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Regular version of the site
Bachelor 2023/2024

Corporate Finance

Type: Elective course (Economics)
Area of studies: Economics
Delivered by: School of Finance
When: 4 year, 3 module
Mode of studies: offline
Open to: students of all HSE University campuses
Instructors: Aglaia Kokurina, Alina Kostochko, Yulia Ovanesova, Nikita Pirogov, Veronika Vinogradova
Language: English
ECTS credits: 3
Contact hours: 40

Course Syllabus

Abstract

This intermediate course in corporate finance focuses on theoretical issues and core concepts in modern corporate finance. The goal of the course is to make students familiar with key theories and how they can be used to solve real world challenges. It also aims at developing the analytical skills for making corporate investment decisions. The major themes of the course will cover such topics as firm's capital structure, pay-out decision, capital budgeting and M&A. The major activities of the course include lectures, classes, quizzes, groupwork project and self-study.
Learning Objectives

Learning Objectives

  • 1) Understand and apply principles of modern financial analysis
  • 2) Be able to discuss different stakeholders’ goals as a source of agency conflicts
  • 3) Understand and apply capital budgeting techniques when making investment decisions
  • 4) Be able to discuss the logic of capital structure decisions and understand how market imperfections influence capital structure decisions
  • 5) Understand corporate payout decisions and be able to discuss market reaction to dividend payout
  • 6) Be able to discuss logic of risk management decisions and sources to increase company value
  • 7) Be able to discuss M&A motives and value creation via restructuring
Expected Learning Outcomes

Expected Learning Outcomes

  • - Explain the tasks of financial managers and difference between financial and accounting models of corporate analysis - Explain the concept of firm value and how it is measured - Discuss the types of stakeholders in the firms and the importance of strong corporate governance
  • - Evaluate different projects using NPV rule, IRR, payback period and PI index, and make investment decisions
  • - Derive and discuss the Modigliani-Miller theorem - Analyze the impact of taxes on Modigliani-Miller proposition - Explain the role of tax shield in firm valuation and be able to calculate its value - Understand and be able to calculate WACC and levered and unlevered beta
  • - Discuss the major theories of capital structure and role in the decision making process - Explain the impact of market imperfections and agency cost on cost of financial distress and managers' incentives - Understand and be able to deal with debt overhang and risk-shifting problems
  • - Show that dividend policy is irrelevant to firm valuation under Modigliani-Miller propositions - Discuss the stylised facts of dividend policy as provided by Lintner - Present the clientele model of dividends - Explain the effect of asymmetric information and agency cost on dividend policy
  • - Understand and be able to apply different major methods used in capital budgeting (WACC, APV, FTE) - Calculate the project-based cost of capital - Differentiate between different methods and be able to make the choice appropriately - Be able to adjust calculation in case of changing leverage and periodically adjusted debt
  • - Differentiate and be able to explain different types of risks facing the corporation (interest rate risk, exchange rate risk, changes in commodity prices, etc.) - Explain how the firm can deal with risk and how it can reduce its exposure - Explain the costs and benefits of hedging - Show how the company can hedge risk with long-term contracts, futures and options - Show how the company can hedge interest rate risk and exchange rate risk
  • - Explain why corporations participate in M&A and what drives merger waves - Understand how the stock prices of bidders and targets react around the time of acquisition announcements - Discuss the argument of Grossman–Hart (1980) regarding the impossibility of efficient takeovers - Explain the concept of NPV of the deal - Outline the major synergies which companies want to achieve in the M&A transactions - Explain how the company can protect itself from hostile takeovers
Course Contents

Course Contents

  • I. Introduction: modern company and its environment
  • II. Net Present Value and investment decisions
  • III. The choice of capital structure
  • IV. The optimal capital structure, agency cost and asymmetric information
  • V. Payout policy
  • VI. Capital budgeting and valuation with leverage
  • VII. Valuation and risk management policy
  • VIII. Mergers & Acquisitions and corporate restructuring
Assessment Elements

Assessment Elements

  • non-blocking Quizzes
  • non-blocking Home Assignments
  • non-blocking Group project
  • non-blocking Mid-term test
  • non-blocking FinalExam
Interim Assessment

Interim Assessment

  • 2023/2024 3rd module
    0.35 * FinalExam + 0.2 * Group project + 0.1 * Home Assignments + 0.25 * Mid-term test + 0.1 * Quizzes
Bibliography

Bibliography

Recommended Core Bibliography

  • Berk, J. B., & DeMarzo, P. M. (2017). Corporate Finance: The Core, Global Edition: Vol. Fourth edition. Pearson.
  • Pierre Vernimmen, Pascal Quiry, Maurizio Dallocchio, Yann Le Fur, & Antonio Salvi. (2018). Corporate Finance : Theory and Practice. Post-Print. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.hal.journl.hal.02298273

Recommended Additional Bibliography

  • Principles of corporate finance, Brealey, R. A., 2020