Hong Kong University of Science and Technology

School of Business and Management

FINA 2303 Financial Management (L1 & L2)

Fall 2017

1. GENERAL INFORMATION
Instructor: Lynn Pi, Associate Professor of Business Education, Dept. of Finance
Email: lynnpi@ust.hk
Office LSK 5073
office hours: by appointment

Teaching Assistant: Stone Wong, Department of Finance

Email: stone@ust.hk
Phone: 2358 5021
Office LSK 5068
office hours: Tue & Thu (except 09/19) 1:00-2:00pm; Thu: 10:30am-12:00am; and by
appointment

Class Dates and Venue:
Optional Tutorials:
Course Exclusion(s):
Course Add/drop deadline:
Canvas course site:
L1: Tue & Thu 3:00-4:20pm, LTJ
L2: Tue & Thu 4:30-5:50pm, LTJ
TBC
FINA 2203 Fundamentals of Business Finance
14 Sep (please contact your program office)
https://canvas.ust.hk

2. COURSE DESCRIPTION
This course provides an introduction to corporate finance. Topics include financial statement analysis, time
value of money, bond & stock valuation, capital budgeting, cost of capital, and risk & return concepts
The valuation principle is the unifying framework in this course. Students will first learn important tools
including time value of money, and several investment decision rules. After reviewing the basic corporate
accounting principles, they will apply these techniques and the valuation principle to corporate investment
decisions and project analysis. Securities valuation of bonds and stocks is another main application.
Subsequently, the critical concept of risk and return trade-off will be introduced and quantified. The model will
then be applied to corporations’ long term financing decisions of estimating the cost of capital.

3. COURSE OBJECTIVES
This course aims to introduce students to key basic financial concepts and theories, and develop their analytical
and problem solving skills in financial problems. It also provides students important foundations in finance for
those who plan to study intermediate and advanced-level courses in finance covering areas such as corporate
finance and investments.

4. COURSE LEARNING OUTCOMES

On Successful completion of this course, students are expected to be able to
Aligned FINA and QFIN
Course Learning Outcomes (CLOs) Program Learning
Outcomes (PILOs)
CLO1. Analyze firm financial performance through basic financial statement analysis PILO 1, 3
CLO2. Apply the concept of time value of money to make correct financial decisions PILO 1, 3
CLO3. Analyze the attractiveness of investment projects using various capital PILO 1, 3
budgeting techniques, and understand the merits and drawbacks of each technique.
CLO4. Explain the fundamental principles underlying asset valuation, and compute PILO 1, 3
asset prices using a variety of approaches
CLO5. Explain the key concepts of risk, return, and diversification PILO 1, 3
CLO6. Explain the key concepts and implications of cost of capital PILO 1, 3

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5. COURSE TEACHING AND LEARNING ACTIVITIES
Expected contact Study Load
Course Teaching and Learning Activities hours (% of study)

Lecture 40 40%
MFL Homework assignments 20 20%
Optional Tutorial 30 30%
Self-study and review 10 10%
Tutorial (optional for students who need extra help)
Total 100 100%

Aligned Course Learning

Outcomes
Assessment Methods Weight (%) (CLO no in section 4)

A. Class participation 6% CLO 1, 2, 3, 4, 5, 6

B. 10 MFL homework assignments (best 9) 15% CLO1, 2, 3, 4, 5, 6
C. Online Quizzes (2) 4% CLO 2, 4
D. Midterm Exam 30% CLO 1, 2, 3, 4
E. Final Exam 45% CLO 1, 2, 3, 4, 5, 6
Total 100%

Assessment Rubrics For Each Assessment

A. Class Participation
 We encourage interactive learning through in-class exercises in which participation and submission of
exercises is required. You will get participation credits by completing all exercises and the PRS
questions, regardless of whether your answers are correct or not.
 You will receive one bonus card if you ask or answer questions.
 You are strongly recommended to regularly attend the lectures for two main reasons. First, lecture
notes only contain brief outlines and do not include detailed explanation of the concepts nor step by
step solutions to numerical examples. So simply reading the lecture notes may not enable you to fully
understand the concepts. Skipping classes will definitely hurt your performance because the
assignments and exam questions are heavily based on materials covered in class. Second, class
participation is important for your learning experience and highly encouraged. It helps you to think
actively rather than passively, keeps you involved and motivated rather than removed and
disinterested.

B. My Finance Lab (MFL) Assignments

 There will be 10 MFL assignments, each one pertaining to specific chapters in the textbook. Only the
best nine (9) are counted towards your grade.
 You can submit the questions for grading individually and in non-specific order. However, you are
allowed only ONE submission of grading for each question, and the whole assignment must be done
before each specified deadline.
 The Homework assignments are individual assessment and you must work on the problems by yourself
without assistance from any other people. Violation will result in penalty for plagiarism.
 You may seek help from the TA and discuss concepts and computation methods with others while
doing the practice problems in the Study Plan.

C. On-line Quizzes
 There will be two online quizzes. All questions are in multiple-choice format.
 Quizzes are similar to MFL exercises and they are meant to help you review for the course content.
 You MUST complete the quizzes in the same strict confidence as in exams.
 There will be no make up for quizzes. Students who miss the quizzes will receive “zero” mark for that
quiz.

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D. Examinations
 There will be two examinations in this course – midterm and final. The final exam will be cumulative.
 The Midterm exam will be on October 14 (Saturday) from 14:30 to 16:30.
 The format of the exams will be all multiple choice questions. Questions are designed to test your
understanding of core finance concepts and principles as well as your ability to solve numerical
problems using the core principles and techniques.
 The examinations are closed book and closed notes. Financial calculators are allowed but
programmable calculators or calculators with text display functions are NOT allowed. All HKEAA
approved calculators are allowed during examinations.
 There are no alternative examination arrangements. A student who misses an examination without a
valid excuse will receive “zero” mark for that examination.

6. STNDARDS FOR ASSESSMENT

Course Grade Descriptors
A+, A, A- Excellent Performance
B+, B, B- Very Good to Good Performance
C+, C, C- Satisfactory Performance
D Marginal Performance
F Failure

7. COURSE CONTENT AND TENTATIVE TEACHING SCHEDULE

Date Course Content

Week 1 Chapter 1: Corporate Finance and the Financial Manager (exclude 1.2)
Week 2 Chapter 3: Time Value of Money: An Introduction , and Chapter 4: Time Value of Money: Valuing
Cash Flow Streams
Week 3 Chapter 5: Interest Rates (exclude 5.3)
Week 4 Chapter 8: Investment Decision Rules (exclude 8.6 and MIRR)
Week 5 Chapter 2: Introduction to Financial Statement Analysis (exclude 2.5)
Week 6 Chapter 2: Introduction to Financial Statement Analysis (exclude 2.5)
Midterm exam (chapters 1, 2, 3, 4, 5, 8)
Week 7 Chapter 9: Fundamentals of Capital Budgeting (exclude 9.5, 9.6, and MACRS)
Week 8 Chapter 6: Bonds (exclude 6.5)
Week 9 Chapter 7: Stock Valuation
Week 10 Chapter 10: Stock Valuation: A Second Look (exclude 10.4 and 10.5)
Week 11 Chapter 11: Risk and Return in Capital Markets
Week 12 Chapter 12: Systematic Risk and the Equity Risk Premium
Week 13 Chapter 13: Cost of Capital
TBC Final Exam (Comprehensive)

8. TEACHING MATERIALS
This course is a foundation required course for all Finance and QFIN major students. As such, the format and
content of the course as well as teaching materials are required by the Department of Finance.

1. Required textbook
rd
Fundamentals of Corporate Finance by Berk, DeMarzo and Harford, Pearson International Edition, 3 Ed.

This book is required of all students since it will be used extensively in the course. You should also read the
assigned chapters in the textbook thoroughly because the lectures will only focus on the core and more
difficult concepts instead of every detail in the textbook.

Note: This textbook contains information about U.S. financial markets, institutions and corporate finance
practices. These will not be covered in examinations.

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2. My Finance Lab (MFL) Access Code
Each student is required to have an individual Access Code to register for My Finance Lab, a web-based
homework and tutorial system accompanied the textbook.
It can be either purchased bundled with the textbook at a special discount price, or separately if you own a
used copy of the textbook, at the campus bookstore. Note: number of standalone cards is limited and may
be sold out quickly.

IMPORTANT: You must have your MFL account properly set up before 5pm on Sept 14 (Thur). Instructions
on registering your personal MFL account and a demo will be provided in the tutorials. Further instructions
on logging into the system to do the practices and assignments are also available on the course website.

My Finance Lab (MFL) contains a number of tutorial tools and learning aids that give you hands-on guidance
with a hint and partial credit system when working on the end-of-the-chapter problems.

There are important features in MFL: STUDY PLAN and HOMEWORK, which you would utilize extensively for
this course. Exercises in STUDY PLAN are non-graded. MFL provides step-by-step instruction, input-specific
feedback, and hints, and may link to spreadsheets, or sample problems that address the learning objective
of the problem. Therefore, you are strongly advised to take advantage of the STUDY PLAN by practicing
exercises for each chapter before attempting the graded assignments in HOMEWORK. All homework
questions are available in the STUDY PLAN but with different numerical parameters.

We will not post the solutions to end-of-chapter problems because you will get detailed solutions in STUDY
PLAN during your own practices.

3. Course website: https://canvas.ust.hk/courses/

You should visit the website regularly because a lot of important information will be available on the course
website including Announcements, Syllabus, Lecture Notes (under Modules), and Gradebook.

 All assigned readings and notes are posted at least two days prior to classes.
 Answers to Critical Thinking questions at the end of each chapter are posted.
 Solutions to Problems at the end of chapter will NOT be posted. Solutions to problems at the end of
chapter will NOT be posted because the detailed solutions are available in the STUDY PLAN in MFL.

4. Personal Response System (PRS)

We will use the PRS regularly in class so you can participate in class exercises and earn participation credit.
You can either use iPRS app on your smartphone or check out a PRS handset from the ITSC Service Desk at
Rm 2021 (Lift 2). If you use a handset, make sure you bring it to every class.

5. Tutorial Sessions
These sessions are optional. In each session, the TA will answer any question that students may have and
will explain selected concepts from the topics covered in the lectures. The TA may also work on additional
examples and exercises. It is important for you to attend these sessions if you need extra help in this course.
The TA also offers office hours and is available to meet you by appointment.

6. Textbook solutions
Textbook solutions can only be accessed via MFL. The only way to master the necessary skills in this course is
through practice. The difficult part of each question is to know where to begin and which formula to use.
This essential skill set will only be developed only if you solve each problem by yourself from the beginning
without taking a glance at the solution. You should use the solution only to check your answer and identify
your mistakes

9. ADDITIONAL COURSE INFORMATION

Class Conduct
This is a large class. To foster the best learning environment, you should abide by the following codes of
conduct:

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 Punctuality
You are expected to arrive and leave the class venue on time as late arrival and early departure are rude
and will be very disruptive to the class. If you need to come in late or leave early for various reasons, please
do so quietly.

 Consideration
‒ Do not use electronic devices for entertainment.
‒ Do not talk with other students except when doing group exercises.
‒ Do not create disturbances in the classroom.

Academic Integrity
Academic integrity and honesty are critical values in upholding HKUST's reputation as a community of
scholars and its claim to the "intellectual property" created by staff and students. As a student of HKUST,
you must commit to the Academic Honor Code. Cheating will not be tolerated. If you are caught cheating
during the exams, at minimum you will receive zero credit and will face further disciplinary action.

How to succeed in FINA 2303

 Read assigned textbook chapter prior to each class
 Attend classes and take notes
 Practice end-of-chapter problems and use MFL for more practice
 Ask when you do not understand and attend the tutorials
 Spend at least several hours per week to study outside classroom

10. MEANS/PROCESSES FOR STUDENT FEEDBACK ON COURSE

Complete online Student Feedback Questionnaire (SFQ) Survey during last two weeks of the course at:
Canvas website (https://canvas.ust.hk) or
SFQ Mobile website (http://sfq.ust.hk/mobile/) or
HKUST iLearn app at smartphones / tablets