Finance 612
Texas A&M University: MBA Term 2, 2003-2004
The objective of the Finance 612 sequence is to develop a framework for corporate financial decision-making, and to provide a solid grounding in the principles and practice of financial management. Relatively little is assumed in the form of prerequisites: basic statistics, algebra, basic financial accounting, and a general interest in the world of business around you. The first half of the course (2003) examines two broad topics: the behavior of financial markets (emphasizing equity markets), and valuation (emphasizing cash flows, with implications for capital allocation). The second half (2004) examines expected returns, the optimal financing for a corporation (with implications for valuation and capital allocation) and the implications of international capital markets and projects. As befits a graduate course, we consider not just the "how" questions, but also the "why" questions. Much of the course takes the form of lecture/discussion format. Over the course, there are also two in-class games and four case studies.
Reading The basic recommended text for Finance 612 is "Principles of Corporate Finance" by Brealey and Myers (7th edition). Although we will not generally follow the text closely, I feel it is the single best background reference (think encyclopedia), and source for additional in-depth reading on the material available. This text is probably the most internationally respected graduate text in corporate finance. If you do not wish to purchase the text, note that I have put a copy of an earlier edition of this text on reserve at the library. Also at the library reserve are solutions manuals for problems in the text (both the current and earlier editions). Any earlier edition of Brealey and Myers, or, for that matter, any standard graduate-level corporate finance text will also provide you with much the same background reading. A limited amount of additional background material will be provided from the financial press. The overhead (PowerPoint) slides from class are in a required course packet, available at Copy Corner. To buy or not to buy the text? I have attempted to make the slides as self-contained as possible. There are a few topics that will not be covered in class and require independent reading from the text. If your long-term career goals are centered around finance or accounting, you very likely will wish to invest in the book. If you expect to regularly need additional problems to work, you will likely wish to acquire the book. If you would like an independent thought on the decision, I recommend you contact any second-year MBA student. Please note that we will not cover all the topics in Brealey and Myers, and some topics we will cover are not available in any current text (e.g., auctions, entrepreneurship, ethics). Some topics will be assigned as background reading, but will not be covered formally in the lecture. Assessment There are two required problem sets, a midterm, and a comprehensive examination. The two homework sets are due and will be discussed on the "review" days, just before each exam. The course grade in Finance 612 is determined as follows: Case studies 20%, Problem sets 20%, Examinations 60%Note: course letter grades are curved. In other words "A" is not defined as "90%-100%".
In addition to the required problem sets, recommended problems are found in the course packet. Although they will not be collected, I highly recommend these problems to you. These are written to help extend your understanding of material presented in class, and to help prepare you for the required problem sets and examinations. This gives you two sets of problems and solutions: these recommended problem (written by myself), and problems in the textbook (with answers in the library). Cases Two of the cases are Harvard-style cases (#1 Phuket Beach Hotel, and #3 Gulf Oil). Two are less rigidly structured, and requires you to retrieve the needed current data (#2 Duke/TJX Equity valuation, and #4 Heinz). Cases are designed to be learning experiences, and may well be challenging. Grading is conducted with that in mind. Office Hours Course instructor: Charles CunyOffice: 310 J Wehner.
Telephone: 979-845-3656.
Office hours: 4:45-5:45 Wed,
and by appt.
Email: ccuny@cgsb.tamu.edu
Website:
http://wehner.tamu.edu/finc.www/finc-cuny/612.htm
Course assistant: Wesley Symank
Office hours: 11:30-1:30
Tues (Lounge), and by appt.
The schedule for course
meetings is outlined below. Chapters listed refer to chapters in the Brealey
and Myers textbook (7th edition). Chapters marked with an asterisk are
background material that we may not have time to cover in any depth during
class time.
2003
Week Dates Topics Chapters
1 Nov 10, 12 Auction
game, Capital market efficiency 1,
13
2 Nov 17, 19 Market
game, Valuation 2,
3
3 Nov 24, 26 Capital
budgeting, Case 1 5*,
6
4 Dec 1, 3 Equity
valuation/Case 2, Mergers 4,
33, 34*
5 Dec 8, 10 Case
3, Review n.a.
6 Dec 17 Exam
2004
Week Dates Topics Chapters
1 Jan 12, 14 Risk
and return 7, 9
2 Jan 21 Ethics
and entrepreneurship n.a.
3 Jan 26, 28 Capital
structure 14*,
15*, 17, 18
4 Feb 2, 4 Valuation
with taxes, Case 4 19
5 Feb 9, 11, 13 Exchange
rates/international, Review 28
6 Feb 18 Exam
On the quality of information in markets:
McWhortle Enterprises Interesting opportunity
Dave Barry on Enron (There is much truth here.)
For non-course related readings in finance, my two highest recommendations to you are: Burton Malkiel's book A Random Walk Down Wall Street and
Warren Buffett's letters to his Berkshire Hathaway shareholders. Among other insights, Malkiel's book illustrates how little many learn from history. Warren Buffett has become one of the world's wealthiest individuals because of his ability to (a) value assets and (b) re-allocate capital from low-return to high-return investments. Buffett has learned much from history.
Yahoo! Finance Good source of current financial information (and links to primitive sources)
Financial Times of London
Business Eccountant Weekly World business News
Our Friend the Euro
Nasdaq bid/ask orders in real time (Java version is best. This is not the complete order book.)
What Badgers Eat Pretty much self-explanatory, but vital information.
And pretty much everything else is here.