University of Pennsylvania

The Wharton School

 

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 9:00-10:30 in SH-DH 215      

Section 5: Monday/Wednesday 10:30-12:00 in SH-DH 215

Section 6: Monday/Wednesday 12:00-1:30 in SH-DH 215

 

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 4:00-5:00pm, Tuesdays 8:00-10:00am, and by appointment. You can ask questions via e-mail at any time.

 

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

Week 1

Wed 9/8        Introduction: BM Ch. 1, 2.4-5, Note 1, R1&R2

 

Week 2                    

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, 6:00-8:00pm


 

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 5 p.m.

 

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, 9:00-10:30 a.m., Room TBD

                        Final Review Session II, 4:30-6:00 p.m., Room TBD

 

Wed 12/15      Final Exam: 4:00-6:00 p.m. , Room TBD