (Due Dec. 5)
Valuation
Mergers and
acquisitions and
Valuation
(See week 11-14)
Review for Final Exam
NOTE: All students are responsible for reading the articles and readings. YOU ARE REQUIRED TO DISCUSS THE RELEVANT READINGS
(ARTICLES) IN YOUR CASE REPORTS AND THIS IS A PART OF THE CASE GRADE!
FINAL EXAM: Monday, Dec. 12 from 8:00-9:50pm.
5
FIN 4550: Cases in Corporate Finance
Written Case Reports
Case:
Group:
________________________
________________________
________________________
________________________
POINTS
POSSIBLE
GRADING CRITERIA
Format of written report:
Structure & organization (i.e. followed guidelines, different sections listed, etc)
10
Executive summary (quality of the summary; under 250 words)
10
Quality of writing (clarity, readability, grammar, punctuation, etc)
15
Conclusion
5
Quantitative and qualitative analysis:
Accuracy & completeness (all questions answered correctly and completely)
30
Use of exhibits
10
Readability & interpretation
10
Readings (These are the assigned articles to read. You must reference and relate to the case.)
5
Resourceful and creative component
5
Overall Grade:
100
Comments:
6
POINTS
RECEIVED
FIN 4550: Cases in Corporate Finance
Written Case Reports
Each group will complete a written report on the assigned cases. The report must be typed double spaced. The written analysis should be
well organized and concise in order to cover all areas of concern, and should focus on financial ANALYSIS. The following outline
should be following and clearly labeled:
Written Case Reports (should be at least 5 pages excluding exhibits)
I.
Executive Memo
II.
Introduction
III. Analysis (or another name for the analysis section where you answer case questions)
IV.
Conclusion
The report should begin with an "Executive Memo" which should be approximately 250 words. This memo summarizes the findings of
the report and provide your recommendations. Next, the body of the report begins with an introduction that briefly explains the focus of
the report (the direction of the analysis) and why it is important to the company. The body of the report must include a discussion of the
issues of concern (i.e.: the case questions). Again, highlight the reason why the issues are important and how they impact the company. Do
not just provide facts but use the facts to present an analysis that explains the importance of the concepts to the company.
Key information and data from the case questions should be used in the written analysis to support explanations and recommendations. Do
not assume that I will hunt through the exhibits to find relevant information. It should be possible for the reader to follow the written case
analysis without fully examining the exhibits. For example an answer of "See Exhibit Problem 3" is unacceptable. It should be expanded
to "The current ratio is 2.3X, which is below the industry average, and it has been declining (see Exhibit 3) thus...”
The report should end with a conclusion that summarizes the findings.
The reports are due at THE BEGINNING OF CLASS on the scheduled day. The report should be stapled with a cover sheet including
case number, title, date, and group member names.
Written report grades will be based on (see my web site to print the written case report grading form):
 Executive Summary (must be under 250 words)
 Initial motivation of the report (why the topic is important)
 Conclusion and justification of recommendations
 Completeness of coverage (concise analysis of the major concerns identified through the case
questions) and accuracy of content
 Discussing and referencing class readings to the case (the assigned articles) – Please note that this
counts as 5 points of the case grade. In other words, your group must carefully read the articles
related to the case and incorporate concepts in the article to your analysis. You must cite (such as
footnote) where you do this. At a minimum, each case report must use at least one of the published
articles to receive part of the 5 points.
 Clarity of analysis with a focus on explaining why
 Paper structure and organization: provide a logical progressive development of issues and provide
transitions (don’t just follow the questions)
Notes: Grades for case analyses will be based on team performance with adjustments for individual contribution and individual
performance. Each student will evaluate their team members using the Peer Evaluation Forms (due at the end of the semester). Thus,
final case analysis grades may vary within the group if a member is a "free rider" (i.e., does not do their fair share of the work), etc.
7
FIN 4550: Cases in Corporate Finance
CASE PRESENTATION
Each team will make a 20 min. presentation before the class, followed by a Q & A at the end. Presentations are to be done in PowerPoint
and will be given using a computer. Each team member is required to present so that the content of the analysis is equally shared. The
presentation is from the prospective of a hired analyst and should at a minimum include:
1.
2.
3.
4.
5.
6.
a brief introduction to the topic,
a motivational discussion that convinces the audience of the importance of the topic,
a discussion of the major issues based on all of the questions accompanying the case. This discussion should focus on the
intuition behind the results (i.e. explanations of why things happen) and should be supported by numerical evidence from
the facts of the case,
outside information, beyond that provided by the case and text,
a smooth transition between speakers, and
a general summary of highlights at the end of the presentation.
YOUR GROUP MUST GIVE THE INSTRUCTOR (DR. SIMKINS) A PHOTCOPY OF ALL POWERPOINT SLIDES BEFORE THE
PRESENTATION BEGINS. POWERPOINT HAS AN OPTION WHERE YOU CAN EASILY PRINT THESE.
In addition, presenters are to provide the “board of directors/senior management” (i.e. the students in the class and the instructor) with a
handout that gives information about the analysis. This handout should not be more than 3 pages long. For example, if your group
presents a detailed discussion of tables or numbers in PowerPoint (such as an Excel spreadsheet), you should include this in the handout.
At a minimum, presenters must provide a written agenda that contains an outline of the presentation with appropriate speakers identified.
ALL PRESENTERS
KEEP YOUR AUDIENCE IN MIND:

Overheads should look professional
i.e. not hastily scrawled and not in tiny type – use at least 20 point font or higher

Do not read your presentation (although notes may be used)

Speak clearly and enunciate properly

Make your voice PROJECT! Smile and be enthusiastic about your presentation!

Make eye contact with the audience

Talk to the group in an interested and interesting manner

Rehearse your presentation

WATCH YOUR TIME
8
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