Advanced Corporate Finance
In this course we will seek to understand the problems of general business managers, this is a corporate finance course, rather than a course in investments, banking, or personal finance. While elements of these related subjects must be brought to bear, our ultimate focus is corporate policy and business investment. We will revisit a number of concepts you have seen in prior corporate finance and accounting classes. In this course we will focus on practical application of these concepts. We will develop deeper intuition about new and already familiar concepts as apply them to real business problems. Key themes running throughout the course include: (a) How can the firm create and sustain value for its investors? (b) How do managers communicate with investors? And vice versa? (c) How should value be allocated among the firm’s stakeholders? (d) How can corporate finance managers add value to the firm? At the high level the course will focus on the problems of allocating value among all the stakeholders in the firm. Although value can be allocated in many ways, some of the most important are through the choice of financial policies, particularly dividend and debt policies and the choice of major investment strategies, for instance, mergers and acquisitions. We will start from exploring how the management of claims on the assets of the firm creates value. We consider such questions as: how much debt a firm should have in its capital structure? How big a dividend should management pay to investors? How should the firm manage the currency and commodity exposure it faces? The cases in this module emphasize the basic determinants of corporate financial policy: tax shields, financial distress, agency costs, and the need for financial flexibility. We will talk about simple investment decisions such as individual project valuation as well as thinking about a company as a collection of (potentially competing) projects. The possible sources of positive net present values are repeatedly considered, thereby fostering greater recognition of the circumstances in which value is created. The final module illustrates how investment and financing policies can interact by overlaying large investment decisions (mergers and acquisitions) with the decision of how to finance the transaction. This module also serves to review and integrate the entire course by drawing on forecasting, financing and investment skills. By the end of the year, you will be able to determine the value of a corporate enterprise. We will examine a variety of valuation methods and make heavy use of sensitivity analysis. Our emphasis will be on developing a keen instinct for the key issues that affect corporate value and the levers at management’s disposal to enhance value. The grades will be determined based on a weighting of 35 percent class participation performance and 65 percent final exam performance.
Flex exam during week of Feb. 27-Mar. 3, 2017.
*Yes means professor requires everyone in the course to submit a substantial research paper (which is the requirement standard in Academic Policies), so no paperwork required to be submitted to SRO. No means student must timely submit paperwork to SRO if intending to use a paper in this course to satisfy the Writing Requirement.
**Yes indicates course credits count towards UVA Law’s Prof. Skills graduation requirement, not necessarily a skills requirements for any particular state bar.