Course: Advanced Corporate Finance

Management Module MN20211

Year: Year 2, Semester 2

Objective

This module aims to extend discussion of the issues raised in MN10311 concerning a firm’s investment and financing decisions. Subjects covered will include- choosing between investment alternatives, Mergers and Acquisitions, Project Finance, Funding with debt and equity, Decision Trees and Real Options and Behavioural Finance.

Course Structure

The course will consist of 11 double lectures per week that all students are expected to attend. The lectures will cover the basic information. Students will be expected to have attempted on their own any of the problems that may have been set each week. Attempting these questions will be important as it provides an opportunity to try problem solving without any risk if the answer is wrong (contrast this with the exam environment), raise questions concerning areas not fully understood and to flesh out the subject of corporate finance.

Assessment

Assessment is by one two-hour examination.

Recommended course book is:

Advanced Corporate Finance, a textbook compiled by Fairchild and Birts from Corporate Finance, Jonathan Berk and Peter DeMarzo. Publisher, Pearson

Referred to as ACF for the readings for each session.

Note: This course outline is designed to give a little more detail on what will be covered in the sessions given by Mr A N Birts and should be read in conjunction with the overall course outline.

Lecturers: Mr A N Birts

X 3675

WH 8.56

And Dr Richard Fairchild

X3456

WH 8.52

Course outline

Sessions 1 & 2

Introduction to Corporate Finance

-  What is it?

Revision

-  What you should remember from a year ago

-  Capital budgeting

-  Process of choice

-  Payback, ARR, NPV, IRR

-  The correct method to use

-  CAPM

-  WACC

Then moving on, how to apply the NPV approach

Free cash flows

-  WACC vs APV vs FTE

Reading: ACF Chs 1-7 and 18

(Assumed you know CAPM theory If you do not, then any good finance textbook or Berk and DeMarzo, Corporate Finance: The core. Chs 10 to 12)

Session 4

Funding

- Debt vs Equity (brief revision)

-  Equity, the process

-  Debt

Short, trade finance

Long, bonds

Reading. ACF Chs 14 and 15, chs 23. For more general information on Bonds ch 24 in Berk and DeMarzo Corporate Finance or any other standard finance textbook.

Session 7

Mergers and Acquisitions

-  What are they

-  Waves

-  Why

-  Types

-  Valuation

-  Form of offer

Reading: ACF Chs 28 and 19

Session 8

Project Finance

-  Definition

-  SPV

-  Characteristics

-  Why?

-  Risk analysis

-  Funding

Readings. Corporate Financial Management, Glen Arnold 3rd ed, pgs 554 -555, 612. pub by FT Prentice Hall. Multinational Business Finance, Eitman, Stonehill and Moffett 11th ed, pgs451 – 456. Pub by Pearson.

http://www.people.hbs.edu/besty/projfinportal/ http://en.wikipedia.org/wiki/Project_finance

Political Risk, Development Banks and the Choice of Recourse in Syndicated Lending. Christa Hainz and Stefanie Kleimmeier. Electronic copy available athttp://ssrn.com/abstract=1539996

Course notes

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