Syllabus
Corporate Finance 7330
Prof. Nisan Langberg
nlangberg@uh.edu
Course Description
This course offers a theoretical analysis of the decisions faced by corporate financial officers. In
particular, both investment decisions (“capital budgeting”) and financial decisions (e.g., how to raise
funds and how much to repay investors) are explored. Several more specialized topics may be covered if
time permits, such as mergers and acquisitions, corporate governance and real options.
My goal for this course is that at the end students will be able to apply state of the art techniques to
solving the types of problems faced by managers making investment and financing decisions. Students
will evaluate investment projects while taking into account uncertainty, tax consequences, and financing
effects. Students will study the financial structure decision while taking into account taxes, bankruptcy
costs, information signaling and conflicts of interest.
Course Web Site
Material will be posted on line. Students are encouraged to visit the class web site – specific URL will be
provided in class. On the class web site students can find lecture notes beforehand – I recommend that
students printout the class notes before they come to class each week. Also, handouts, announcements,
and other class materials will be posted throughout the semester.
Textbook
The text book for the course is
Corporate Finance by Jonathan Berk and Peter DeMarzo, Addison-Wesley, 1st or 2nd edition
Another excellent text book is
Principles of Corporate Finance by Richard Brealey, Stewart Myers, and Franklin Allen, McGraw-Hill, 8th
edition (or higher), 2006
Most of the material covered in class can be found in the text book. The text book also contains
numerous real life examples, exercise problems and additional topics in corporate finance that we will
not cover in this course. Students might find the book useful for better understanding the material
covered in class but also for in-depth coverage of other related topics. The text book is a good
investment for all students that seek to work in the area of finance and have an interest in corporate
finance. I have asked for the text book to be reserved in the library.
Academic Honesty
While encouraged to work in groups on homework assignments, I consider it a violation of academic
honesty to sign one’s name to an assignment if the assignment was completed substantially by others.
Homework
Homework assignments are designed to practice the concepts that are covered in the lectures and in the
readings. They also offer a chance for students to apply new concepts to more complicated situations
than are appropriate for the lectures. It is recommended to work on the homework assignments in
groups (of at most four people). Remember to visit the class web page to be current on the due dates.
Late homework will not be accepted. If you are unable to attend class, you may submit homework via
email any time prior to the beginning of class or you can slide it under my office door. If you send
homework by email remember to write the homework and section numbers in the subject line.
Office Hours
I will hold office hours in my office upon appointment or you can approach me at the end of the class. I
encourage you to email me any questions you may have to allow faster feedback.
Grades
The course grade will be based on homework assignments, discussion questions, and the case
presentation (the breakdown by percentages will be provided in class).
Discussion questions
I will hand out discussion questions throughout the course. All discussion questions are answered via
email and count as a bonus for the final grade.
Course Outline
A tentative time line is provided below. The actual material covered in class might change and the
course might not eventually cover all the material intended due to time constraints.
Tentative timeline
Week
July 11
July 18
July 25
August 1
Monday
Wednesday
Friday
Topic: Introduction and
Capital Budgeting
Reading: Ch. 7
Topic: Capital structure in
perfect capital markets
(Modigliani Miller
propositions)
Reading: Ch. 14
Assignment: Discussion
question DQ1
Topic: Practice questions
(work in groups)
Assignment: Homework 1&2
chapters 7/14
Topic: Capital structure with
corporate tax and valuation
of the Interest tax shield
Reading: Ch. 15
Assignment: Discussion
question DQ2
Homework 1&2 due
Topic: Financial distress and
the Asset substitution
problem
Reading: Ch. 16
Homework 3 due
Topic: Capital Budgeting
with Leverage
Reading: Ch. 18
Assignment: Discussion
question DQ3
Topic: Practice questions
(work in groups)
Assignment: Homework 3
chapters 15/18
Topic: Capital Budgeting and
Leverage an example
Reading: HBS case Whirlpool
Europe
Assignments: work in groups
homework 4 chapter 16
Topic: work in groups
Reading: HBS American
Chemical Corporation
Topic: Stock valuation
exercise
Reading: Ch. 9
Homework 4 due
Topic: Student Presentations
Assignment: HBS case
American Chemical
Corporation
Case due