The module provides a foundation to understanding key issues in corporate finance. The module will first examine the nature of the modern corporation and the context of corporate financial decision making. Stating with basic concepts such as time value of money and understanding and measuring risk and return, the module will introduce student to aspects of investment decisions - choosing between various investment opportunities. The course will also very briefly cover financing decisions - choosing the optimal mix of financing methods and payout decisions -choosing to return funds back to shareholders and how these affect firm value. Techniques to estimate the cost of capital - an important determinant of firm value, will be introduced and the complexities involved in its calculation will be discussed.
Corporate finance theory and frameworks are internationally applicable. Different countries are however are approaching corporate responsibility issues at vastly different paces and through different means. Some of these aspects will be discussed during the lecture
Finance is a key element in many management decisions. This module develops your skills and confidence to understand and evaluate the opinions, forecasts and financial decision making of company management and the views and opinions of analysts, particularly in relation to financial risk and returns and generating value to shareholders and other stakeholders
Research in Teaching:
Theoretical discussion will be complemented, where appropriate, with insights from theoretical and empirical research in finance/corporate finance.
Full module specification
|Module title:||Corporate Finance|
|Duration of module:||
Duration (weeks) - term 3: |
The general aim of this module is to develop a foundation to understanding the key issues in corporate financial decision making. It provides a grounding in aspects of corporate finance theory and equips you with the necessary tools to evaluate the implications of corporate finance decisions for firm value.
ILO: Module-specific skills
- 1. explain the objectives of the firm and the main aspects of corporate financial decision making.
- 2. explain the concept of cost of capital and how to estimate this for a firm.
- 3. evaluate the attractiveness of investment projects based on expected cash flows and cost of capital.
- 4. evaluate the issues involved in choosing the optimal mix of various financing alternatives.
- 5. evaluate the issues the issues involved in choosing payout policies.
ILO: Discipline-specific skills
- 6. develop arguments based on analytical reasoning.
- 7. rigorously analyse problems in corporate finance.
- 8. interpret and analyse financial data and relate these to established theories.
ILO: Personal and key skills
- 9. plan and manage independent study and research, and communicate effectively in writing.
- 10. make effective use of learning resources, databases, spreadsheets and associated tools.
- 11. critically analyse problems in academic and practical contexts
- 12. plan and manage their own study both individually and within a group.
Topic 1 - The firm, its objectives and the decision making environment.
Topic 2 - Cost of capital
Topic 3 - Capital structure
Topic 4 - Payout Policies
Topic 5 - Capital budgeting.
Indicative learning resources - Basic reading
Software: MS Excel or alternative.
Recommended textbooks:Textbook is not compulsory for this module.If you want to buy any, the recommended textbooks are.
First Option: Brigham, E and Houston, J.: Fundamentals of Financial Management, South Western Cengage Learning, 12th Edition (or later) referred to as (B&H).
Advanced Text: Aswath Damodaran: Applied Corporate Finance. (Editions 1-4).
Reading: All readings (urls below) are compulsory and required for in class discussion. In addition to these, there are links to relevant materials (shown in teal color) on the lecture slides, it is expected that you will read them prior to the lectures.
An overview of Corporate Finance: (required for the first day of the course)
Corporate Finance in 30 minutes: a Guide for Directors and Shareholders, Mercer capital (2016):
Topic 1 -The firm, its objectives and the decision making environment
- The Real Business of Business, McKinsey on Finance , No 53, Winter 2015: https://tinyurl.com/ycbfjpk5
- Measuring the Economic Impact of Short-Termism, Mckinsey Global Institute , Feb 2017: https://tinyurl.com/ycxpsyoh
Topic 2 - Cost of Capital
- The Real Cost of Equity Capital, McKinsey on Finance , Autumn 2002: https://tinyurl.com/y7bgy87p
Topic 3 - Capital Budgeting
- Avoiding a risk premium that unnecessarily kills your project, McKinsey on Finance, August 2012: https://tinyurl.com/yahl4lx2
- The Art of capital Allocation, BCG, March 2017: https://tinyurl.com/y83cthzk
Topic 4 – Capital Structure
- The Theory and Practice of Corporate Capital Structure, Deutsche Bank, Jan 2006: https://tinyurl.com/yb99zbju (Pages 1-3 only)
- Making Capital structure follow strategy, McKinsey on Finance, Winter 2006: https://tinyurl.com/y7xnv77s
Topic 5 – Payout Policies
- Paying Back your Shareholders, McKinsey on Finance, May 2011: https://tinyurl.com/y7xaa6vb
- The value of Share buybacks, McKinsey Quarterly, No 3, 2005: https://tinyurl.com/ybv6ql57
Textbook Chapters: The textbook is not compulsory, but the relevant chapters from B&H are indicated below.
The Firm and its Objectives: B&H Chapter 1 (Sections 1, 3, 4 and 8)
Cost of Capital: B&H Chapter 10
Capital Budgeting: B&H Chapter 11.
Capital Structure: B&H Chapter 14
Payout policy: B&H Chapter 15
Last revision date