Fin 357 Business Finance -Riutort

FIN 357: Business Finance 71315

Fall / 2009 UTC 4.104 T//Th 11:00AM-12:30PM

Instructor: Julio Riutort CBA 3.332M, [email protected] Office Hours: TTH 1:00-2:30

I. Course Goal and Objectives: Goal The ultimate goal of this class is for you to learn how to approach financial problems and develop an appreciation for the usefulness of financial theories in decision making. Both big multinational corporations and any average investor often face similar problems. Simplifying things, these problems are about how to allocate money. This is what finance is about, how to make the best money allocating decision when there are many available alternatives. Finance 357 introduces concepts and analytical techniques to identify and solve financial management problems. It serves as the basis for all other courses in the area of finance as well as providing those basic tools that every business student will need to be successful in her/his chosen career. Those students majoring in marketing, management and accounting, as well as those going further in the study of finance, will find this material an essential part of their business education. Regardless of the student’s chosen career, these tools and techniques will provide the basic tools to make personal financial decisions.

Objectives:  Understand the usefulness of the theories of modern financial management,  Develop the student’s financial decision-making skills,  Provide an overview of financial management theories and practices.

II. Format and Procedures: This is going to be a relatively intense class. As such I expect you to fully engage in this class and participate actively during the lectures, both actively or passively, and allocate a fair amount of time to study between classes. The lectures are designed to provide an understanding of the major elements of finance. The emphasis is on the logic underlying each concept, on how each concept is used in finance, and on how the concepts are interrelated.

III. Course Requirements: 1. Class attendance and participation policy: It is expected an appropriate classroom behavior, that is, respect for everyone involved. I understand class participation as “personal”, if you don’t particularly like to voice your opinion I don’t expect you to do so, and no part of your grade is going to be related to it. However, during class, and to gather feedback on your progress I may ask any of you to participate.

2. Course readings: Required text: Corporate Finance by Ross, Westerfield and Jaffe, 8th ed. McGraw-Hill Irwin. (RWJ) Recommended reading: Wall Street Journal (C section); Business Week; The Economist.

3. Assignments: I will give you a list of questions to work on each topic. These are not going to be graded but are intended to help you make sure you understand the concepts covered in class. In addition to these, we will have a number of in-class short quizzes based on the previous questions. These quizzes will not be graded but are also intended to help you check your understanding of the various topics. 4. Calculator: Each student is required to bring a calculator to all classes and tests. Any calculator with a x y button will be enough. Laptop computers will not be allowed in class or exams. Although a business calculator is not needed for the course, I encourage you to obtain one for future course work in finance, accounting, and other business courses. A student business calculator (such as HP 10bII, TI BAII Plus or calculators with similar capabilities) should be adequate for all business courses. Because of the variety of calculators used, students will be expected to learn how to use their calculator on their own.

5. Course Web Page: Course material will, in general, be distributed through the course web page on Blackboard. Please familiarize yourself with Blackboard, and print the handouts before class. http://courses.utexas.edu/

IV. Grading Procedures:

Grades will be based on: (a) Midterm exams (600 points, 300 each). Two in-class midterm exams. a. Midterm 1: September 24th. b. Midterm 2: October 29th. (c) Final exam (400 points). University-wide final exams schedule.

Grade Appeals: All grades are assigned after a careful examination of the work submitted. Appeals to grading of mid-term exams can be made after 24 hours but less than two weeks from the time when the grades are put up. The appeals should be made in writing. The final exam will not be returned. Students wanting to review their final or appeal their overall semester grade must do so in writing during the first two weeks of the following semester. Requests must clearly state your reasons for objecting to your assigned score on a particular question. In making your request, please keep in mind that the whole exam is subject to re-grading.

Exam Rules: You can also bring one formula sheet (one-side, 9” x 11”). Writing down any information other than formulas will be considered cheating. No laptops are permitted during the exams. You can bring in a calculator. There will be no exceptions to rescheduling the midterm and final exam dates (internship searches and travel are not acceptable excuses). Students missing exams for valid (e.g., medical /bereavement) reasons must notify me in advance, where possible, and provide documentation if requested. An example of a documented excused absence is a note from the doctor saying that you are physically UNABLE to attend the exam, NO EXCEPTIONS. There is no make up for exams. If you cannot take one midterm, that percentage will be added to the grade percentage of your final exam. There will be no make-up exam for the final and it may not be taken at an alternative time for any reason. In particular, failure to take the final exam at the scheduled time and place that you are signed up for without an approved, documented excuse will automatically result in failing grade. A documented, excused absence at the final will result in an Incomplete being assigned.

Failure to turn in exams when requested / minute purchase: I will give notice when the time for an exam has expired. Students will have two minutes to complete their work and turn in their exams. After that, students will have the option of purchasing up to five (5) additional minutes at a cost of 4 points per minute. For example: a student that decides to “purchase” 4 additional minutes and has everything correct in the exam will have a score of 300 – 16 = 284 points in the exam.

Grade Distribution: Your letter grade for the course will be based on your ranking in the course (i.e., the curve). The distribution will be about 15-25% A to A-, 40-50% B+ to B-, 15-25% C+ to C-, and 10% D+ or below. I will make adjustments to the grade distribution based on the performance of the class as a whole. If all of you do a good job during the semester, then none of you should expect a bad grade.

V. Academic Integrity Each student in this course is expected to abide by the University Code of Academic Integrity. Any work submitted by a student in this course for academic credit will be the student's own work. During examinations, you must do your own work. Talking or discussion is not permitted during the examinations. Any “collaborative behavior” during the examinations will result in failure of the exam, and may lead to failure of the course and University disciplinary action.

The McCombs School of Business has no tolerance for acts of scholastic dishonesty. The responsibilities of both students and faculty with regard to scholastic dishonesty are described in detail in the Policy Statement on Scholastic Dishonesty for the McCombs School of Business:

By teaching this course, I have agreed to observe all of the faculty responsibilities described in that document. By enrolling in this class, you have agreed to observe all of the student responsibilities described in that document. If the application of that Policy Statement to this class and its assignments is unclear in any way, it is your responsibility to ask me for clarification. Policy on Scholastic Dishonesty: Students who violate University rules on scholastic dishonesty are subject to disciplinary penalties, including the possibility of failure in the course an/or dismissal from the University. Since dishonesty harms the individual, all students, and the integrity of the University, policies on scholastic dishonesty will be strictly enforced. You should refer to the Student Judicial Services website at http://deanofstudents.utexas.edu/sjs/ or the General Information Catalog to access the official University policies and procedures on scholastic dishonesty as well as further elaboration on what constitutes scholastic dishonesty.

The University of Texas Honor Code The core values of The University of Texas at Austin are learning, discovery, freedom, leadership, individual opportunity, and responsibility. Each member of the University is expected to uphold these values through integrity, honesty, trust, fairness, and respect toward peers and community.

VI. Accommodations for students with disabilities In compliance with the UT Austin policy and equal access laws, I am available to discuss appropriate academic accommodations that may be required for student with disabilities. Requests for academic accommodations are to be made during the first three weeks of the semester, except for unusual circumstances, so arrangements can be made. Students are encouraged to register with Student Disability Services to verify their eligibility for appropriate accommodations.

The University of Texas at Austin provides upon request appropriate academic accommodations for qualified students with disabilities. For more information, contact the Office of the Dean of Students at 471-6259, 471-4641 TTY.

VII. Tentative Course Outline:

The mayor topics and their corresponding text chapters are shown below.  Introduction to Corporate Finance. RWJ, Ch. 1. o Corporate finance o The Corporate firm o Agency problems and control of the corporation o Financial markets  Perfect Capital Markets, Basic. RWJ, Ch. 4-5-6-7. o TVM and NPV o Stock and bond valuation o Annuities and perpetuities o Investment rules (NPV, IRR, payback, PI) o Time varying interest rates, inflation, and the yield curve  Perfect Capital Markets with Risk Aversion. RWJ, Ch. 9-10-11-12 o Uncertainty, default and risk o Investments, historical perspective o Portfolio choice basics, risk and reward, diversification o CAPM  Imperfect Market. RWJ, Ch. 13. o Market imperfections o Efficient markets  Capital budgeting in detail. Extensions. RWJ, Ch. 2-3-7-8 o Common mistakes in capital budgeting o Project interactions o From financial statements to cash flows o Comparables  Capital Structure. RWJ, Ch. 14-15-16-17-18-19-20 o Corporate claims o Idealized capital structure (M&M) o Corporate taxes o More market imperfections  If time allows… o Options in corporate finance o Mergers and acquisitions o Financial distress o International corporate finance

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