Chapters refer to Brealey, R., and S. Myers. Principles of Corporate Finance. 7th ed. Irwin/McGraw Hill. ISBN: 0073368695. Articles in the reading packet are referenced using the authors’ last names. The study questions listed after each class are recommended, not required, and can be found at the end of the chapter under “Practice Questions.”
| SES # | TOPICS | KEY DATES |
|---|---|---|
| Part 1 - Introduction | ||
| 1 |
Introduction
What is Finance? What Types of Questions Will We Answer? |
Chapter 1
Dial, J. and K. Murphy. Incentives, Downsizing, and Value Creation at General Dynamics. Journal of Financial Economics 37, 1995, pp. 261–314. |
| 2 |
Principles Of Valuation
Opportunity Cost Of Capital; Present Value; Discount Rates; Comparables |
Chapter 2, 3
Study Questions: |
| Part 2 - Project and Firm Valuation | ||
| 3 |
Evaluating Projects
Net Present Value; Measuring Cashflows, Using Accounting Data |
Chapter 6, 12.1 - 12.3 Myers, S. Finance Theory and Finance Practice. Interfaces 14, 1984, pp. 126-137. Reprinted in Midland__Corporate Finance Journal 5, Spring 1987. Study Questions: |
| 4 | Case | Reinhardt, Forest. Acid Rain: The Southern Co. (A). Boston, MA: Harvard Business School, 1993. Case No. 9-792-060. |
| 5 |
Evaluating Projects (2)
Real Options, Internal Rate Of Return |
Chapter 5, 10, 11
Study Questions: |
| 6 |
Firm Valuation
Growth and Free Cashflows |
Chapter 4
Study Questions: |
| 7 |
Firm Valuation (2)
Valuation Models, Accounting vs. Economic Returns |
Chapter 12.4 - 12.6
Kim, M. and J. Ritter. Valuing IPOs. Journal of Financial Economics 53, 1999, pp.409-437. Study Questions: |
| 8 | Case | Piper, Thomas R. Cooper Industries, Inc. Boston, MA: Harvard Business School, 1993. Case No. 9-274-116. |
| Part 3 - Risk and Return | ||
| 9 |
Introduction to Risk and Return
Historical Evidence; Measuring the Risk of a Portfolio; Statistics Review |
Chapter 7 (pp. 153-165)
Study Questions: |
| 10 |
Portfolio Theory
Risk in a Portfolio Context, Diversification; Optimal Portfolios |
Chapter 7 (165-end), 8.1
Study Questions: |
| 11 |
CAPM
Quantifying the Trade-off between Risk and Return; Measuring the Risk of a Stock |
Chapter 8.2 - 8.5
Study Questions: |
| 12 |
Discount Rates in Practice
Estimating Betas, Market Risk Premium, Multifactor Models, WACC |
Chapter 9 Graham, J. and C. Harvey. The Theory and Practice of Corporate Finance: Evidence From the Field. Durham, NC: Duke University Working Paper, 2000, pp. 1-10. Study Questions: |
| 13 | Case | Mitchell, Mark. Cost of Capital at Ameritrade. Boston, MA: Harvard Business School, 2001. Case No. 9-201-046. |
| Part 4 - Financing Policy | ||
| 14 |
Raising Capital
Sources of Funds; Trade-offs; Empirical Evidence; Stock Market Reaction |
Chapter 14, 15
Smith, C. Raising Capital: Theory and Evidence. Midland Corporate Finance Journal 4, pp. 6-22, 1986. |
| 15 |
Capital Structure (1)
The Choice between Debt and Equity; MM Theorem; Leverage and Risk; Fallacies |
Chapter 17
Graham, J. and C. Harvey. The Theory and Practice of Corporate Finance: Evidence From the Field. Durham, NC: Duke University Working Paper, 2000, pp. 10-22. Study Questions: |
| 16 |
Capital Structure (2)
Taxes and the After-Tax WACC, Financial Distress, Debt Overhang |
Chapter 18, 19.1 - 19.4
Myers, S. The Search for Optimal Capital Structure. Midland Corporate Finance Journal 1, 1983, pp. 6-16. Reprinted in D. Chew, Ed. _The New Corporate Finance: Where Theory Meets Practice._McGraw Hill, 1993, pp. 142-150. Bank of America Roundtable on the Link between Capital Structure and Shareholder Value. Journal of Applied Corporate Finance 10 (2), 1997. Reprinted in D. Chew, Ed. The New Corporate Finance: Where Theory Meets Practice, 3rd edition. McGraw Hill, 2001, pp. 247-274. Study Questions: |
| 17 | Two Cases |
Mitchell, Mark L., and Janet Mitchell. UST, Inc. South-Western College Publishing, 1996. ISBN No. 0-538-85800-1. Baldwin, Carliss Y., Scott P. Mason, and Jennifer H. Hughes. Massey-Ferguson Ltd. - 1980. Boston, MA: Harvard Business School, 1990. Case No. 9-282-043. |
| 18 |
Market Efficiency
Empirical Evidence; Implications for Corporate Managers |
Chapter 13
Ball, R. The Theory of Stock Market Efficiency: Accomplishments and Limitations. Journal of Applied Corporate Finance 8, 1995, pp. 4-17. Study Questions: |
| Part 5 - Miscellaneous Topics | ||
| 19 |
Options Risk Management, Option Strategies, Black-Scholes Model, Implied Volatility |
Chapter 20, 21 Case: Tufano, Peter, and Michael Lewittes. Sally Jameson: Valuing Stock Options in a Compensation Package. Boston, MA: Harvard Business School, 1993. Case No. 9-293-053. Study Questions: |
| 20 | Final Exam | Exam |
