Financial Management, BMA 5008
National University of Singapore
NUS Business School Investment Financial Management BMA 5008
Understand the time value of money and calculate present value of future cash flows
Estimate cash flows for a project
Calculate the cost of capital
Use the net present value rule and other methods to evaluate a project
Measure the risk of individual securities and portfolios
Evaluate different sources and methods of financing
Analyze a firm’s capital structure
Set payout policy of a firm
any additional assigned
the lecture, you
Class attendance is highly encouraged. You are responsible for all material and announcements made in class. All students should display name sign during the class AND during the test.
REQUIRED COURSE MATERIALS
(1) Textbook: Principles of Corporate Finance, Richard A. Brealey, Stewart C. Myers, and
Franklin Allen (11th edition), McGraw-Hill.
(2) Case studies:
1) Alibaba (NUS/Ivey)
2) Emirates Airlines: A Billion-Dollar Sukuk-Bond Issue (NUS / Ivey)
3) East Meets West: Rothschild’s Investment in the Indonesian Mining Sector (NUS / INSEAD)
4) SIAS (NUS/Ivey)
(3) Calculator: A calculator that does two variable statistics is needed for homework and tests. If you do not have one, I recommend the Texas Instruments BAII plus business calculator (that’s the one I use). It does everything you need to be able to do, is user friendly, and is relatively inexpensive. You are required to bring calculator every class.
RECOMMENDED READING (1) The Wall Street Journal
(2) Financial Times
(3) Business Times
The assessment policy for this course is specified in the following paragraphs. Please read it carefully. The final course grade will be computed based on the following weights:
(1) Class participation: 10% (2) Case study analysis and participation: 10% (3) Team project: 20% (4) Test: 20% (5) Final Exam: 40%
Tests will be a combination of multiple choice questions, show-your-work problems, and essay questions. Tests will cover all assigned readings and problems as well as material covered and discussed in class. The multiple-choice questions will be conceptual. The show-your-work
problems will be computation based and similar to assigned problems. The essay questions will ask you to explain a concept. Answers to these should be one or two paragraphs in length. The best
way to prepare for the tests is to do the readings and the assignments and attend class.
You are allowed to have a calculator and formula sheet (and nothing else) to all tests. You may bring in a 5” 8” formula sheet (both sides) for the test or a 8”x11” formula sheet (one side only). You are allowed to write only formulas on a formula sheet (this should be self-explanatory). Each formula sheet will be submitted with your test when you turn it in. If you know that you have
a conflict with an upcoming test such as a job interview, you must notify me several days in advance and provide supporting documentation or a make-up test will be denied. Students on athletic scholarships have to provide supporting material in the first week of the semester. Last minute requests for a make-up test will be denied except in the case of medical emergencies. In these cases, you must provide supporting documentation.
You will be assigned to a team of 4 – 6 students. If you are not assigned to a team, come and talk to me. Teams are responsible for the discussion of case studies and the class project.
Project is team effort. The project is to be done in Excel. Many recruiters want to see that you have done financial modeling. Calculations must be done using Excel formulas. You will submit the
hard copy of the report to me and electronic copy of the report and Excel file to IVLE. Guidelines will be posted on the class web page later in the course. Project is due on a specified date at the beginning of the class. Late submissions will be penalized at the rate of 10% for every 12 hours (with first 10% being deducted immediately after the deadline).
NAME OF THE FILE HAS TO LOOK LIKE FOLLOWING:
For example, . Names of team members, your section number, and team number need to be printed on the cover page.
The following is a list of some of the topics that we will cover in this course. Based on the progress of the class, minor changes (additions or deletions) may be made to this list.
Introduction to finance
What is a corporation?
The objectives of a firm
What is the role of a financial manager?
Separation of ownership and management
Introduction to present value and the opportunity cost of capital
Valuation of stocks and bonds
Making investment decisions with the Net Present Value (NPV) rule
NPV vs. alternative criteria for making investment decisions such as the Internal Rate of
Return Rule and Payback Period Rule
Estimation of cash flows and valuing a project using discounted cash flows
Risk, Return, and Cost of Capital
The benefits of diversification
Measures of risk for individual securities and portfolios
Capital Asset Pricing Model and alternative pricing models
The cost of equity and the weighted average cost of capital (WACC)
Efficient markets theory
Stock market anomalies and behavioral finance
Financing a company using common stock, preferred stock, and debt
How corporations issue securities (e.g. IPOs)
Venture Capital and Private Equity
How dividends are paid and how firms repurchase stock
The payout controversy
How much should a company borrow?
The trade-off theory of capital structure
The pecking order of financial choices
Investing in weak legal environments
Frequently, students will be interested in non-textbook books on investing in equity securities. There is a huge range in the difficulty level and quality of these books. Following is a list of books that complement what you are learning in this course and are at an adequate difficulty level. They are organized by general topic area.
A Random Walk Down Wall Street by Burton G. Malkiel
The Intelligent Investor by Benjamin Graham
Security Analysis by Benjamin Graham and David L. Dodd
Applied Equity Analysis by James English
Beyond the Random Walk by Vijay Singal
The New Finance: The Case Against Efficient Markets by Robert A. Haugen
The Inefficient Stock Market: What Pays Off and Why by Robert A. Haugen
Irrational Exuberance by Robert J. Shiller
Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of
Investing by Hersh Shefrin
Inefficient Markets: An Introduction to Behavioral Finance by Andrei Schleifer
Advances in Behavioral Finance by Richard H. Thaler
Behavioral Corporate Finance by Hersh Shefrin
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for
Global Capitalism by George A. Akerlof, Robert J. Shiller
Predictably Irrational by Dan Ariely
SPECIFIC EVENTS OR PEOPLE
One Up on Wall Street by Peter Lynch with John Rothchild
Beating the Street by Peter Lynch with John Rothchild
The Warren Buffet Way by Robert G. Hagstrom, Jr.
Buffetology by Mary Buffet and David Clark
Winning on Wall Street by Martin Zweig
Freakonomics by Stephen J. Dubner, Steven D. Levitt
Accidental Investment Banker by Jonathan A. Knee
NUS Business School