Finance 600-01/Financial Management/ Fall 2012

Learning Objectives
The objective of this course is to help you develop the skills required to work effectively with corporate financial models. Finance 600 examines models that corporate managers use in their attempts to maximize the wealth of the shareholders, as well as models that financial economists use to describe how managers behave. The topics that we cover will include but not be limited to: financial ratio analysis, the time value of money, the valuation of fixed, residual and derivative claims, techniques for evaluating proposed capital expenditures, the capital acquisition process and the determination of the cost of capital. A strong foundation in the prerequisite material (accounting and economics) will be essential to your ability to succeed.

Course Instructor
Michael J. Alderson/300 DS/ office 314.977.8169/ cellular 560.5557/ E-mail: alderson@slu.edu I will be in my office to provide you with assistance on Tuesday afternoons from 4:00 to 5:30 PM. Owing to an essential need to review my notes prior to class, I am unable to meet with students after 5:30 PM. I also check my e-mail frequently during the day, which makes email Q&A work well for many people, and Im always happy to talk to you anytime on my cell phone, day or evening.

The textbook and course coverage

The textbook is essential to our work. You will be reading Fundamentals of Corporate Finance (in hardbound copy or e-book form) by Berk, DeMarzo and Harford. Access to MyFinanceLab (the online supplement) is required as well. Various combinations of those resources are available at the bookstore. The course is divided into eight units and the schedule of instruction is as follows: September 18, 25 October 2 October 9, 16 October 23 Getting to know a company: Chapters 1, 2 Time value of money: Chapters 3, 4 More time value of money: Chapters 4, 5 Valuation of bonds and stocks: Chapters 6, 7 Project analysis: Chapters 8, 9 Stock valuation revisited: Chapter 10

October 30, November 6 Risk and expected return: Chapters 11, 12, 13 November 13 November 20, 27 December 4 Capital acquisition: Chapters 14, 15 Capital structure and payout policy: Chapters 16 and 17 Stock options: Chapter 21

Recommended problems for each unit (along with their respective due dates) are shown on MyFinanceLab.

Method of instruction
My job is to provide you with energetic assistance in your study of corporate finance. That charge is markedly different from a course of action that would have me create a series of clerical tasks that you can execute with minimal investment of time and effort. You have successfully completed an undergraduate degree and a set of prerequisite courses. I therefore assume (with reason) that you are capable of reading textbook material that deals with the estimation and valuation of cash flows. In order to both capitalize on your prior training and allow you to engage in the greatest breadth and depth of study, it is essential that you come to class fully prepared to engage the material. Full preparation for class occurs when you adopt the following approach to the coverage of each chapter: 1. Carefully read and note the contents of each assigned chapter. Grab your calculator and use it to help you follow the numbers as you read the brown shaded examples. Dont like pure theory? Neither do I! The examples provide just the type of explanation that folks like us are looking for (But you actually have to read them in order to realize their value.) 2. Make a determined attempt to work each of the recommended problems: this is the only effective way to practice for a quiz. The MyFinanceLab learning platform makes it easy---if you get stuck, its a short trip to go back to the examplesthere is often one to correspond to each type of problem at the back of every chapter. 3. Attend class on a regular basis and take detailed notes. I will devote the majority of class time to explaining the material, reviewing the solution to select problems and explaining how those solutions relate to the underlying theory. My objective will be to help you both reinforce and extend your understanding of the materialthat is a more advanced goal than instructing you in the basicssomething you will have accomplished in steps 1 and 2 above. You will enjoy the fullest preparation for the quizzes if, in addition to the above, you also: 4. Review your class notes on a regular basis and ask informed questions early in an effort to clarify your understanding of the material. If you ask me a very basic question about something weve already covered, my first response will often be to ask in return whether you have any information about that in your class notes. Why? Informed questions serve to advance your understanding of the materialuninformed questions get you nowhere because you havent invested anything in the process. 5. Make every effort to learn from your mistakes. First time mistakes are a natural part of the learning processrepeatedly making the same mistake most often results from incomplete attention to detail. Corporate finance is a challenging subject, so you should expect to apply significant amounts of both time and concentration on a consistent basis over the course of the semesterten hours out of class each week wouldnt be unreasonable. The models are fairly complex and the wording is something that everyone has to work to learn (similar to the study of a foreign language). Unless you have extraordinary skills in both reading comprehension and algebra, cramming wont constitute an effective approach. Ill do my best to help you apply yourself by observing a healthy balance between assistance and selfreliance, in-class and out-of-class work, and structured problem solving versus independent analysis. Expect to work hard if you want to acquire an understanding of the material for the long-term. Im here to helpdont be embarrassed to ask for assistance.

How your course grade will be determined

Grades will be awarded in a manner that balances a desire for recognition with the reality that the highest grades have value only because they are scarce. The role of a grading system is to motivate people to follow the prescribed course of study. Three vehicles for earning points will be available to you over the course of the semester: 1. Six quizzes. The quizzes focus on the material from the prior unit of coverage. The quiz questions will require either a short narrative response or the solution to a problem that draws on the material in the prior unit of coverage. The quiz will begin at 6:00 PM and will be collected promptly at 6:25 PM. A total of 20 points will be available on each quiz. The purpose of the quizzes is to provide you with feedback on your progress to date, with the sole objective of helping you to improve your method of preparation for the comprehensive final examination. The quizzes will draw on the same source of material as the recommended problems (the lecture notes and the textbook chapters), but you should not expect the quiz questions to be modeled on the recommended problems. Said differently, good performance on the homework is a necessary, but not sufficient, condition for good performance on the quizzes and exam. 2. Problems on MyFinanceLab. The problems recommended on MyFinanceLab will help you develop a working knowledge of each topic. The online facility will provide you with the opportunity to make several attempts on each problem. A total of 10 points will be available for each homework assignment. 3. A comprehensive final examination. The final examination will be offered on December 11. The exam will require you to both solve problems and describe the elements of financial theory and practice. A total of 100 points will be available. The exam will cover the assigned chapters and lecture material. Your course grade will be determined by your Semester Point Total. That number is the sum of your score on the final examination and (1) the average of your best five Tuesday quiz scores and (2) the greater of (a) the average of your homework scores or (b) five points. The following grade scale will be applied:

Final Grade A AB+ B BC+ C CD F

Semester Point Total 93 or more 90 to 92 87 to 89 84 to 86 80 to 83 77 to 79 74 to 76 70 to 73 60 to 69 59 or less

How exams and quizzes will be evaluated

Examinations and quizzes will consist of problem and essay questions (no multiple choice questions). I will provide very clear and specific guidance regarding the coverage of each. Students who receive the most credit on any particular essay question will tend to have provided a wellwritten and complete response that reflects deliberate preparation prior to the exam. Students receiving very little credit on any particular essay question will more likely than not have offered a collection of incomplete sentences with little forethought. The quizzes and the final exam will also contain a set of quantitative problems designed to test your understanding of the concepts, not your ability to memorize examples and change a few numbers where appropriate. The recommended problems are not only practice problems, but are also intended to be vehicles for encouraging you to think more deeply about the material. The distinction is significant. You should expect the evaluation of the quizzes to be rigorous in nature. My sole objective in assigning points is to provide you with a sense of how well your responses convey an understanding of the material. Mistakes will cost you points because I want you to be able to clearly see the distinction between what youre doing correctly and where you have made mistakes. I will do everything I can to reduce the uncertainty about what will be covered on the examinations and, when grading them, to reward those who demonstrate an excellent understanding of the material. If you want to earn a high grade in this course, you should expect to work consistently and learn as much about financial management as you can.

Scheduling, cheating, extenuating circumstances and appeals

Your exam and quiz scores determine your grade and you should therefore expect to take them at the time they are scheduled. The integrity of the examination process is maximized when everyone takes an exam or quiz at the same time, because that approach holds everything else constant (such as the amount of information available about the test). So dont be an idiot and schedule a job interview or mid-semester vacation on the day of an examination or quiz unless you intend to receive a zero. And please dont tell me that you need to take your final examination before everyone else because you have booked an early flight out of townexpect to follow the University calendar just like everyone else. That means you must take the final exam when your section is scheduled to take the final. So heres the scoop on replacement exams and quizzes: They will be available only under exceptional circumstances (example: certified illness or personal tragedy), and then only when arranged for in advance. (If you contact me just prior to, during or after a quiz, your score on that quiz will be zero.) Replacement quizzes will only be given during finals week. Cheating and dishonest behavior also tarnish the integrity of the examination process and it is my job to make sure that doesnt happen. Why? People who play by the rules have let me know that they dont want to be at a disadvantage because they choose to be honest. Its as simple as that. As you may know, it is the policy of the School of Business and Administration at Saint Louis University that the Giving and Receiving of unauthorized assistance on any graded exercise constitutes academic dishonesty and may result in grade reductions and/or probation, suspension, or dismissal.

In my book, cheating occurs when you dont work independently on an examination (bringing hidden information, placing a call from the restroom during an examination, etc.), turn in a group solution to a problem set or review paper while claiming it is your own or when you misrepresent your personal circumstances in order to avoid meeting the requirements that apply to everyone else. Therefore, in order to preserve the integrity of the course, personal situations are relevant to me only if they are considered important and handled by the administrative officials of the Cook School. No closed circuit deals for this course only. The integrity of the course is also affected by the quality of the scoring. I do make mistakes when evaluating exams and dont believe that you should be penalized for that! Please feel free to request a review of the grading if you have reason to believe Ive made an error. Given the competitive nature of grade assignments, it is best that appeals be made in the form of a written (neatly typed, professionally presented) memorandum that describes your concern. Communicating your appeal in writing will maximize the likelihood that I will understand the point you are attempting to make and ensure that I deal with people on a consistent basis. The timeliness of the appeal is also important, so your written communication must be turned in by the end of the first class period following the return of the exam. I will conscientiously evaluate all qualified appeals and will render a final decision within a reasonably short period of time. In all cases, my overriding objective will be fairness to you and your classmates. One more thing. Students who believe that, due to the impact of a disability, they may need academic accommodations in order to meet the requirements of this, or any other class at Saint Louis University are encouraged to contact the Disability Services office at 977-8885 or should visit the Busch Student Center, Suite 331 (Student Success Center). Confidentiality will be observed in all inquiries.