The course provides a sound foundation to understanding key issues in corporate finance. The course 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 course will introduce student to aspects of investment decisions - choosing between various investment opportunities; 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. The course will also examine commonly used security valuation models to estimate the value of the firm. Finally, the course will examine the notion of stakeholder value maximisation and the increasing importance of corporate governance and social responsibility in corporate decision making.
Internationalisation: 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 lectures.
Employability: 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.
Ethics and Corporate Responsibility: The module examines how corporate governance and social responsibility issues impact business financing decisions in current corporate finance transactions.
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 1: |
The general aim of this module is to develop a sound foundation to understanding 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. understand the objectives of the firm, main aspects of corporate financial decision making
- 2. understand the concepts of risk and return and estimate basic measures of risk and return
- 3. understand the concept of cost of capital and how to estimate this for a firm
- 4. evaluate the attractiveness of investment projects based on expected cash flows and cost of capital
- 5. understand the issues involved in choosing the optimal mix of various financing alternatives
- 6. understand issues involved in choosing payout policies
- 7. understand the principles of valuing securities, and the common models used in valuation and how to estimate the inputs to the models
- 8. understand the stakeholder approach to value maximisation and notions of corporate social responsibility
ILO: Discipline-specific skills
- 9. develop theoretical arguments based on analytical reasoning
- 10. rigorously analyse problems in finance
- 11. interpret financial data and problems in the light of established theories
ILO: Personal and key skills
- 12. plan and manage independent study and research, and communicate effectively in writing
- 13. make effective use of learning resources, databases, spreadsheets and associated tools
- 14. critically analyse problems in academic and practical contexts
- 15. 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 - Time value of money.
Topic 3 - Understanding risk and return.
Topic 4 - Cost of capital.
Topic 5 - Capital budgeting
Topic 6 - Capital Structure.
Topic 7 - Dividend policy.
Topic 8 - Equity Valuation Models and issues.
Topic 9 - Rethinking firm objectives - shareholder vs stakeholder value maximisation, corporate governance and social responsibility issues.
Indicative learning resources - Basic reading
Brigham, E and Houston, J: Fundamentals of Financial Management, South Western Cengage Learning, 12th Edition (or later).
Brealey, Richard / Myers, Stewart / Allen, Franklin: Principles of Corporate Finance, newest edition, McGraw Hill.
Aswath Damodaran: Applied Corporate Finance. (Editions 1-4).