Corporate Finance is concerned with the financing and investment decisions made by the management of companies in pursuit of corporate goals. It will further develop student’s knowledge of the theory and practical application of finance. The course also introduces students to empirical studies on corporate finance. The aim of the course is to provide students with the practical tools required to be able to make good decisions in a financial management setting together with a solid understanding of the theoretical concepts underpinning the financial markets and the financial environment in which firms operate. It will enable students to understand the importance of finance in company decision making and its place in the broader business mix.
| Market Efficiency The Efficient Markets Hypothesis. The perspective of the investment, finance and dividend decisions and its role and relevance to small investors in an investment advice setting. Sources of Finance Equity and Debt finance. Issuance, valuation, risk and return characteristics and the relative strengths and weaknesses of each as a source of finance. Particular focus on practical methods of valuing companies and evaluating bonds in terms of risk and default probabilities. Banks as a source of finance. Investment Appraisal Methods The decision making process for investment appraisal. Present Value and the Internal Rate of Return, Payback and Accounting Rate of Return. Capital rationing, taxation and inflation. Risk and project appraisal. Analysis of Financial Performance Appraising firm performance using traditional and modern methods including ratio analysis, and economic methods. Focus on performance from both insider and outsider perspectives Working Capital Management Management of stocks, debtors, creditors and cash. The working capital cycle and the choice of working capital policies. Cash management. Capital Structure Gearing, measurement and implications. Estimating the Cost of Capital. Business risk and financial risk. Capital structure and its place in financial strategy and decision making. The issue of whether an optimal capital structure exists and whether it affects firm value. Financial Distress. Dividend Policy The relationship between earnings and dividends. Dividends and capital structure, firm ownership and whether dividend decisions can affect the value of the firm. The Market for Corporate Control Mergers and Acquisitions and links between ownership and control. Corporate diversification. The merger decision. Merger motives. Financing mergers. The merger process. Managing mergers. Portfolio Theory and Risk Management Holding period returns. Expected returns and standard deviation. Combinations of investments. Portfolio expected returns and standard deviation. Capital Asset Pricing Model .Incorporates modern portfolio theory, asset pricing, CAPM, and hedging. Corporate Governance This is examined in the setting of the principal agent conflict and corporate goals including shareholder wealth maximization.
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This course is focused on corporate finance from both a practical and a theoretical basis. Consequently the learning style will facilitate students in understanding and being able to use financial tools and financial analysis to aid decision making in a financial management setting. To facilitate learning, a number of methods will be used including the use of labs to demonstrate practical concepts, a case study based approach and both independent and group learning. This will encourage problem solving and group discussions. Formal lectures will be used to develop the students’ knowledge of the financial tools and the theoretical underpinnings of the subject.
| Module Content & Assessment | |
|---|---|
| Assessment Breakdown | % |
| Formal Examination | 70 |
| Other Assessment(s) | 30 |