BUS 106 (ECON 134) - Section 030

Introduction to Financial Management

Instructor: Professor Y. Peter Chung
Office: AH 146
Phone: (951) 827-3906
Fax: (951) 827-3970
E-mail: peter.chung@ucr.edu
TA:

Quarter: Spring 2016

Lecture time: TTH 11:10 am -12:30 pm
Classroom: LS 1500
Course Website: http://ilearn.ucr.edu/
Office Hours: TTH 2:00-3:00 pm

Xiao - weiqing.xiao@email.ucr.edu (Sec 35/36)

Yiyang Yin - yyin004@ucr.edu (Sec 31/32)
Ye Qiu - yqin003@ucr.edu (Sec 33/34)
Weiqing

SoBA Mission Statement

Our mission is to develop diverse leaders, propel research-based innovation and promote the
sustainable growth of Inland Southern California within the global economy. We harness the
powerful resources of UC and our location at the nexus of commerce to create a laboratory for
education, research, and productive partnerships across economic enterprises.
The strategic activities that propel our mission include:
Conducting basic and applied research in management that explores and informs the
creation, development and management of growth;
Providing degree programs that prepare our students to be effective managers and
responsible community leaders with a deep understanding of the dynamics of growth
in both a regional and global context;

Partnering with business and community leaders through a shared commitment to

exemplary growth; and

Delivering educational programs to executives and the public at large that respond to
the needs of our local, state, national, and international communities.

Course description
This course provides a foundation in theories of finance. Topics include time value of money,
net present value analysis, security valuation, portfolio theory, asset pricing models, capital
budgeting decision, capital structure decision, sources of financing for a firm, dividend policy,
and mergers and acquisitions.

Course/Learning objective
This course is designed to give business students an overview of the role of financial
management in business firms and to facilitate understanding of financial concepts and their
applications. It is also intended to develop some proficiency in the use of the basic tools and
techniques employed in financial analysis, traditional as well as newer concepts. It is, therefore,
to help students understand why corporate financial managers behave the way they do. Students
must also absorb facts and institutional materials being covered in lectures as well as in the text.

Prerequisite
(BUS 020, STAT 048, and ECON 102) or (BUS 020, ECON 101, and ECON104A)

Course Materials

Textbook: Richard Brealey et al, Fundamentals of Corporate Finance,

8th ed., McGraw-Hill Irwin

Grading policy
A.
B.
C.
D.
E.

Midterm I
Midterm II
Final Exam
Homework
Class Participation

25%
25%
30%
10%
10%

Grades will be posted on iLearn. If you find any problem with your score, you must inform the
instructor within one week from the time this score is posted. After one week, scores will not be
reviewed.

A, B, C. Midterm I, Midterm II, and Final Exam

In the case of score dispute, the entire exam will be reviewed, not just the question(s) in dispute. The
score could go up, down, or remain the same.

Exams are basically noncumulative in terms of topics covered, but obviously, you are assumed to
know the main concepts and techniques covered in the previous exam.
Students who are absent from any exam without prior permission will receive a score of zero for
that particular exam. Requests for permission to be absent from an exam will be considered only
2

in cases of serious illness, and a formal note and a phone call from the physician must be
accompanied. No exception to this rule under any circumstances!
D. Homework
Students are required to solve some problems at the end of each assigned chapter in the textbook.
This homework (Homework A) is not to be submitted but solving them by yourself is crucial to
understand the subject matter and to monitor your progress in the course. Some exam questions
will resemble homework problems. Web Exercise (Homework B) is to be submitted at the
beginning of the class immediately following previous class meeting when we discuss the
chapter of interest. Note that I do NOT accept homework by email or fax. Also, the pace and
structure of the lectures and discussions will presume that students have completed the weekly
reading assignment prior to the first class meeting in that week.
Homework A:
Some of these problems will be reviewed in class occasionally, and a packet that has key answers
for PP and CP will be available on UCRs iLearn site (Blackboard). ST = Self-Test Problems; PP
= Practical Problems; CP = Challenging Problems.
Chap 1 - ST 1
Chap 5 - ST 1,2,3,4,5,7,8,10,11,12
Chap 8 - ST 1,2,3,4,5

PP 13

Chap 11 - ST 2,3,4,5,6,7

PP 6,14

Chap 12 - ST 1,4,5,6,7

PP 9,10,25,26

Chap 6 - ST 3,4,5

PP 5,28

Chap 7 - ST 1,2,3,4,5,6,7

CP 34

CP 42

Chap 13 - ST 1,2,4,5,6,7

PP 3,10

Chap 16 - ST 1,2,3,5,6,8

PP 19,27,28,31 CP 31

Chap 17 - ST 3,4

PP 8,9,13,19

Chap 21 - ST 1,2,3,4

PP 4,5,7,8,9

Homework B:
WE = Web Exercise
Chap 1 - None
Chap 5 - WE 1,2
Chap 8 - None
Chap 11 - WE 1,2
Chap 12 - WE 1,2
Chap 6 - WE 3,4
Chap 7 - None
Chap 13 - WE 1
Chap 16 - WE 1
Chap 17 - WE 1
Chap 21 - WE 1

Class Notes and Handouts

Class notes (Student version of PowerPoint slides) will be available at least one day before the
class meetings. Note that another packet that has all class handouts for this class will be
available on UCRs iLearn site.
Note also that students need to frequently check the course website on iLearn for important
announcements and all course materials. iLearn is the primary channel of the communication.
E. Class Participation
The class participation score will be determined jointly by the instructor and the TA. Primary
considerations include class and TA session attendance, participation in class and TA session
discussions, and other requirements explained by the TA.

Course Schedule
Week
1,2,3

4,5,6

Topic
Final Exam ( June 8th, Wednesday, 8:00 - 11:00 am)
Introduction
role of financial managers
time value of money
measuring incremental cash flows
investment decision with NPV and other rules
Midterm I (Temporarily Scheduled for Tuesday, April 19th)
Capital Budgeting Decision
risk, return, and cost of capital
portfolio theory and CAPM
risk-adjusted cost of capital and investment decision

Chapters
Ch. 1,5,8

Ch. 11,12

Valuation of Bonds and Stocks

Midterm II (Temporarily Scheduled for Tuesday, May 17th)

Ch. 6,7

8,9

Financing and Capital Structure Decision

component cost of capital and WACC
MM's propositions
taxes and optimal debt level
costs of financial distress
interactions of investment and financing decisions

Ch. 13,16

Dividend Policy
Ch. 17
Mergers and Acquisitions
10
Ch. 21
conflicts between stockholders and bondholders
motives for mergers
cost of a merger
mechanics of mergers
empirical findings for merger gains or losses
for merger
gains or losses
Note: (1) The aboveempirical
schedulefindings
is tentative;
can be changed
depending on our speed.
(2) I MAY need to cancel a class, and will make it up if necessary.

Integrity statement:
5

At the University of California, Riverside (UCR) honesty and integrity are fundamental values that
guide and inform us as individuals and as a community. The academic culture requires that each
student take responsibility for learning and for producing work that reflect their intellectual potential,
curiosity, and capability. Students must represent themselves truthfully, claim only work that is their
own, acknowledge their use of others words, research results, and ideas, using the methods accepted
by the appropriate academic disciplines and engage honestly in all academic assignments.
Misunderstanding of the appropriate academic conduct will not be accepted as an excuse for
academic misconduct. If a student is in doubt about appropriate academic conduct in a particular
situation, he or she should consult with the instructor in the course to avoid the serious charge of
academic misconduct.
To ensure the highest standard of academic integrity, all students should be familiar with the
guidelines posted at:
http://conduct.ucr.edu/SiteCollectionDocuments/DocumentsFromStudentConduct/AcademicIntegrity
BrochureStudent.pdf