Corporate Financial Strategy and Governance

  • 16-weeks
  • 3 credits
  • Prerequisite: F303 and F305 with grades of C- or better

Advanced treatment of corporate financial management. Covers all major areas of corporate financial decisions: capital budgeting, dividends, capital structure, cash-flow projections, mergers, and acquisitions.

Learning Objectives:
I. Capital budgeting    
   A. With and without capital rationing    
   B. Projects with unequal lives    
   C. Replacement decisions    
   D. Dealing with uncertainty (sensitivity analysis, simulation, decision trees)    
   E. Project and asset betas    
   F. Projects with option-like features    
   G. Characteristics of positive NPV projects
II. Dividends    
   A. Stylized facts about dividend policies    
   B. Types of dividends, tax treatments    
   C. Modigliani and Miller irrelevance    
   D. Miller "Debt and Taxes"    
   E. Dividends as a signal    
   F. Dividends as a solution to agency problems    
   G. Evidence: market reactions to dividends
III. Capital structure    
   A. Restructuring trends, junk bonds, use of leverage in practice    
   B. Types of debt or quasi-debt instruments    
   C. Agency costs (free cash flow, disciplinary role of debt, stockholder/manager/bondholder         conflicts)    
   D. Option pricing view of corporate debt    
   E. Financing decisions as signals
IV. Financial analysis/projections    
   A. Ratio analysis    
   B. Pro forma financial statements to predict financing needs    
   C. Cash budgets    
   D. Accounting vs. economic profit
V. Mergers and Acquisitions    
   A. Trends in number, size, and financing of deals    
   B. Motivations for takeovers    
   C. Market responses to takeovers    
   D. Defensive tactics    
   E. Valuation of potential targets  

Typical Text:  Corporate Finance, Ross Westerfield, and Jordan

Kelley School of Business

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