University of Southern California
Foundation of Business Finance
BUAD 215
Spring 2006
Building: HOH 101
MW: 8:00-9:50 a.m.
Instructor: Dr. J. Kashefi “Dr. Kash”
Course Web Page: WWW.drkash.com
Please turn-off your cell phone.
Course Assistance:
Room: Hoffman Hall 702 L
Telephone:(213) 740-8864
Cal Poly: (909) 869-2396
Fax:
(213) 740-6650
E-mail:
Jkashefi@cox.net or Dkashefineja@csupomona.edu
Please note my website e-mail does not work.
Office hours: MW 7:00-7:45 am and Monday 12:00-1:00 pm.
Catalogue Description:
Principles and practices of modern financial management; use of financial statements;
valuation of investment; asset pricing under uncertainty; and elements of financial
decisions. Not available for credit to business majors. (4 units) Prerequisite:
BUAD 100 and ACCT 410 (no exception).
Course Description:
This course is primarily designed to introduce non-business majors to fundamentals of
corporate finance. It explains the procedures, practices, and policies by which
financial managers contribute to the successful performance of organization. The
course also provides students with knowledge of key finance concepts and theoretical
principles relating to the time value of money, the effects of debt and dividend policy
on firm value, the operation of financial markets, and the operation of foreign
exchange markets. In addition, the course is intended to provide students with the
tools to calculate the value of stock and bond investments, to evaluate investments in
productive firm assets, to assess the risk of investments, to determine the cost of
capital for firms and for individual projects, and to calculate exchange rates across
different national currencies.
Academic Integrity:
The University is committed to maintaining academic integrity throughout its
academic units. Academic dishonesty is a serious offense that can diminish the
quality of scholarship, the academic environment, the academic reputation, and the
quality of a USC degree. Please read the University catalogue to learn about academic
dishonesty at the University of Southern California and to the responsibility of
students, faculty, and administrators relating to this subject.
Disability Services and Programs (DSP)
"Any student requesting academic accommodation based on a disability is
required to register with Disability Services and Programs (DSP) each
BUAD 215 – Foundations of Business Finance
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semester. A letter of verification for approved accommodations can be
obtained from DSP. Please be sure the letter is delivered to me (or to
TA) as early in the semester as possible. DSP is located in STU 301 and
is open 8:30 a.m. - 5:00 p.m., Monday through Friday. The phone number
for DSP is (213) 740-0776."
Text Requirement:
Title:
Author:
Publisher:
Date:
Essentials of Corporate Finance
Stephen Ross, Randolph Westerfield & Bradford Jordan
Irwin/McGraw-Hill
2007, Fifth Edition
Course Requirements:
Readings:
You are responsible for the following readings in preparation for class participation
and examinations.
Reading the assigned topics, as outlined in the lecture schedule, from chapters in the
required textbook.
Homework:
1. The homework assignment and due dates will be announced during the class
meeting.
2. Please make sure your homework is legible and shows all your calculations (not
just the answer!). Please print your name and ID/SS number on each homework
assignment.
3. There are absolutely no points for late homework. If you cannot attend the class
when homework is due, please fax it to the department before 10:00 a.m. of the
due dates. E-mail attachment will not be accepted.
Quizzes:
There are three quizzes in this course, which are equally weighted. Each quiz will
cover the material discussed in class and presented in the textbooks. Questions will be
in multiple-choice essay and problems. Questions will be similar to those listed at the
end of each chapter in the textbook. Please make a careful note of the quiz dates as
listed in the lecture schedule because there is absolutely no make-up test!
Examinations:
There is one mid-term and one final examination in this course. The final examination
is comprehensive. Each exam will cover material discussed in the class and textbook.
Questions will be in the forms of multiple-choice essay and problems. The problem
section will contain questions similar to those recommended in the lecture schedule.
Please make a careful note of the examination dates as listed in the lecture schedule
because there is absolutely no make-up test!
Examination Policy:
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All exams are closed book and closed notes.
You are required to follow all instructions given on the cover sheet of each test. Failure to
do so may result in not receiving credit for correct answers.
It is your responsibility to check your test to ensure that no pages are omitted. The cover
sheet to each test will explain how many pages there are to the test, how many questions
are included in the test, and how many points are assigned to each question.
BUAD 215 – Foundations of Business Finance
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You are responsible to check the number and sequence of the pages of each test. If your
test is missing a page, ask the instructor for a new test. Requests for re-grades because
pages are claimed to have been missing from a test will not be accepted.
If you have any questions during a test, raise your hand and ask the instructor. No
discussion with other class members will be allowed during a test.
You may be asked to change seats during a test. This does not necessarily mean that you
are suspected of cheating.
You may be asked to show proper identification before, during, or after a test. You are
required to bring your university student picture identification to each test.
No programmable calculators or palm-held computers are allowed during a test.
You cannot leave the classroom after examinations are distributed. Please turn-off
your pager and cell phone.
No partial credit will be awarded for objective questions.
Requests for grade changes for such reasons as “I am only 2 points from a B” or “I need a
few more points to be admitted into the Business School” will not be considered.
If you change your answer on the scantron sheet, it is your responsibility to properly erase
any other answers you had previously selected. Scantron sheets that are misgraded
because of poor erasure marks will not be re-graded.
Grading Policy:
Grades are determined in the following format:
Class attendance
Homework
Three quizzes
Mid-term Examination
Final Examination
Total
10 percent
10 percent
15 percent
25 percent
40 percent
100 percent
Important Dates:
Date
Events
Jan 16, 2006
Feb. 20, 2002
March 20, 2006
March 13-17, 2006
May 8, 2006
No Class
No class
Mid-term Examination
Spring recess
Final Examination
BUAD 215 – Foundations of Business Finance
Lecture Schedule:
Jan 9
Checking Student List
Review of Course Outline
Chapter 1: Introduction to Financial Management
Finance: A Quick Look
Business Finance and The Financial Manager
Jan 11
Chapter 1: Introduction to Financial Management
Forms of Business Organization
The Goal of Financial Management
The Agency Problem and Control of the Corporation
Financial Markets and the Corporation
Jan 16
Martin Luther King Day, university holiday
Jan 18
Chapter 2: Financial Statements, Taxes, and Cash Flow
The Balance Sheet
The Income Statement
Taxes
Jan 23/25
Chapter 3: Working with Financial Statements
Jan 30/ Feb 1
Chapter 4 Introduction to Valuation: The Time Value of Money
Future Value and Compounding
Present Value and Discounting
Feb. 6/8
1st Quiz Chapters 1-3
Chapter 5: Discounted Cash Flow Valuation
Future and Present Values of Multiple Cash Flows
Valuing Level Cash Flows: Annuities and Perpetuities
Feb 13
Chapter 5: Discounted Cash Flow Valuation
Future and Present Values of Multiple Cash Flows
Valuing Level Cash Flows: Annuities and Perpetuities
Feb 15
Chapter 6: Interest Rates and Bond Valuation
Bonds and Bond Valuation
More on Bond Features
Bond Ratings
Some Different Types of Bonds
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BUAD 215 – Foundations of Business Finance
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Feb 20 No class
Feb 22
Chapter 6: Interest Rates and Bond Valuation
Bonds and Bond Valuation
More on Bond Features
Bond Ratings
Some Different Types of Bonds
Feb 27
Chapter 7 Equity Markets and Stock Valuation
Common Stock Valuation
Some Features of Common and Preferred Stock
March 1
Chapter 7 Equity Markets and Stock Valuation
Common Stock Valuation
Some Features of Common and Preferred Stock
Quiz 2
Chapter 4-6
March 6
Chapter 7: Equity Markets and Stock Valuation
Common Stock Valuation
Some Features of Common and Preferred Stock
March 13-15
Spring recess
March 20 Mid-term Examination: Chapters 1-7
March 22/27
Chapter 8: Net Present Value and Other Investment Criteria
Net Present Value
The Payback Period Rule
The Internal Rate of Return
The Profitability Index
The Practice of Capital Budgeting
March 29
Chapter 9: Making Capital Investment Decisions
Pro Forma Financial Statements and Project Cash Flow
Evaluating NPV Estimates & additional Considerations
Scenario and Other What-If Analyses
April 3
Chapter 10: Some Lessons from Capital Market History
Returns
Average Returns
BUAD 215 – Foundations of Business Finance
The Variability of Returns
Capital Market Efficiency
Quiz 3. Chapter 8- 10
April 5
Chapter 11: Risk and Return
Expected Return and Variances
Portfolios
Risk: Systematic and Unsystematic
April 10
Chapter 11: Risk and Return
Diversification and Portfolio Risk
Systematic Risk and Beta
The Security Market Line
April 12
Chapter 12: Cost of Capital
The Cost of Capital
The Cost of Equity
The Costs of Debt and Preferred Stock
April 17
Chapter 12: Cost of Capital
The Weighted Average Cost of Capital
Divisional and Project Costs of Capital
April 19
Chapter 14: Dividends and Dividend Policy
Cash and Dividend Payment
Does Dividend Policy Matter?
Establishing a Dividend Policy
Stock Repurchase
Stock Dividends and Stock Splits
April 24
Chapter 15: Raising Capital
Corporate Taxes and Capital Structure
Bankruptcy Costs
Optimal Capital Structure
Observed Capital Structure
April 26 Review for Final Exam
Final Examination:
Comprehensive covering all
of the chapters covered.
Monday May 8
11:00-1:00 p.m.
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