module specification

FE5002A - Corporate Finance (2018/19)

Module specification Module approved to run in 2018/19
Module title Corporate Finance
Module level Intermediate (05)
Credit rating for module 15
School Guildhall School of Business and Law
Total study hours 150
 
5 hours Assessment Preparation / Delivery
105 hours Guided independent study
40 hours Scheduled learning & teaching activities
Assessment components
Type Weighting Qualifying mark Description
Coursework 40%   Essay - 1,500 words
Unseen Examination 60%   In-class test - 1.5 hours
Running in 2018/19
Period Campus Day Time Module Leader
Autumn semester City Friday Afternoon

Module summary

The module focuses upon the theory and the practice of Corporate Finance. It provides a theoretical and practical framework for understanding the relationship between markets and corporations and the interactions between them. The module will critically explore the current theoretical perspectives and consider their practical application in relation to investment strategies and corporate decision making.
The contents of the module covers corporate objectives, investment appraisal techniques and decisions making, capital structure, mergers and acquisitions, dividend policy theory and practice, working capital management, financial markets and instruments, financial Investment Strategies, and valuation of securities.
The module provides thorough knowledge of finance and guides students on assessing risks and managing risks for businesses and investment.  The module builds up strong quantitative, written, critical and analytical skills required for employment in the finance industry.
A blended teaching and learning approach includes use of websites, videos, guest talks from industry and support for employability enhancing classroom activities.
Bloomberg will be used to deliver teaching sessions.

Syllabus

Corporate objectives: wealth maximisation, agency theory, stakeholder theory, information asymmetry. The interaction between the corporation and financial markets. LO1
Corporate investment decisions: Hirschleifer analysis and Fisher separation; the NPV rule and IRR rules of investment appraisal; comparison of NPV, IRR, Payback and accounting rate of return. LO1
Capital structure and sources of finance: capital structure and capital structure irrelevancy; taxation, the finance mix and weighted average cost of capital. LO1
Mergers and acquisitions: motivations for merger activity; gains and losses from merger/takeover, empirical evidence on the success of mergers or acquisitions. LO1
Dividend policy theory and practice: Modigliani–Miller and dividend irrelevancy; Relevancy theories; taxes and clienteles; signalling. LO2
Working capital management: relaxed and aggressive working capital policies, liquidity, overtrading; management of cash debtors, creditors, stocks. Risk management. LO1, LO3
Financial markets and instruments: money markets, forex markets, bond markets, equity markets. Efficient markets Hypothesis; theory and empirical evidence, EMH testing methodology. Behavioural finance. LO2
Valuation of securities: Valuation of Equities and bonds. Term structure of interest rates, duration. LO2, LO3

Balance of independent study and scheduled teaching activity

Teaching is structured by lectures and seminars. The formal lectures of two hours will take place every week and these will be interactive, requiring students to participate in in-class exercises and discussion.
The lectures are be supported by one-hour seminars. Seminars typically provide a forum for discussion of class exercises based on either theory, case studies or the practical application of topics explored in the lecture. Some seminar time will be allocated to use of IT resources such as spreadsheets and retrieval and analysis of market data from sources such as Bloomberg.
Both lecture and seminar activities are structured to enable students to initially develop basic knowledge and then to progress to develop a deep and rich understanding of corporate finance and analysis of investment. Class exercises require students to carry out independent work prior to seminars and explore their ideas in the class with their peers and the tutor.
Professional and transferable skills are developed in lectures and seminars, and through independent directed learning and assessment. Skills development is enhanced through problem solving practiced in seminars and preparing examinations. Initiative and independence is developed progressively throughout the module such that students are required to take greater responsibility of their work.

Learning outcomes

On completion of this module students will be able to:
1. explain corporate objectives, the roles of shareholders, managers and other stakeholders in relation to Corporate Financial Strategy, and use corporate and market data to inform investment decision-making and discuss the factors which affect corporate decisions on capital structure and their impact upon the company.

2. critically apply the main theoretical models for determining the fair value of securities.

3. evaluate the construction, selection and management of investment portfolios and critically understand the relationship between risk and return and the concept of corporate diversification.

Assessment strategy

The summative assessment for this module includes three assignment components as below:
1. Coursework: An academic essay of 1,500 words will be due in week 8. The weighting of this coursework is 40%. The focus of this assignment will be a reflective exercise which will require students to explore their understanding and knowledge gained from the first 6 weeks. Case study of a listed corporation will allow students to apply their knowledge gained from the first 6 weeks. This will also enable formative feedback to be provided on the early stages of the module.

2. In-class test: An in-class test will be held in week 15. The duration of this examination will be 1.5 hour and the weighting will be 60%. The knowledge points to be examined will be from week 1 to week 12. This will examine students’ ability to articulate written answers to unseen questions. The questions will require students to demonstrate understanding of theory, its practical application and quantitative skills. 
Feedback on assessments will be provided in accordance with University guidelines.

Bibliography

Textbooks:

Corporate Finance

Core Text
Pike and Neal, (2009), Corporate Finance and Investment – Decisions and Strategies, 6th Edition, Pearson Education Limited, Harlow.

Other useful texts
Brealey, Myers and Allen (2007) Principles of Corporate Finance, 8th Edition., McGraw Hill Irwin

Copeland, Weston and Shastri, (2005), ‘Financial Theory and Corporate Policy’ - 4th Edition, Pearson EducationRoss,

Westefield & Jaffe, (2006), Corporate Finance, 8th Edition, McGraw Hill Education, Europe

Watson and Head, (2010), `Corporate Finance: Principles and Practice’ 5th Edition, Financial Times/Prentice Hall.

Brealey R.A., Myers S.C. and Franklin A., (2007), Principles of Corporate Finance. 9th  Edition, McGraw Hill

Journals:
The Journal of Finance
The Journal of Economics and Finance

Internet Sources
http://www.hsbcnet.com/treasury/futures-and-options
http://www.bloomberg.com
http://www.thebigproject.co.uk/money.htm
http://www.duke.edu/~charvey/Classes/ba453/groups05.htm

Media:
Financial Times

Data Sources:
Bloomberg