Delivered at:: Department of Financial Management (Faculty of Economics)

Course type:: Compulsory course

When:: 3 year, 3, 4 module

Instructors

Zharikova, Ekaterina

Rossokhin, Vladimir V.

Ханина Екатерина Владимировна

Full Syllabus

Abstract

The course develops a theoretical framework for understanding and analysis of the major financial problems of the modern company. The course covers the basic models of valuation of capital, including the pricing model of financial and real assets, capital structure, and also involves the study of methods and models for the management of assets and liabilities of the company. This provides the necessary knowledge to assess different management decisions and their impact on the performance and value of the corporation.

Learning Objectives

Know the basic concepts of corporate finance.
Know the methods and models of corporate finance.
To be able to use the basic concepts, methods and models in financial decisions making.
To acquire the skills of analysis of the main factors of company value.
To gain experience in evaluating various approaches to the justification of strategic and cur-rent financial decisions.
To acquire skills of search and selection of effective investment projects.
To acquire the skill of finding the optimal sources of financing.

Expected Learning Outcomes

Knows the concept of present and net present value. Able to calculate the present and net present value.
Able to apply the calculation of the present value to the valuation of financial assets.
Able to apply the criterion of net present value in making investment decisions. Knows alternative criteria used in making investment decisions.
Knows the definition of risk and the concept of opportunity costs of raising capital. Knows the methods of risk assessment based on statistical indicators.
Knows the concept of risk and return. Knows the methods of calculating systematic risk. Able to calculate the discount rate of the project using various models.
Knows the impact of operational and financial leverage on project risk. Able to determine the beta of the project when it is impossible to directly calculate it.
Knows the approaches to risk assessment in evaluating an investment project. Able to assess the sensitivity of the project. Able to manage risk.
Knows the concept of market rent. Knows the stages of the investment process. Owns methods for assessing the effectiveness of management using economic value added.
Knows the concept of capital structure. Compares the impact of dividend policy on the value of the company based on various concepts.
Compares the impact of borrowing policies on company value based on various concepts. Knows the impact of corporate and personal taxes on management actions.Knows the concept of a tax shield.
Owns methods for calculating adjusted present value. He knows the methods of calculating the weighted average cost of capital.

Course Contents

Present value and opportunity costs.
Signs of the corporation. The role of financial manager. Introduction to the theory of present value. NPV. Risks and present value. NPV and profitability. The opportunity cost of raising capital. Capital market: current consumption or future consumption. A perpetual annuity and an annuity.
Valuation of financial assets.
Valuation of bonds according to the rules of net present value. Valuation of shares. Share price and earnings per share. PVGO. Estimation of business value by discounted cash flow method.
Criterion of net present value in making investment decisions and its advantages.
Methods for assessing the effectiveness of investments: balance sheet profitability, return on investment. Internal rate of return and investment decision making based on the IRR criterion. The choice of investment programs in conditions of limited resources.
Risk, profitability and opportunity costs.
Risks and returns of various instruments. Risk measurement: variance and standard deviation. Portfolio risk and diversification. The impact of individual components on portfo-lio risk, the beta coefficient. A diversified and non-diversified business in terms of value for the investor.
The relationship between risk and profitability.
Drawing up a stock portfolio. Estimates of expected returns. Capital assets pricing model. CAPM - the reliability of the model and its role. Arbitrage pricing theory. Three-factor model.
Capital investment planning and risk assessment.
Capital costs for the project and the company. Estimated cost of equity. The capital structure and the cost of capital of the corporation. Determining the discount rate in case of impossibility to determine "beta". Operating leverage and its impact on risk.
Planning and analysis of capital investments.
Break-even analysis. Sensitivity analysis and scenario analysis. Monte-Carlo simulation model. Real options: options for business expansion; options to terminate the project. Decision tree.
Investment process and maximization of net present value.
The market value of assets. Forecasting market rents. Investment process and maximi-zation of net present value in decision making. Evaluation and promotion of results. EVA remuneration and motivation of corporate managers.
Corporate Financing. Dividend policy and capital structure.
Investment decisions and financing decisions. Market Efficiency Three forms of effi-ciency. Stock market anomalies and behaviorism in finance. Sources and models of corporate finance. Relevance of dividend policy.
Corporate borrowing policy.
The effect of financial leverage in a competitive economy without taxes. The effect of financial leverage on profitability. Postulates of Modigliani and Miller. The ratio of risk and profitability. The traditional approach to borrowing policy. Corporate taxes. Tax protection. Theory of Modigliani and Miller with taxes. Personal taxes. The cost of bankruptcy. The cost of financial difficulties without bankruptcy. Trade-off theory of capital structure. Pecking order theory of capital structure.
Financing and valuation.
After-tax weighted average costs of capital. Features of application of WACC. WACC correction when changing debt load. Adjusted Present Value. Discounting a reliable nominal cash flow.

Assessment Elements

Control work №1
Control work №2
Exam
Homework
Independent work
Classroom work

Interim Assessment

Interim assessment (4 module)
0.2 * Control work №1 + 0.2 * Control work №2 + 0.4 * Exam + 0.1 * Homework + 0.1 * Independent work

Bibliography

Recommended Core Bibliography

Corelli, A. Analytical Corporate Finance / Angelo Corelli. – 2nd ed. – Cham, Switzerland: Springer Nature Switzerland AG, 2018. – (Springer Texts in Business and Economics). - Текст: электронный // DB Springer Books [сайт]. - URL: https://link.springer.com/book/10.1007/978-3-319-95762-3
Thibierge, Ch. A Practical Guide to Corporate Finance: Breaking the Financial Ice / Christophe Thibierge, Andrew Beresford. – Basingstoke, Hampshire: Palgrave Macmillan, 2015. – Текст: электронный // DB Springer Books [сайт]. - URL: https://link.springer.com/book/10.1057/9781137492548

Recommended Additional Bibliography

Corporate Finance: Theory and Practice / Pierre Vernimmen, Pascal Quiry, Maurizio Dal-locchio, Yann Le Fur, Antonio Salvi. – 5th ed. – Chichester: John Wiley & Sons Ltd, 2018. – 1010 p.

Bachelor’s Programme 'Economics'

Corporate Finance

Author