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Магистратура 2019/2020

Финансовая экономика II: Финансы корпораций

Статус: Курс обязательный (Финансовая экономика)
Направление: 38.04.01. Экономика
Когда читается: 2-й курс, 1 семестр
Формат изучения: без онлайн-курса
Преподаватели: Золина Анна Петровна, Степанов Сергей Сергеевич
Прогр. обучения: Финансовая экономика
Язык: английский
Кредиты: 4

Course Syllabus


The core of the course is the analysis of investment (capital budgeting) and financing (capital structure) decisions of a firm. We will first discuss the principles and techniques of selecting investment projects. Secondly, we will examine the determinants of the capital structure choices by firms as well as the notion of the optimal capital structure. We will then discuss how to value a company, taking into account its capital structure. We will also analyze how firms decide on their payouts to shareholders and what the optimal payout policy should be. Finally, we will cover initial public offerings, mergers and acquisitions, and corporate governance. Prerequisites: Financial Economics I (Asset Pricing), Microeconomics
Learning Objectives

Learning Objectives

  • The main objective of the course is to present the modern approach to the financial analysis of a company and to teach the principles and techniques of evaluating the most important corporate decisions.
Expected Learning Outcomes

Expected Learning Outcomes

  • Explain the basic principles and concepts of accounting
  • Apply the main techniques of project evaluation
  • Use techniques of real option valuation
  • Evaluate the effect of leverage on the cost of equity
  • Able to compute tax advantage of debt, explain the trade-off theory of capital structure
  • Assess the overall risk profile of a firm which operates in multiple lines of businesses
  • Compare various approaches to assess the value of a company
  • Employ financial data to create valuation models
  • Use real options valuation techniques
  • Explain the motives, sources of value creation, and negotiation aspects of M&A transactions
  • Explain firms’ motives to go public, IPO mechanisms, IPO pricing and performance
  • Outline the relations between capital structure and agency problems in a firm
  • Evaluate the effects of asymmetric information on capital structure choices of companies
  • Able to evaluate payout policies
  • Outline the key corporate governance mechanisms and their effect on the cost of external capital and value of companies
Course Contents

Course Contents

  • Introduction.
    Notion of corporation, financial statements
  • Fundamentals of capital budgeting
    a. Refresher on time value of money and discounting, risk and return, CAPM b. Basic investment decision rules (NPV, IRR, payback period, etc.) c. Evaluating a project: forecasting earnings, determining cash flows, computing NPV, sensitivity and scenario analyses
  • Basics on financial options and real options
  • Capital structure. Perfect world
  • Capital structure. Effects of taxes and costs of financial distress
  • Business risk and bottom-up beta
    Students learn two different sources of firm risk - business risk (i.e., unlevered CAPM beta) and financial risk - and how they interact to influence firm risk and cost of capital. We discuss the empirical methods to estimate the overall risk profile of a firm which operates in multiple lines of businesses. Particularly, students will learn how to choose comparables (pure plays) and to unlever/relever CAPM beta to assess a firm's risk profile.
  • Discounted cash flows model (DCF) versus multiples valuation
    Students learn various approaches to assess the value of a company. The course will put emphasis on two major approaches and their hybrid - discounted cash flows (DCF) model and multiples (i.e., relative) valuation. Students are expected to learn how to employ historical, financial data to create their valuation models. Students will discuss pros and cons of each of these approaches. In particular, the course will provide in-depth discussions on the validity of the underlying assumptions for each approach. Valuation will be done in various circumstances, for example, public equity, mergers and acquisitions (M&A), and leverage buyout (LBO).
  • Real options under uncertainty
    Students will learn how to value enterprises under high uncertainty. Several types of real option models will be discussed – decision trees and Black-Scholes option pricing – to incorporate high uncertainty into valuation. We will discuss the validity and interpretation of real option models
  • Mergers and acquisitions (M&As)
    The course will provide the overview of M&A determinants, deal process, and outcomes. - What is M&A? - Why do firms do M&As? What determines the price of the deal? - How do various stakeholders (shareholders, bondholders, employees, etc) respond to M&A? Students will also gain understanding on a corporate governance perspective on M&A. Students are expect to gain understanding on sources of M&A synergies and how to incorporate into deal valuation. Based on deal valuation, students will discuss acquirer versus target managements' negotiation strategies.
  • Initial public offerings (IPOs)
    Students will learn details of initial public offering (IPO) process. In particular, in-class discussions will focus on the followings: - What is IPO? How do firms go public? - Why do some firms go public while others do not? - What determines the price of IPO shares?
  • Capital structure. Effects of agency problems
  • Capital structure. Effects of asymmetric information
  • Payout policy
  • Corporate governance
Assessment Elements

Assessment Elements

  • non-blocking Home Assignments
  • non-blocking Cases (including evaluation of presentations)
  • non-blocking Midterm test
  • blocking Final exam
Interim Assessment

Interim Assessment

  • Interim assessment (1 semester)
    0.2 * Cases (including evaluation of presentations) + 0.45 * Final exam + 0.15 * Home Assignments + 0.2 * Midterm test


Recommended Core Bibliography

  • Corporate finance, Berk, J., DeMarzo, P., 2014

Recommended Additional Bibliography

  • Financial markets and corporate strategy, Hillier, D., Grinblatt, M., 2012
  • Financial theory and corporate policy, Copeland, T. E., Weston, J. F., 2005
  • The theory of corporate finance, Tirole, J., 2006