FIE402 Corporate Finance
Autumn 2022Spring 2023
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 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. The lectures and all course material are in English.
In fall, the course is taught in a reverse classroom setting: for every lecture there exists a pre-recorded video on Canvas with all the lecture material that the students are expected to watch before each lecture . In order to facilitate the discussion during the physical classes, the lectures and tutorials will not be streamed or 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) that are typically covered in bachelor-level finance courses.
A single, written, individual homework assignment. The homework assignment is handed out in the middle of the term and graded on an 'approved/not approved' basis.
4 hour individual written home exam. The exam will be written in English and has to be answered in English.
The textbook for the course (Berk and DeMarzo) comes with access to the online-tool MyFinanceLab. Usage of MyFinanceLab is entirely voluntary and students are not required to use this tool. For students who wish to use MyFinanceLab but do not wish to buy the course book, a separate license to MyFinanceLab can be purchased directly online.
Berk J. and DeMarzo P., "Corporate Finance" (2020), Pearson Global Edition, 5th edition.
- ECTS Credits
- Teaching language
Autumn and Spring. Offered Autumn 2022.
Autumn: Assistant Professor Carsten Bienz, Department of Finance, NHH
Spring: Associate Professor Konrad Raff, Department of Finance, NHH