FIE402 Corporate Finance
Høst 2023Vår 2024
The course is built around the following three main topics:
(i) Financial strategy: capital structure, dividend policy, issuing of securities
(ii) Valuation and value creation: Discounted cash flow techniques, Interaction of financing and investment decisions.
(iii) Options in corporate finance: real options, equity and debt as options, convertible debt
The first part of the course covers various theories that trade off the costs and benefits for a firm of choosing between debt and equity financing. We will come up with a framework of an optimal capital structure and payout policy. In addition, students will gain an understanding of and institutional knowledge in the area of equity and debt issues. The second part of the course will look at the interaction between capital structure and valuation. We will cover valuation techniques that incorporate financial side-effects, such as Adjusted Present Value (APV), Weighted Average Cost of Capital (WACC), and the Flow-to-Equity. The third part of the course focuses on the role of options for corporate finance. We will consider the consequences of viewing debt and equity as options. In addition we will consider the valuation of investment projects with embedded real options. Finally, we will cover various specialized topics, including mergers and acquisitions and corporate governance.
The goal of this course is to teach students the principles and tools of corporate financial management. Upon successful completion of the course, students are able to:
- critically evaluate different capital structure theories
- compare and apply various discounted cash flow techniques
- critically reflect on the implications of option valuation for firms financing and investment decisions
- critically evaluate merger & acquisition opportunities
- apply capital structure theories to come up with optimal financing strategies for firms
- value assets using complex discounted cash flow methods
- analyze investment decisions using a `real options` approach
- analyze different payment methods for mergers & acquisitions
- assess the costs and benefits of different risk management strategies
- Use the ideas and techniques of financial economics to deal with applied real-world problems.
Lectures and tutorials. Lectures and tutorials will be taught in person. The course will feature some pre-produced videos but in order to facilitate the classroom discussion no lectures will be recorded.
There are no formal prerequisites for the course but students are expected to be familiar with basic finance concepts (e.g. time value of money; NPV, CAPM) that are typically covered in bachelor-level finance courses.
Two written, individual homework assignments. The homework assignments are graded on an 'approved/not approved' basis.
3 hour individual written school exam. The exam will be written in English and has to be answered in English.
The course makes extensive use of Excel. Note: the course does not use or endorse MyFinanceLab.
Berk J. and DeMarzo P., "Corporate Finance" (2020), Pearson Global Edition, 5th (or any earlier) edition.
Permitted Support Material
One bilingual dictionary (Category I)
All in accordance with Supplementary provisions to the Regulations for Full-time Study Programmes at the Norwegian School of Economics Ch.4 Permitted support material
and https://www.nhh.no/en/for-students/regulations/ https://www.nhh.no/en/for-students/regulations/ https://www.nhh.no/en/for-students/examinations/examination-support-materials/ https://www.nhh.no/en/for-students/examinations/examination-support-materials/
Autumn and Spring. Offered Autumn 2023.
Autumn 2023: Professor Uwe Walz, Department of Finance, NHH
Spring: Associate Professor Konrad Raff, Department of Finance, NHH