The
FNCE 100—Corporate Finance
Fall 2004—Sections 4,5,6
Course Description
This course provides an introduction to the theory and
practice of the major financial decisions made by corporations. The topics
covered in this course include the time value of money and the net present
value rule; capital budgeting principles and problems; valuation of bonds and
stocks; risk and the trade-off between risk and return; corporate financing and
payout decisions; and option pricing.
Class Schedule
Section 4: Monday/Wednesday
Section 5: Monday/Wednesday
Section 6: Monday/Wednesday
Instructor: Patrik Sandås
Office: SH-DH 2429
Phone: (215) 898-1697
E-mail: sandas@wharton.upenn.edu
Course web page: http://finance.wharton.upenn.edu/~sandas
Office Hours: Mondays
Books
R.A. Brealey and S.C. Myers, Principles of Corporate Finance, 7th edition, McGraw-Hill, 2002.
(Referred to as BM below).
Selected Solutions and
Study Guide to accompany Brealey and Myers’ Principles of Corporate Finance (NewYork:
McGraw-Hill/Irwin, 2002).
The latter is a special version of the study guide that includes solutions to the problems at the end of chapters 1-25 in Brealey and Myers. The combined price is only a few dollars more than the price for the book itself and much cheaper than buying the book, the study guide, and the solutions manual separately.
A course pack, which contains three case studies and the readings,
will be available from Wharton Reprographics. Please note that lecture notes,
problem sets, solution keys to the problem sets, sample exams and other
material will be posted on the course web page.
Evaluation
There will be one midterm exam counting for 30% and a final exam counting for 40% of your final grade. If you show significant improvement on the final exam compared to the midterm exam the weights will change to 10% for the midterm and 60% for the final exam. A significant improvement is defined as an improvement in class ranking by 20 percentiles or an improvement in exam score of 20% or more. There are six problem sets that will count for 15% of your final grade. There are two case write-ups that will count for 15% of your final grade.
If illness should force you to miss an exam, please contact
me before the exam is given.
Case Write-Ups
You may work in groups of three or four students for the case write-ups. All group members should be from the same section of the course—please come and see me if you wish to work with someone in a different section. I will provide more detailed instructions for the case write-ups in class.
Problem Sets
There will be seven
problem sets. To obtain full credit for the problem sets you need to hand in,
on time, an acceptable solution to each of the first six problem sets—you do not need to hand in a solution to the last
problem set. The first six problem sets will be graded. You will get full
credit if your solution shows that you made a good-faith effort to solve all questions
on the problem set. Your solution must be handwritten. I will post solutions to
each problem set on the course web site about a week after the problem set is
due. The teaching assistants will also review
the solutions to each problem set in their weekly review sessions.
Calculators and
Spreadsheets
The recommended calculator for this course is the HP 10BII
calculator. An alternative is the TI BAII Plus calculator. More advanced
calculators, Palm Pilots, or any device with download capabilities are not
allowed in the course. You will need to know EXCEL at a basic level in order to
write the case write-ups.
Teaching Assistants
A list of the teaching assistants and a schedule of their
office hours and review sessions will be posted at the beginning of the second
week on the course web page.
Academic Integrity
The University's Code of Academic Integrity is designed to ensure that the principles of academic honesty and integrity are upheld. All students are expected to adhere to this Code. Please visit the following website for more information on the University's Code of Academic Integrity: http://www.vpul.upenn.edu/osl/acadint.html
Problem-set solutions and case write-ups must be your own
original work. You may not use solutions prepared by someone else including current
or former students. In your case write-ups you may, however, use some types of information
from outside sources. If you use information from outside sources in your case write-up,
you must properly cite those sources. Please note that you are allowed to
discuss the problem sets or case studies with other students, including students
in other case groups. The problem set solutions and the case write-ups that you
hand in, however, must only reflect your own original work.
Tentative Course Calendar
Mon 9/13 Financial Market and Net Present Value: BM Ch. 2, Note 2
Wed 9/15 How to Calculate Present Values: BM Ch. 3, Note 3
Week
3
Mon 9/20 How to Calculate Present Values (continued): BM Ch. 3, Note 3, R3
Problem Set #1 due in class
Wed 9/21 How to Value Stocks: BM Ch. 4, Note 4, R4
Week
4
Mon 9/27 Competing Capital Budgeting Criteria: BM Ch. 5, Note 5
Problem Set #2 due in class
Wed 9/29 Applying the NPV Rule: BM Ch 6, Note 6
Week 5
Mon 10/4 Ocean Carriers Case (no write-up due)
Problem Set #3 due in class
Wed 10/6 Risk and Return: BM Ch 7.1-2, Note 7
Week 6
Mon 10/11 Diversification: BM Ch. 7.3-5, Note 8
Problem Set #4 due in class
Wed 10/13 Portfolio Theory: BM Ch. 7.3-4, 8.1, Note 9
Week 7
Mon 10/18 Capital Asset Pricing Model: BM Ch. 8.2-3, Note 10
Problem Set #5 due in class
Wed 10/20 Capital
Budgeting using the CAPM: BM Ch 9 (11,12), Note 11
Week 8
Mon 10/25 Fall Break—No Class
Wed 10/27 No regular class—Q&A during class time
Midterm Exam,
Week 9
Mon 11/1 Market Efficiency: BM Ch 13, Note 12
No problem set due
Wed 11/3 Issuing Securities: BM CH 14,15, Note 13, R5
Week 10
Mon 11/8 Payout Policy: BM Ch 16, Note 14, R6
Eskimo Pie Case Write-Up due in class
Wed 11/10 Case Discussion
Week 11
Mon 11/15 Capital Structure: BM Ch. 17, Note 15
No problem set due
Wed 11/17 Capital Structure (continued): BM Ch 18, Note 15
Week 12
Mon 11/22 Financing and Valuation: BM Ch 19, Note 16
Problem Set #6 due in class
Wed 11/24 Financing and Valuation (continued)
Week 13
Mon 11/29 Options: BM Ch 20.1-3, Note 17
No problem set due
Wed 12/1 Option Pricing: BM Ch 20.4-5, Note 18, R7
Fri 12/3* UST
Inc. Case Write-Up due in my office
by
Week 14
Mon 12/6 Case Discussion
No problem set due
Wed 12/8 Option
Pricing: BM Ch 20.4-5 (continued), Note 18
Week 15
Mon 12/13 Final Review
Session I,
Final
Review Session II,
Wed 12/15 Final Exam: