Corporate Finance

FIE402 Corporate Finance

Autumn 2020

  • Topics

    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 risk management and mergers and acquisitions.

  • Learning outcome

    The goal of this course is to teach students the principles and tools of corporate financial management. Upon successful completion of the course, students shall have:

    Knowledge:

    • critically evaluate different capital structure theories
    • compare and apply various discounted cash flow techniques
    • critically reflect the implications of option valuation for firms financing and investment decisions
    • critically evaluate merger & acquisition opportunities

    Skills:

    • 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

    Competencies:

    • Use the ideas and techniques of financial economics to deal with applied real-world problems.

  • Teaching

    Lectures in English. All powerpoints are in English.

    Students should be prepared to discuss case assignments in class

  • Recommended prerequisites

    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; capital asset pricing model; project valuation)

    typically covered in most bachelor-level finance courses.

  • Requirements for course approval

    To earn course approval, students are required to earn a 'pass' on a written, individual homework assignment. The homework assignment is handed out in the middle of the term and graded on a pass/fail basis. 

  • Assessment

    4 hours written school exam in English. The exam questions have to be answered in English. The exam in the Fall will be conducted through Wiseflow.

  • Grading Scale

    A-F

  • Computer tools

    Access to the online-tool MyFinanceLab, which accompanies the texbook. For students who do not wish to buy the course book (Berk and DeMarzo), a separate license to MyFinanceLab can be purchased directly online.

  • Literature

    Berk J. and DeMarzo P., "Corporate Finance" (2014), Pearson Global Edition, 4th edition.

Overview

ECTS Credits
7.5
Teaching language
 English both semesters
Semester

Autum and Spring. Offered autumn 2020.

Please note: Due to the present corona situation, please expect parts of this course description to be changed before the autumn semester starts. Particularly, but not exclusively, this relates to teaching methods, mandatory requirements and assessment.

Course responsible

Autumn: Assistant Professor José Albuquerque de Sousa, Department of Finance, NHH

Spring: Associate Professor Konrad Raff, Department of Finance, NHH