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School of Business
 
 F302 FINANCIAL DECISION MAKING
COURSE OUTLINE FOR FALL 2014
(Class #22267 Tu & Th 4:00 - 5:15 p.m. KO 104)

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INSTRUCTOR:
Dianne Roden, PhD
   Office: KO 174G; phone: (765)-455-9470; fax: (765)-455-9348
Office hours: Tu & Th  2:30-4:00 and 5:30-7:00 p.m. or by appointment
WEB PAGE:
Roden's Home Page
email EMAIL: droden@iuk.edu

 TEXTBOOK:   ross
                            text        Ross, Westerfield & Jaffe, Corporate Finance, 10th edition 
 The student companion website for the textbook includes chapter summaries and on-line quizzes.  text website

TI
                            BAII PlusOPTIONAL:
At Solutions Manual for Corporate Finance will be on reserve in the library.
A calculator is necessary to do the assignments and exams. A financial calculator is strongly recommended.
Assistance with financial calculators can be found at: www.tvmcalcs.com 


PREREQUISITE:
F301

EXAMS: There will be three exams, two during the semester and one during the final exam period.

first midterm Sept 30
in class
second midterm Nov 4
in class
Final exam Dec 16 4:00-6:00 p.m.

There will also be a project which involves analyzing a publicly traded company. This project is described more fully at the end of this syllabus.
(Description of Project)

Your grade will be determined based on the following weights:

first midterm 25% 75 points
second midterm 25% 75 points
Final Exam
25% 75 points
Project 15% 45 points
Participation
10%
30 points
TOTAL 100% 300 points

Exam format will contain some multiple choice, some short answer, and a number of problems similar to the ones assigned in class.

CLASS PARTICIPATION: Problems and questions from the text will be assigned each week and the solutions discussed in class. Participation in this process, other class discussions, and general attendance will impact this portion of the grade.

GRADES: A 90-100%, B 80-89%, C 70-79%, D 60-69%, F < 60%
(plus and minus grades will be given in the high & low range of each group)
Grades will be posted on Oncourse at:      http://oncourse.iu.edu

GOALS:
This course covers application of financial theory and techniques in the search of optimal solutions to financial management problems. The course expands upon and extends the topics introduced in Financial Management F301. In addition, the student will be exposed to specialized topics including options, hedging, futures, mergers, and financial distress.

OBJECTIVES:

  • Demonstrate proficiency in the application of discounted cash flows in a capital budgeting setting. Advanced topics in capital budgeting will be addressed.
     
  • Use and understand mean/variance analysis to facilitate work in an environment where risk and return are related. Students will be familiar with applications of the Capital Asset Pricing Model.
     
  • Learn strategies for successful short-term financial planning. Be able to calculate the optimal level of cash balances.
     
  • Use the Black-Scholes model to value and understand options.
     
  • Understand the use of forward and future contracts to hedge against risk.
     
  • Comprehend the possible motivations for mergers and acquisitions. Be able to value an acquisition target.
     
 The structure of this class makes your individual study and preparation outside class extremely important. You will get much more from the lectures if you attempt the problems on your own and you come to class prepared.

LIBRARY RESOURCES:  The IUK library offers a large variety of resources to supplement this course. Examples include current newspapers (Wall Street Journal), magazines (Business Week), databases (Mergent Online), and access to the Internet.  IUK library

Mission Statement of the IUK School of Business: may be found at:    mission

Indiana University Kokomo provides equal access and support services to students with special needs. Students with documented disabilities should contact the Accessibility Center (765-455-9301) and discuss any necessary support services or accommodation with the instructor. 

 

WEEK DATE TEXT TOPIC & ASSIGNMENT
C=Concept Questions & P=Problems at end of each chapter
1 Aug 26
 
Aug 28
intro 

ch 6
introduction & overview
 
Net Present Value
2 Sept 2
 
Sept 4
HW 

ch 7
ch6 C#2,3     P#2,3,10,15,18,19 

capital budgeting strategy 
3 Sept 9
 
Sept 11
HW 

ch 10
ch7 C#2,5,6,9     P#3,4,5,6,7,9,25       investment idea 

risk and return 
4 Sept 16
 
Sept 18
HW
 
ch 11
ch10 C#3,5,6      P#1,2,4,9,10,17,20      Ch11 P#3,5,9

CAPM
5 Sept 23
 
Sept 25
HW 

review
ch11 C#1,4,5,6     P#11,12,15,16,26,28,32   

review for first exam
6 Sept 30
 
Oct 2
EXAM I 

ch 13
EXAM I 

cost of capital
7 Oct 7
 
Oct 9
HW 

ch 22 
ch13 C#1,2,3,6,10     P#1,3,5,11,12,16 

options
8 Oct 14
 
Oct 16
HW
 
ch 23
ch22 C#1,2,4,5,6    P#2,6,10,15 

option applications
9 Oct 21
 
Oct 23
no class

HW
FALL BREAK

ch22 C#14,15    ch23 C#1,2,6,9    P#1,4,5
10 Oct 28
 
Oct 30
ch 25

HW 
hedging & futures

ch25 C#1,3,7,10,12    P#2,4,7,8,9,13
11 Nov 4
 
Nov 6
EXAM II

ch 26
EXAM II

short-term finance
12 Nov 11
 
Nov 13
HW

ch 27
ch26 C#3,4,5,6,8,10    P#2,6,10,11

cash management
13
Nov 18
 
Nov 20
HW

ch 29
ch27 C#1,2,6,7      P#2,3,7,9,11,12

mergers & acquisitions
14 Nov 25

Nov 27
projects

No class
work on projects

THANKSGIVING
15 Dec 2
 
Dec 4
HW 

ch 30
ch29 C#2,3,8    P#1,7,13,14,15

financial distress
16 Dec 9
 
Dec 11
HW 

review
ch30 C#1,3,5,6,9    P#1,2,3,4           PROJECT DUE 

review for final exam
17 Dec 16
FINAL

FINAL EXAM
 
FINANCIAL DECISION MAKING PROJECT

The purpose of this project is to give you an opportunity to consider the topics covered in Financial Decision Making in a real world context and to familiarize you with sources of publicly available financial information found in the library and on the web. This project will determine 15% of your final course grade. You may work alone or with one other person on this project.

The final typed report will be due in class on Dec 9. No late reports will be accepted. The reports may vary in length, depending on the company chosen. However, each report must include all seven sections described below.

Select a publicly traded company for analysis. It may be beneficial to select a company you are interested in for employment purposes, have worked for, have family ties with, or that you currently invest in. It will be easiest to find information if the firms is listed on a major exchange and is included in the Mergent Online database (available through the IUK library website) database link

Each report must contain a section devoted to the following topics:

1) Introduction: Why did you choose this firm? Describe the type of business, including major competitors and the overall industry outlook.

2) Financial Health: Report standard financial ratios for the last five years and identify and discuss financial strengths and weaknesses of your firm. Identify any trends and compare to industry or competitors' ratios.

3) Recent Events: Review public sources to find public announcements that have directly or indirectly affected the market value of the company. Discuss the events and the market response.

4) Market Risk: Collect stock price information and report the monthly rates of return for the stockholders over the last five years. Calculate beta for the firm's equity and compare it to a publicly available beta. 

5) Debt Policy: Collect information on the long-term debt that the company has outstanding. Compare the current yield to maturity on the debt relative to the yield for Treasury securities with similar maturity. What credit rating does the company's debt have?

6) Cost of Capital: Calculate the weighted average cost of capital the company should use for capital budgeting projects that expand capacity in its core business. Discuss recent capital budgeting decisions that the company may have made or may be considering.

7) Summary: Comment on the position of the company relative to its competitors. Put yourself in the position of an investor and evaluate the prospects of the company. Would you invest your money in this firm?
 

INTERESTING FINANCE WEB SITES
 

BIG CHARTS 
historical stock quotes
big charts
CNN MONEY 
business news and stock quotes
cnn money
OPTION PRICING CALCULATOR 
calculates option values
OPTION CALCULATOR
WALL STREET JOURNAL 
interactive version
wsj
GOOGLE FINANCE
stock market quotes and financial news
Google Finance
YAHOO FINANCE
a
one-stop financial center
yahoo
OTHER COOL WEB SITES 
lots of interesting finance & econ web sites
FUN FINANCE SITEScool
 
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