CORPORATE FINANCE
- Overview
- Assessment methods
- Learning objectives
- Contents
- Full programme
- Bibliography
- Delivery method
- Teaching methods
- Contacts/Info
There are no explicit prerequisites. A good understanding of basic Principles of Corporate Finance, Accounting and Financial Statements and Financial Mathematics is however recommended.
Final written test, which lasts an hour and a half, divided as follows:
• 3 theoretical questions (9 points), to test the knowledge of definitions and basic principles of Corporate Finance
• 3 exercises (15 points), , in order to verify the application of financial instruments for projects’ and firms’ valuations
• 4 multiple-choice questions (9 points), to test reasoning ability.
For the purpose of passing the exam is necessary to achieve a score of at least 18 points over 30. The student can obtain the highest score (30 over 30 cum laude) if he obtains the maximum score (30 over 30 points).
Mid-term exams are not scheduled.
The course covers a selection of the major advanced topics of corporate finance, focusing on some of the “pillars” of Corporate Finance:
a. the investment policy;
b. financing decision;
c. the dividend policy;
d. firm valuation.
We will examine the variables and the main algorithms to estimate the value of firms. We also focus on issues related to the complex choices of capital budgeting (real options and under uncertainty) and to the decisions on the composition of the firms’ financial structure and their impact on firms’ value.
At the end of the course the student will be able to know and understand the main economic and financial variables used to estimate the value of a company.
Results of estimations should be analysed by the student in order to make a judgment related to the acceptability or otherwise of an investment or financing decision. For example: whether or not to replace the firm’s car fleet, purchasing a new machine for the production chain, compare the cost of a debt issue and a share issue, to assess M&A operations.
1. Review of the course content of Principles of Corporate Finance (undergraduate cours) (10 hours)
1.1 Basic elements of capital budgeting
1.2 The capital budgeting’s criteria
1.3 The estimation of cash flows
2. Advanced topics in capital budgeting (6 hours)
2.1 Sensitivity analysis
2.2 Break even point analysis
3. Real options and decision trees (6 hours)
3.1 Extended NPV
3.2 The valuation of real options
4. The firm’s capital structure (6 hours)
4.1 The propositions of Modigliani-Miller
4.2 The weighted average cost of capital
4.3 The effect of corporate taxes
4.4 The effects of the collapse, the agency conflicts and information asymmetries
5. The capital budgeting for levered firms (6 hours)
5.1 Investments’ valuation for levered firms
5.2 The debt’s tax shield
5.3 The debt’s capacity
5.3 How much should a firm borrow?
6. Special topics of corporate finance (6 hours)
6.1 The dividend policy
6.2 International corporate finance
6.3 The firm’s valuation
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The course material required is as follows:
• For a review of basic capital budgeting is recommended: R.A. or Brealey, Myers S.C., Allen F. and S. Sandri, “Principles of Corporate Finance” [it], McGraw-Hill, Milan, 2015, 7th edition, chaps. 2, 5 and 6, or a similar handbook available at the Library of Economics.
• For all students: R.A. or Brealey, Myers S.C., Allen F. and S. Sandri, “Principles of Corporate Finance” [it], McGraw-Hill, Milan, 2015, 7th edition.
Required parts will be indicated in class and reported within the syllabus/timetable on e-learning platform.
Other materials (slides of the lectures, tutorials and study materials) will be progressively available online on e-learning platform.
No other teaching materials (handouts, summaries, etc..) are authorized by the teacher.
Teaching lessons and exercises, for a total of 40 hours.
No other forms of supplementary teaching are scheduled.
OFFICE HOURS
• Room #20, first floor, Department of Economics, Via Monte Generoso, 71 – Varese
• During the whole academic year office hours is scheduled weekly. The calendar will be displayed on the teacher’s webpage (https://www.uninsubria.it/hpp/andrea.uselli).