Financial Management (251.301.

007)
Spring 2014, SNU-CBA Undergraduate
Instructor

Kuan-Hui Lee
Associate Professor
College of Business, Seoul National University
http://hosting01.snu.ac.kr/~kuanlee/
Office
LG-703
Phone
6924
Email
kuanlee@snu.ac.kr (best way to contact me)
Class Time
3:30PM-6:00PM, Tuesday
Class Room
SK-120
Office Hours
By appointment
Class Web
http://biz.snu.ac.kr/intranet/ (intranet)
Teaching Assistant: Joohun Lee (ceolee@snu.ac.kr)

This course provides the students with the fundamental principles of finance and their applications.
The topics include time value of money, risk and return tradeoff, pricing of bonds and equity, capital
budgeting, and market efficiency. This course uses a combination of assignments, classroom lectures
and discussions to convey the material. Each student is expected to contribute regularly to classroom
discussion. A list of planned topics and materials by class session is presented below (in the Course
Schedule). Before each exam, I may have a review session that most students find very helpful.

Course resources

Main textbook (required):

Richard A. Brealey, Stewart C. Myers, and Alan J. Marcus
Fundamentals of Corporate Finance (7th ed., McGraw-Hill).

Other helpful texts (not required):

Richard A. Brealey and Stewart C. Myers
Principles of Corporate Finance (6th ed., McGraw-Hill).
Richard A. Brealey, Stewart C. Myers, and Franklin Allen
Principles of Corporate Finance (Concise edition, 1st ed., McGraw-Hill).
Ivo Welch
Corporate Finance An Introduction (Prentice Hall)
Robert Parrino and David Kidwell
Fundamentals of Corporate Finance (Wiley)

Grades

Mid-Term Exam:
Final Exam:
Homework #1, #2:
Market watch presentations (Team Project):
Individual class participation:

200
400
100 (=50 x 2)
100
100

Total Score:

900

Exams
Make sure you need to bring your ID and calculator. During the exam, your cell phone and notebook
computers should be turned off.
Absence from the exams will not be excused, except for the most serious circumstances. Such
circumstances must be validated in writing by an appropriately accredited professional (e.g. medical
doctor, police officer). Remember that joining Wonder-girls concert cannot be a reason to miss the
exam. No make-up exams will be given (no exceptions).

Homeworks
All individual students are required to submit two separate reports for the two books below. The list of
books will be updated during the semester. Verbatim copy of homework is strictly prohibited and if
such activity is detected, the student will receive the failure grade for this course.
Readings for homeworks:
TBA

Team Projects
You have to form a team of five to seven students for the team projects. In order to prevent free-rider
problems, I offer each group the possibility to request the exclusion of a particular student from their
group by submitting a written petition along with supportive documentation. If I find after reviewing
the case that the complaint is justified, I drop the particular student from the group. Dropped student
will get zero point for all team-related projects.
Market Watch
Any team who presents the summary of news in the class would get points per each presentation. The
topic can be anything if it is related to financial economics. Resources are plentiful (e.g. Wall Street
Journal, Financial Times, CNN, Morningstar, Economist, Businessweek, etc). Topics are on a firstcome-first-serve basis and no two groups will be allowed to present on the same topic. If you want to
present, you need to email me to secure your topic. At least one day before the presentation, you need
to send the TA your slides and the article itself or its source. The presentation is for 15 minutes at the
beginning of class.

Individual class participation

Any activity that hampers class atmosphere will result in zero point for individual class participation. I
will not allow: 1) turning on laptop during the class, 2) making noises (private talking), 3) reading
materials that are not related to class, 4) going-out and coming-in during the class, 5) and any other
activity that violates honor code.

Academic Misconduct
It causes failing the course and triggers quite unpleasant university-mandated procedures which
result in further sanctions. Academic misconduct includes, but is not limited to, giving or
receiving information during an exam and submitting plagiarized work for academic
requirements.

Course schedule
Each class period includes required readings from the textbook and other resources. Exam dates are
fixed. However, the dates and the topics in the course outline are approximate and could be subject to
change.

I.

Introduction

Week 1
Course Overview; The Corporation and the Financial Manager
Reading:
Chapter 1 (BMM)
Problem Sets: 2, 3, 4
Week 1, 2
Accounting and Finance
Reading:
Chapter 3 (BMM)
Problem Sets: 1, 3, 5, 18, 19, 23
Due: Submission of Team member list

II.

Time Value of Money; Valuation of Bonds and Stocks

Week 2, 3
The Time Value of Money; Present Value (PV); Future Value (FV); Cash Flows; Inflation
Reading:
Chapter 5 (BMM)
Problem Sets: 1, 2, 7, 13, 15, 38, 52, 64, 72, 73
Week 3, 4

Valuing Bonds; Yield to Maturity; Interest Rate Risk; Default Risk; Yield Curve
Reading:
Chapter 6 (BMM)
Problem Sets: 1, 2, 9, 16, 21, 25
Week 5
Valuing Stocks; Stock and Stock Markets; Dividend Discount Model
Reading:
Chapter 7 (BMM)
Problem Sets: 1, 2, 6, 8, 11, 20, 21, 30

III. Investment Decision; Valuation of Investment Projects

Week 6
Net Present Value (NPV); Internal Rate of Return (IRR); Other Criteria
Reading:
Chapter 8 (BMM)
Problem Sets: 11, 13, 15, 22, 28
Week 7
Discounted Cash Flow (DCF) Analysis; Review Session
Reading:
Chapter 9 (BMM)
Problem Sets: 2, 3, 15, 18, 19, 28
Due: Homework #1
Week 8

Midterm Exam Week: Exam

Week 9
Project Analysis; Capital Budgeting
Reading:
Chapter 10 (BMM)
Problem Sets: 6, 9, 10, 11, 16, 20, 23, 27

IV. Risk, Returns, and the Opportunity Cost of Capital

Week 10
Risk and Returns; Diversification; CAPM; Opportunity Cost of Capital
Reading:
Chapter 11, 12 (BMM)
Problem Sets: 3, 9, 12, 17 (Ch.11) 1, 6, 11, 18, 29, 30 (Ch.12)
Week 11
Weighted Average Cost of Capital (WACC)
Reading:
Chapter 13 (BMM)
Problem Sets: 1, 2, 3, 4, 5, 10, 11, 14, 16, 21

V.

Capital Structure; Financing; Distribution

4

Week 12
Initial Public Offering (IPO); Seasoned Equity Offering (SEO)
Reading:
Chapter 14 (BMM)
Week 13
Debt Financing; Capital Structure
Reading:
Chapter 15 (BMM)
Week 14
Payout Policy; Dividend Payment; Stock Repurchases
Reading:
Chapter 16 (BMM)
Due:
Homework #2
Week 15
Review Session
Week 16

Final Exam