Fundamentals of Corporate Finance (BUS–342)



Professor Cyrus Ramezani

Summer 2006



Contact Information:                                                             http://cyrus.cob.calpoly.edu

Office: 03-451                        Email: cramezan@calpoly.edu             Phone: 756-1168                   

Course Call No. 10230          Classroom and Time: 03-111,  TTH 10:10-12:30 PM

Office Hours: TTH 1:30 – 2:30 (and by appointment)

COURSE DESCRIPTION: Corporate Finance deals with the choices that have financial implications for firms' owners and stakeholders. The primary issues that corporate finance addresses are:

·        How should the resources of the firm be allocated among alternative projects (investment decisions)

·        How should current operations and new projects be funded (financing decisions)

·        How should the firm select among risky projects in an efficient manner (risk management)

·        How much of the cash flows generated from the firm’s investments should be returned to the owners and how much should be reinvested (dividend decision)

·        How should the contracts among various parties in the firm be structured and designed (contracting decision)

In this course we analyze these decisions. We will also discuss issues related to corporate social responsibility and ethics. Finally, we will make use of technology (spreadsheets).

PREREQUISITES: A grade of C or better in all of the following: ECON-222, MATH-221, STAT-252, BUS-215. Junior standing required. If you have not completed these requirements, you must speak with the professor as soon as possible.

LEARNING OBJECTIVES: This course will introduce you to the theories and techniques of managing capital resources and uses within the framework of shareholder wealth maximization. A substantial part of the course is devoted to the proper methods of computing cash flows and determining market values. In addition, we will examine the sources of capital available to businesses and learn how to allocate assets efficiently.



COURSE INFORMATION:

a. Text Book: Fundamentals of Corporate Finance by Ross, Westerfield, and Jordan, 7/e. A study guide is available for the text but is optional. Copies of the overhead transparencies will be available from the course web page shortly.

b. Calculator: A financial calculator is required. I recommend the TI-BA II Plus. We will also make use of Excel (spreadsheet program).

b. Exams: There will be at least three exams over the course of the term. The exams may be any combination of multiple choice, essay/short answer, and problems. While the exams are not cumulative, per se, the material in the later chapters builds on the material from earlier chapters.

c. Homework Problems: Homework is assigned from the end-of-chapter problems in your textbook. These problems are to be completed on your own and need not be turned in. These problems will be very similar to those appearing on the exams and the final. The aim is to help you understand the materials and to prepare you for the exams. I will provide solutions to selected problems.

e. Grades: Your grade is to be determined based upon the following:

      In Class Exams                                                           40-50%

Final                                                          40-50%

Attendance                                                10%



GRADING RANGES:

                        A         100 – 90

                        B+         89 - 87

                        B            86 - 80

                        C+         79 - 77

                        C           76 - 70

                        D           69 - 60

F            Below 60

g. Additional Course Materials:  I will create a course web page this week. All pertinent information will be posted.  Please be sure to have a valid e-mail address and to check e-mail for course announcements.

h. While every case is considered on an individual basis, No make-up exams or grades of Incomplete will be given in the course.  If for unavoidable professional/personal emergencies, a scheduled exam cannot be taken, you will need to provide valid proof or obtain prior approval.  In such cases, the weight of the remaining projects may be increased appropriately.  Students are encouraged to contact me early to work out specific difficulties.

i. Teaching Philosophy: My goal is to see you learn. Grades are carrots that encourage learning. There are many shades of grade and I will not hesitate to give poor grades when your performance warrants it. I want you to do well and I use a straight scale so that lots of people can get A's if the class as a whole is highly motivated. Thus, I will do my best to help you understand the material and to do well on the exams. I realize that this is “Summer Term,” that you have a busy schedule (working and having fun), that you may need this course to graduate, and that you may face other difficulties that prevent you from studying. All of this makes it more important to get involved early in the term. This will be a difficult course but we are going to have lots of fun as well. The course will cover a lot of material and you will be overwhelmed if don't keep up with the readings. I expect you to work hard because the material will help you do better in your career. Your dedication and hard work will pay off in your first job. Learning is for keeps. The ideas in the course are some of the most important in business and require that you really work hard to understand the material. There are some courses where common sense and a few midnight cram sessions will get you a decent grade. This is not such a course.

ADMINISTRATIVE MATTERS:

a. Class sessions will be primarily devoted to lectures and discussion of assigned materials.

b. Important to keep in mind: 1) keep up with the reading, 2) attend all class sessions, 3) keep up with email announcements, and 4) visit with me or the course tutor during office hours if you are experiencing difficulty with the material.

c. Students requiring any special assistance or accommodation to complete this course should speak to me as soon as possible.

ETHICS AND ACADEMIC DISHONESTY:

We all hate to cover this topic, so you can simply keep in mind the following: No copying others’ work. No plagiarism. No cheating.

Once in awhile, someone is caught cheating. I always do everything in my power to make them pay for it (starting with an F for the course, reporting the student to the appropriate campus administrators, which leads to being kicked out with embarrassing fan fair). I do not like cheating because it penalizes those who are honest and work hard.

COURSE OUTLINE:

The tentative outline for the course follows.  This may be modified and additional material introduced, depending on the needs, interests, and progress of the class.

Date

In-Class Work

June 20

Intro & Chapter 1

June 22

Chapter 1 and 2

June 27

Chapter 2

June 29

Chapter 2 & 5 (Handout on TVM)

July 6

EXAM 1

July 11

Mortgages Handouts and Chapter 6

July 13

Chapter 6

July 18

Chapter 7

July 20

Chapter 8

July 25

EXAM 2

July 27

Chapter 9

August 1

Chapter 10

August 3

Chapter 12

August 8

Chapter 12 & 13

August 10

Chapter 13 & Review