Corporate Finance

FIE402 Corporate Finance

Spring 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 in English. All power points 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.

    Students who have been registered to the exam in FIE402 in a previous semester are exempted from the requirement for course approval. If this applies to you, please send an email to Maj-Brit Iden, "maj-brit.iden@nhh.no", as soon as possible and before February 1. This arrangement applies only to this semester (spring 2020).

  • Assessment

    Due to the ongoing Corona pandemic, the assessment for the spring semester 2020 has been changed:

    Individual home exam, number of hours TBA, grading scale pass/fail.

    The exam data has not been changed.

     

    Original assessment form spring 2020 – cancelled:

    3 hours written school exam in English. The exam questions have to be answered in English.

    Students who have been registered to the exam in FIE402 in a previous semester are exempted from the requirement for course approval. If this applies to you, please send an email to Maj-Brit Iden, "maj-brit.iden@nhh.no", as soon as possible. This arrangement applies only to this semester (spring 2020).

  • Grading Scale

    Grading scale spring 2020 pass/fail.

    (Ordinary 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

Autumn and Spring. Offered spring 2020.

NB! The assessment form has been changed due to the ongoing corona pandemic.

See assessment section for details.

Course responsible

Associate Professor Konrad Raff, Department of Finance, NHH