COURSE OUTLINE

SUBJECT: FINANCIAL MANAGEMENT FACULTY NAME: ASIYA SHIRAZI RECOMMENDED TEXT BOOKs: 1.FINANANCIAL MANAGEMENT Theory and Practice by Eugene F.Brigham and Michael C.Ehrhardt 10th Edition 2. FUNDAMENTALS OF FINANCIAL MANAGEMENT, J.C.Van Horne, 11th Edition Session Topic 1&2 Overview of Financial Management Finance and your career Capital Market and Institutions, Investments, Financial Management How are Companies organized Finance in the organizational structure of the firm The goals of the corporation Financial management in the new millennium Business Ethics and Social Responsibility Agency Relationships 3&4 Financial Statements, Cash Flow and Taxes Financial Statements and Reports, The Balance sheet, The Income Statement, Statement of Retained Earnings, Net Cash Flow Statement of Cash Flows Modifying Accounting Data for Managerial Decisions (NOPAT, Free Cash Flows) MVA and EVA 5,6&7 Financial Planning Strategic Plans Operating Plans The Financial Plan Sales Forecasts Financial Statements Forecasting AFN Forecasting Financial Requirements when the Balance Sheet ratios are subject to change Other techniques for forecasting financial statements 8&9 The Cost of Money The Cost of Money Interest Rate Levels Determinants of Market Interest Rates The Term Structure of Interest Rates Yield curve Using the Yield Curve to Estimate Future Interest Rates 10&12 Time Value of Money Revision (IBF) Annuity Due Perpetuity Loan Amortization First Mid term Bonds Valuation What are Bonds Perpetual Bonds Bonds with a Finite Maturity Assessing the Risk of a Bond Default Risk Stock Valuation Preference Stock Valuation (Callable and Perpetual) Common Stock Valuation (No growth, Constant Growth, Growth Phases)

Chapter 1 Brigham

2 Brigham

4 Brigham

5 Brigham

8 Brig. & 3 Van Horne

11 13&14

9 Brig.& 4 Van Horne

15&16

10 Brig. & 4 Van Horne

17&18

Risk and Return Defining Risk and Return Probability Distributions to measure Risk Attitude towards risk Risk and return in a portfolio Context Diversification, Systematic and unsystematic risk CAPM (SML, Beta, Characteristic Line) 19&20 Cost of capital Overall Cost of capital of the Firm Cost of debt Cost of Preferred Stock Cost of Equity (Dividend Discount Model approach) Cost of equity (CAPM Approach) Cost of Equity (before tax cost of debt and risk premium approach) WACC, Some Limitations, rationale for a Wacc WACC Factors that affect WACC 21 Second Mid term 22,23,24 Capital Budgeting The capital budgeting process Generating Investment Project proposals Project Evaluation and Selection (Payback, NPV, IRR, Profitability index) Potential Difficulties (Dependency and Mutual Exclusion, Ranking Problems, Multiple IRR, capital rationing) Project monitoring: Progress reviews and Post completion Audits 25&26 Capital Structure Decisions The Target Capital Structure Revision (IBF: Break even, DOL, DFL) Degree of Total Leverage Determining the Optimal Capital Structure (WACC and Capital Structure Changes, Hamada Equation, Optimal Capital Structure) 27&28 Dividend Policy Passive versus Active Dividend policy Factors Influencing Dividend Policy Dividend Stability Stock Dividends and Stock splits Stock Repurchase Administrative Considerations 29&30 Final Exam

5 Van Horne

11 Brigham

13 Brig. & 13 van Horne

16 Brigham

18 Brigham

Note:Chapter reading before coming to class is highly recommended. Students without textbook and calculators will be marked as absent. Marks Allocation Assignment (10 marks) Quizzes (5 marks each) Quizz in every 3rd session be prepared. Note: No make-up for quizzes and assignments. Class Participation (5 marks) Midterm (30 marks) Final (40 marks)