Corporate Finance

 

Semester Autumn
Level 11
Credit Value 20
Module Co-ordinator Dr Kevin Campbell
Contact Hours The module will be delivered by means of Lectures, Problem-Solving sessions and Drop-in sessions.  There will be three hours of weekly Lectures, a one hour weekly Problem-Solving session and a one hour weekly Drop-in session.
Assessment Assessment will comprise a one and a half hours' duration multiple choice test (50 per cent of the module grade) and a final examination (50 per cent of the module grade) of one and a half hours' duration . The multiple choice test and the final exam will contain both numerical and discursive questions and will enable students to demonstrate their knowledge of both corporate finance theory and the application of this theory to practical problem-solving.

 

Objectives

The primary aim is to provide an understanding of the major decision areas of corporate finance and how these affect the value of the firm. A secondary aim is to develop analytical skills and apply them to financial problems. The module will involve an examination of both the theory and the practice of corporate financial decision-making.  Upon completion of the module students will have met learning outcomes from levels I, II and III of the CFA® Program Candidate Body of Knowledge in respect of Corporate Finance.

Learning outcomes

Knowledge and understanding of:

1.             Understand the nature of the ‘agency problem’ in finance and its implications for corporate governance.

2.             Identify the basic principles of investment decision-making.

3.             Understand the concept of the time value of money and use it to calculate the present

                and future values of a variety of cash flow patterns. 

4.             Appraise an investment by calculating its Net Present Value (NPV), Internal Rate of

                Return (IRR), payback period, discounted payback period and Profitability Index (PI). 

5.             Compare the relative merits of the above investment appraisal methods.

6.             Determine the fair value of shares and bonds.

7.             Calculate the value of growth opportunities embedded in share prices. 

8.             Understand the relationship between risk and return, both for individual shares and for portfolios.

9.             Understand the basic principles of modern portfolio theory.

10.          Explain the theoretical underpinnings of the Capital Asset Pricing Model (CAPM).

11.          Calculate CAPM beta values and use the CAPM to calculate risk-adjusted discount rates.  

12.          Understand the intuition behind factor pricing models, including the Fama-French asset pricing model.

13.          Explain the meaning and implications of the efficient markets hypothesis (EMH).

14.          Distinguish the characteristics of the major forms of long-term debt and equity financing.

15.          Identify different methods of raising equity capital.

16.          Calculate the impact on shareholders’ wealth of rights issues.

17.          Understand the procedures adopted when shares are sold by an IPO or by a rights issue.

18.          Understanding why underpricing often occurs in an IPO.

19.          Explain the effect of a rights issue on the share price.

20.          Explain the significance of capital structure for company valuation.

21.          Explain the Modigliani and Miller propositions concerning capital structure.

22.          Describe the sources of bankruptcy costs.

23.          Calculate the weighted-average cost of capital.

24.          Describe alternative theories relating to the impact of dividend policy on shareholders’ wealth.

25.          Calculate the impact of dividend payments on the value of a firm and on shareholders’ wealth.


Generic Skills:

  • numeracy, through the manipulation and interpretation of financial data
  • methodical working through planning and prioritisation
  • effective listening
  • effective time management and the ability to work under pressure

Cognitive Skills:

  • the ability to analyse information  and solve structured problems
  • the ability to identify arguments and think critically

Division: Accounting & Finance

 

 

 


This module information is representative of what is included in the module in a given year. Details of actual reading, lectures and coursework may vary year to year and will be available at the beginning of the semester.

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