IILM Undergraduate Business School 1

[FIN 310]

IILM Undergraduate Business School

Module Name: International Finance

Course Code: FIN 310

Stage: 3

Semester: 5

Credits: 5

Maximum Marks: 100

Module Prepared by: Ms. Sadhna Gaur

Module Plan Discussion Date: 6th August 2019

Members Present: Dr. Daisy Mathur, Dr. Gurpreet Bhatia, Prof Sadhna Gaur, Dr. Pankaj
Rawal, , Prof. Aarti Sharma

Comments:

Final Submission Date:

Module Approved by:

 Area Chair –

 Dean –

 Director –
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IILM Undergraduate Business School

Module Name International Finance

ECTS Credits 5
Academic Year UG 2019-20
Module Code FIN 310
Type of Course Obligatory for all
Specializations
Semester Fifth
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IILM Undergraduate Business School

International Finance
SBS Batch 2017-2020
Academic Year: 2019-20
Semester V Credits - 5

The course is designed to be an introductory course in Corporate Financial Management. It

analyses the three broad areas of financial decision problems faced by modern corporations,
viz. the investment decisions (Capital Budgeting), the financing sources (Capital Structure)
and the payout decisions (Dividend Decision). The course also includes the fundamental
principles of bond and stock valuation for comparative and better decision making.

Introduction to Tutors
Module Tutor:
Ms. Sadhna Gaur
Cabin No: 221 (2rd Floor)
Email Id: sadhna.gaur@iilm.edu

1. Introduction to the Module:

Most of the world's work is done through organizations, which comprise groups of people
working together to accomplish organizational objectives. To achieve these objectives they
use various resources. These resources need to be financed or paid for. Managers to work
effectively need to know the amounts of these resources, means of financing them & the
results achieved through using them. This information is required both by internal & external
users & decision makers.

This subject provides an overview of the Corporate Finance. It analyses the three broad areas
of financial decision problems faced by modern corporations, viz. the investment decisions
(capital budgeting), the financial decisions (capital structure) and the payout decisions. We
will also study the fundamental principles of bond and stock valuation and risk- return
tradeoff.

Course Focus:

The course explores investing and financing decisions, focusing on their role in the creation
of value for shareholders. Corporate applications of financial theories are thoroughly
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examined from both financial policies and financial management standpoints. This module
help students understand the perspective of groups within the firm, asked to create firm value
by a) deciding how much capital to raise and b) managing those funds and generating
relevant financial information. Through this course, students will get an insight into the issues
involved in investment decision and financing of such decision. Therefore, the main focus
will be on understanding the techniques of capital budgeting decision.

Learning Outcomes: Upon completion of this course, the student will be able to:
 Understand the concept of “time value of money”
 Evaluate of bonds, stocks, and projects by applying the concept of “time value of money”
 Price risk, and relate risk and expected return using Capital-Asset-Pricing Model
 Explain the basics of call and put options, and calculate their pay-offs and profits

2. Module Pre-Requisites:
Basic understanding of the subject, Principle of finance – 1 and 2.

3. Preparing for the class:

Learning through participation is ensured through class discussion and dialogue to achieve
the objective of this module b) also peer learning contributes in the overall learning in the
classroom. The concepts are delivered using live examples so it involves a lot of calculation
and problem solving exercises manually and sometimes through excel.

The course outline has detailed session plan which includes readings and cases. You are
required to come prepared by going through the material already uploaded on Feebank. The
quality of discussion will contribute to the overall achievement of this programme’s goals.

4. Module Overview:

Session Topic
An Overview of Financial Management, Concept of Present value
1 /Future value
2-3 Estimating Future Cash Flows and discounting it ( M S Excel)
4-5 1.Tutorial Class ( 2Classes)
6-7 Bonds and its valuation and Yields
8 Stock Valuation: Preference / Equity Share Capital
9-10-11 2. Tutorial Class (3 Classes)
Capital Budgeting Decisions and its importance, Techniques of
12 Capital Budgeting: NDCF (PBP, ARR)
13-14 Techniques of Capital Budgeting: DCF (NPV, IRR, BCR, DPBP)
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15-16 Project analysis and Evaluation, Expected Return and Variance

17-18 3. Tutorial Class (2 Classes)
Capital Market Efficiency, Security Market line, Capital Asset
19 Pricing Model
20 Introduction to Derivatives
21 Future & Options: Call n Put
22-24 4.Tutorial Class (2 Classes)

5. Readings:
The readings will also be made available to the students. The below mentioned text will be
helpful to the students.

Main Text:
1. Ross, Stephen A., Randolph Westerfield, and Bradford D. Jordan. Fundamentals of
corporate finance. Tata McGraw-Hill Education, 2008.
2. Financial Management by Prasanna Chandra, Tata McGraw Hill, 7th Edition.
3. Brealey, Richard, Stewart Myers and Franklin Allen. principles of corporate finance.
9th edition. Mcgraw Hill, 2007. (Bocconi)

References:
1. Pike, R. Neale, B & Linsley, R, (2012) “Corporate Finance and Investment: Decisions &
Strategies”, 7th Edition, Prentice Hall.
2. Corporate Finance by Ross, Westerfield, Jaffe and Kakani, Tata McGraw Hill, 8th
Edition, ISBN: 0070991242
3. Corporate Finance by Aswath Damodaran, Wiley, 2nd Edition.

Journals
1. Journal of Finance
2. ICFAI Journal of Applied Finance
3. International Journal Financial Management
4. Journal of accounting and finance

6. Detailed Schedule:

Session 1: An Overview of Financial Management, concept of Time Value of Money.

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Description of the session: Session will include the overview of Corporate Finance
including the Introduction, Scope of Financial Management, Key activities of the Financial
Manager, Objectives of Financial Management, Profit maximization v/s Wealth
maximization objectives, the concept of Discounting & Compounding through Excel. At
times a cash flow is neither a single nor a series of equal payments; it is a mixed pattern of
cash flows. In this session students shall understand the concept of mixed flows through
exercises. If interest is paid/ received more than once a year, the effective interest rate will be
higher than the normal rate. This is applicable on EMI’s and semiannual payments
Learning Outcome:
1. To understand the basic concept of financial management, functions of financial
management, objectives of a firm especially its financial objectives, agency cost and agency
problem.
2. This lecture covers the key concepts relating to cash flows taking place in different time
periods.

Required Reading: Ross, Stephen A., Randolph Westerfield, and Bradford D. Jordan.
Fundamentals of corporate finance. Tata McGraw-Hill Education, 2008.
Financial Management by Prasanna Chandra .
Desired Readings:
TVM: http://www.investopedia.com/articles/03/082703.asp
Desired Video Link:
TVM Video: http://www.investopedia.com/video/play/understanding-time-value-of-money/
https://www.coursera.org/lecture/wharton-finance/intuition-and-discounting-9gLOm
https://www.coursera.org/lecture/wharton-finance/compounding-GBTo1
https://www.coursera.org/lecture/wharton-finance/useful-shortcuts-zCS5Q

Session 2-3: Estimating Future Cash Flows and Discounting it.

Description of the Session: This session focuses on calculation of future cash flows as they
require care and particular attention to detail in properly accounting for noncash expenses
such as depreciation and deferred taxes. It is especially important that the student does not
confuse cash flow with changes in net working capital and net income.
.
Learning Outcome: To understand the preparation of statement of future cash flows
Required Reading: Ross, Stephen A., Randolph Westerfield, and Bradford D. Jordan.
Fundamentals of corporate finance. Tata McGraw-Hill Education, 2008.
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Session 4-5 : Tutorial Class:

Description of the Session: Session will take up practical questions related to the topic taught
in the previous class/classes and students doubts would be cleared.

Learning Outcome: To clear the concept taught in the class and give more practice
questions.

Session 6-7: Bonds and its Valuations

Description of the Session: Session will introduce and discuss about the concept of Bond.
The relevance of various types of bond and their investment pattern will be discussed in the
session. Session will introduce and discuss about the concept of Valuation, Valuation of
Bond, and Yield to maturity. It covers more advanced time value topics with numerous
example and excel spreadsheet. The highlights of inflation and interest rate and their impact
on bond value. The company becomes liquid through the sale of its bond to the public and its
issue. We will discuss the fisher effect on bonds in brief.
Learning Outcome:
1. To understand the concept and types of bond and
2. To learn different methods of valuations.
3. Understanding the difference of US venture market with foreign venture markets.

Required Reading: Ross, Stephen A., Randolph Westerfield, and Bradford D. Jordan.
Fundamentals of corporate finance. Tata McGraw-Hill Education, 2008.

Entrepreneurial Financial Management Author: Cornwall, Vang, Hartman 2004 Edition,

Prentice Hall.

Desired Reading:
http://www.investopedia.com/walkthrough/corporate-finance/3/bonds/valuation.aspx
https://www.forbes.com/sites/wadepfau/2017/01/24/making-sense-of-bond-pricing/
https://www.forbes.com/sites/wadepfau/2017/01/24/making-sense-of-bond-pricing/

Session 8: Stock Valuation: Preference Share Capital & Equity Share Capital

Description of the Session: Session will introduce and discuss about the concept of
Preference share capital and it’s Valuation. Session will cover approaches to equity
valuation- Dividend discount model; P/E ratio approach along with the relationship between
earnings-price ratio and expected return, and growth
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Learning Outcome:
To understand the concept of valuation of preference shares and finding its value.
To understand the concept of valuation of equity shares and finding its value.
Required Reading: Ross, Stephen A., Randolph Westerfield, and Bradford D. Jordan.
Fundamentals of corporate finance. Tata McGraw-Hill Education, 2008.
Desired Reading:
http://www.investopedia.com/walkthrough/corporate-finance/3/stock-
valuation/introduction.aspx
Session 8-9-10 : Tutorial Class:

Description of the Session: Session will take up practical questions related to the topic taught
in the previous class/classes and students doubts would be cleared.

Learning Outcome: To clear the concept taught in the class and give more practice
questions.

Session 12: Capital Budgeting Decisions, importance and techniques

Description of the Session: This session introduces to techniques of capital budgeting

which are helpful in identifying valuable investment opportunities. Discount method of
capital budgeting does not explicitly consider the time value of money.
Learning Outcome: Student will understand the nature and types of investment decision
and its role in creating long-term value for firm. Student will also learn about characteristics
of a good investment decision.
Required Reading: Ross, Stephen A., Randolph Westerfield, and Bradford D. Jordan.
Fundamentals of corporate finance. Tata McGraw-Hill Education, 2008.
Financial Management by Prasanna Chandra.
Desired Reading:
http://www.investopedia.com/university/capital-budgeting/decision-tools.asp
https://home.kpmg.com/content/dam/kpmg/pdf/2015/08/an-eye-on-the-future-kpmg-acca-
report.pdf
Desired Video Link:
http://www.investopedia.com/video/play/capital-budgeting/
Session 13-14: Techniques of Capital Budgeting: DCF (NPV, IRR, BCR, DPBP)
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Description of the Session: When appraising capital projects, basic techniques such as
ROCE and Payback could be used. Alternatively, companies could use discounted cash flow
techniques discussed in this session, such as Net Present Value (NPV) and Internal Rate of
Return (IRR).
Learning Outcome: Students will be able to calculate NPV and IRR and analyse the same.
Required Reading: Ross, Stephen A., Randolph Westerfield, and Bradford D. Jordan.
Fundamentals of corporate finance. Tata McGraw-Hill Education, 2008.
Financial Management by Prasanna Chandra.
Colin Drury, 6th ed, Chapter – 13
Desired Reading:
http://www.investopedia.com/ask/answers/05/irrvsnpvcapitalbudgeting.asp
Desired Videos:
https://www.coursera.org/lecture/wharton-finance/apr-and-ear-FsOBC
https://www.coursera.org/lecture/wharton-finance/discounted-cash-flow-decision-
making-vrO55

Session 15-16 : Project analysis, Evaluation Expected Return and Variance

Description of the Session: This session highlights on techniques of project analysis and the
evaluation of project. The session will consider the real time industry example to do the
extensive coverage of Risk premium. The concept of holding period return, expected return
and concept of total risk-systematic and unsystematic risk are taken up.
Learning Outcome: Students will be able to do a project’s investment decision on MS
Excel. Students will be able to calculate and interpret concept of risk and return for various
securities.
Required Reading: Ross, Stephen A., Randolph Westerfield, and Bradford D. Jordan.
Fundamentals of corporate finance. Tata McGraw-Hill Education, 2008.
Financial Management by Prasanna Chandra.
Colin Drury, 6th ed, Chapter – 13
Desired Videos:
https://www.coursera.org/lecture/wharton-finance/decision-criteria-hRuBX
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Session 17-18 : Tutorial Class:

Description of the Session: Session will take up practical questions related to the topic taught
in the previous class/classes and students doubts would be cleared.

Learning Outcome: To clear the concept taught in the class and give more practice
questions.

Session 19: Capital Market Efficiency, Portfolio Theory, Security Market line, Capital
Market line.

Description of the Session: This session will discuss about the capital market efficiency and
how to test the efficiency of any market, concept of diversified portfolio and calculation and
interpretation of risk and return of the same and model of CAPM and its application in
investment management.
Learning Outcome: The students will learn about the concept of efficiency in capital market
investments to understand the model of CAPM and its application of a diversified portfolio
and its risk and return. Also security market line with intuitive approach that bypasses the
portfolio theory.
Desired Reading: Investment Analysis and Portfolio Management, Prasanna Chandra.
Colin Drury, 6th ed, Chapter – 13
Desired Videos:
https://www.coursera.org/lecture/wharton-finance/return-on-investment-2RBnz

Session 20: Introduction to Derivatives

Description of the Session: This session will discuss about the concept and the mechanism
of derivatives. The session will also discuss the different types of derivatives traded in the
Indian Stock Market.
Learning Outcome: The students will learn about:
1.The concept of Dervatives
2. Different types of derivative instruments traded in the market
3.Mechanism of trading
4. Risk n return aspect.
Desired Reading: Investment Analysis and Portfolio Management, Prasanna Chandra.
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Colin Drury, 6th ed, Chapter – 13

Prassanna Chandra Chapter : Derivatives.
https://www.edx.org/course/derivatives-futures-swaps-and-options

Desired Videos:
https://www.youtube.com/watch?v=m3im-iJdhv4&t=26s
https://www.apnacourse.com/course/nis...

Session 21: Options: Call n put

Description of the Session: This session will discuss about options and different types of
options and their mechanism of working and its effect on risk n return.
Learning Outcome: The students will learn about the
1. To learn options
2. To understand call n put.
3. To understand the application of a diversified portfolio and its risk and return.
.
Desired Reading: Investment Analysis and Portfolio Management, Prasanna Chandra.
Colin Drury, 6th ed, Chapter – 13
Desired Videos:
https://www.youtube.com/watch?v=m3im-iJdhv4&t=26s
https://www.apnacourse.com/course/nis...

Session 22-24 : Tutorial Class:

Description of the Session: Session will take up practical questions related to the topic taught
in the previous class/classes and doubts would be cleared.

Learning Outcome: To clear the concept taught in the class and give more practice
questions.

7. Assessment Plan

You will be assessed on the basis of the following:

S. No. Assessment method Weight (%)

1. Active Class Participation, Class Assignment 25%
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2. Mid- term Exam (Closed Book) 35%

3. End Term Examination (Closed Book) 40%

Total 100%

1) Component 1: Class Assignments: (25%)

The students will be given an assignment to be submitted to the faculty in the
stipulated time. In assignment the student need to create their own portfolio of four
companies from any source ie Money control, ET etc and evaluate risk and return.
The excel sheet also needs to be submitted.

2) Component 2: Mid Term: (35%)

There would be a 1.5 hours closed book Campus examination. Students will have to
take the exam conducted in college premises. The examination will test students'
theoretical understanding through questions and their ability to apply various concepts
to situation based problems.

3) Component 3: End Term Exam (Closed Book): 40%

A three-hour closed book on campus end-term examination will be held at the
conclusion of the course. The examination will test students' theoretical understanding
through questions and their ability to apply various concepts to situation based
problems.

8. Maps
8.1 Assessment Map

Module A1 A2 A3 A4 A5
International * *
Finance

A1- Individual assignment

A2- Group assignment
A3- Open book examinations
A4- Closed book examinations
A5- Presentations

8.2 Teaching Map

Module Name: T1 T2 T3 T4 T5 T6
International Finance * * * *

T1: Lectures
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T2: Seminars/Tutorials
T3: Projects
T4: Case Discussion
T5: Guest Lectures/Industrial Visit
T6: Lab Sessions

8.3 Curriculum Map

Program Learning Goal

Module L1 L2 L3 L4 L5 L6 L7 L8
International Finance * * * * *

L1- Awareness
L2- Global & Multicultural Perspectives
L3- Critical & Integrative Thinking
L4- Communication: Oral & Written
L5- Data & Information Analysis
L6- Teamwork
L7- Entrepreneurial & Innovative Thinking
L8- Responsible Leadership

8.4 Assessment Mapping with Learning outcomes and PLGs:

Sl Asse Component
Mod Learning PLGs Rema
Out outcomes assessed Asses Remarks
1. Class Participation Understand the concept of “time value of money”
 Evaluate of bonds, stocks, and projects by applying
the concept of “time value of money”
 Price risk, and relate risk and expected return using
L1L3, L5, L7,
Capital-Asset-Pricing Model
L2,
 Explain the basics of call and put options, and
L3,L1
calculate their pay-offs and profits
2. End T Term Exam - Understand the concept of “time value of money” L1, L L3, L5,
 Evaluate of bonds, stocks, and projects by applying L7,
the concept of “time value of money” L2,L1
 Price risk, and relate risk and expected return using
Capital-Asset-Pricing Model
 Explain the basics of call and put options, and
calculate their pay-offs and profits
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