NYU Stern School of Business Corporate Finance B40 2302 11 B40 2302 12 Fall 2001 Prof Office Tel Email Ofc hrs Course page Jeffrey Wurgler Tisch 9 09 212 998 0367 jwurgler stern nyu edu 1 immediately after class 2 Thursdays 4 30 5 45pm 3 by appointment up soon Description This course covers the major topics in modern corporate finance The course is organized into two parts The first part investment policy includes investment decision rules in general and net present value in particular the valuation of investment projects the cost of capital and the valuation of options The second part financial policy includes the mechanics and vocabulary of financing the irrelevance of financial policy in unrealistically perfect but pedagogically useful capital markets and the relevance of financial policy in real world capital markets characterized by taxes financial distress costs asymmetric information inefficient market prices and agency problems The course is designed to serve as the backbone for several subsequent finance courses It therefore emphasizes breadth over depth Topics not covered for lack of space include financial statement analysis measuring corporate performance financial planning credit management cash management a detailed analysis of bankruptcy and specialized topics in international corporate finance These topics are covered by other offerings at Stern B10 2303 Financial Statement Analysis B40 3198 Bankruptcy and Reorganization B40 3388 International Financial Management B40 3387 Global Banking among others Required text BM Richard A Brealey and Stewart C Myers 2000 Principles of Corporate Finance 6th ed Available at bookstore It is important to get the 6th edition The in class discussion will be heavily framed around this textbook and the slides I use will be modified versions of the slides included in the Student CD ROM in the inside back cover of the textbook You may want to bring the text or a CD ROM laptop combination to class Required article GH John R Graham and Campbell R Harvey 2001 The theory and practice of corporate finance Evidence from the field Journal of Financial Economics 60 p 187 244 We will not use it until the last class It will be distributed in class or as otherwise noted Handouts notes Hard copies available in class and posted on course page Grading 40 30 21 9 Final open book open notes open calculator laptop Midterm open book open notes open calculator laptop Regrading policy Submit whole exam again along with written summary of perceived discrepancy Note that exams are photocopied before being returned Three problem sets 7 each Group policy Up to three students may turn in a single solution To maximize learning however you should give all problems your best effort before meeting with others Late policy One problem set contributes at most 6 to total grade if one day late 5 if two days late etc if more than six days late don t bother Class participation roughly attendance constructive discussion Following departmental guidelines sorry final grades will be curved to an approximate distribution of 10 A 10 15 A 10 B 50 60 B B 10 15 C C C 0 10 D F Dates W R section Major topics Reading Assignment PART I INVESTMENT POLICY 9 5 9 6 Course introduction corporate structure present value opportunity cost of capital No class Terrorism BM 1 2 3 end ofchapter quizzes 9 26 9 27 Using present value e g valuing stocks superiority of NPV examples Risk and return capital budgeting under risk 10 3 10 4 Option structures Black Scholes real options BM 4 5 6 end ofchapter quizzes BM 7 8 9 end ofchapter quizzes BM 20 21 end ofchapter quizzes 10 10 10 11 first half Midterm examination 9 12 9 13 9 19 9 20 Problem set 1 due in class PART II FINANCIAL POLICY 10 10 10 11 second half 10 17 10 18 10 24 10 25 10 31 11 1 11 7 11 8 11 14 11 15 11 21 11 22 11 28 11 29 12 5 12 6 12 19 12 20 Overview of financial instruments equity related common stock preferred stock venture capital Overview of financial instruments debt related debt overview warrants convertibles debt contracts and markets leasing intro The security issue process Irrelevance of financing and dividend policy in idealized capital markets the ModiglianiMiller theorems Relevance of financial policy under taxes and or financial distress leasing cont Relevance of financial policy under taxes and or financial distress cont Risk management international risk management Relevance of financial policy under asymmetric information and or market inefficiency No class Thanksgiving Relevance of financial policy under agency problems incentives mergers and acquisitions other governance mechanisms Course review BM 14 1 14 3 15 1 end of chapter quizzes BM 14 4 14 5 22 1 22 3 23 24 25 1 end of chapter quizzes BM 15 2 15 6 16 116 4 17 end ofchapter quizzes BM 16 5 16 8 18 118 3 18 5 19 25 225 6 end of chapter quizzes BM 26 27 end ofchapter quizzes Problem set 2 due in class BM 13 18 4 22 422 5 end of chapter quizzes BM 12 3 33 34 end of chapter quizzes GH Problem set 3 due in class Final examination will be held 6 8pm on day of class location TBA Note that BM chapters 10 and 11 and the associated topics were deleted in response to the missed class session on 9 12 and 9 13 You should skim these chapters for your own knowledge but they will not represent testable material