Finance 3322 Corporation Finance I Fall Semester 2007 Department of Finance, Texas Tech University Classroom Rawls College of Business Administration Bldg., Room LH 5 Meeting time Mon / Wed, 2:00 – 3:20 p.m. Instructor Jack Cooney Office Rawls College of Business Bldg., Room 909 Office phone (806) 742-1536 Office Hours Mon / Wed, 9:30-11:30 a.m. and by appointment Email [email protected] (put “Fin 3322” in the subject line) Web Page http://jcooney.ba.ttu.edu/fin3322.html Description This is an introductory course in corporate finance. Its objective is to provide the student with the conceptual framework necessary to appreciate and understand how a corporate financial manager should make capital investment and financing decisions. Learning Outcomes After completing this course, students should be able to: 1) Know how to use a computer spreadsheet program to analyze financial problems and to communicate the results of this analysis 2) Understand how to value a set of cash flows using time value of money formulas 3) Understand the proper methods to evaluate projects and critique the shortfalls associated with other project evaluation methods 4) Know how to determine working capital requirements for projects 5) Know how to calculate project cash flows 6) Know how to address project interactions 7) Know how to determine project risk and the cost of capital (i.e., discount rate) for a project 8) Know how to evaluate international projects 9) Assess the value of information 10) Assess the effects of competition 11) Know how to evaluate project performance 12) Identify the possible financing sources available for a corporation 13) Know how to compare the benefits of using debt versus equity financing (i.e., know how to determine the optimal capital structure for a company) You were exposed to some of these topics in FIN 3320 (Financial Management). This class reexamines these topics at a more advanced level, as well as covers new material. Textbook Selected chapters from Principles of Corporate Finance, Brealey, Myers, and Allen; McGraw Hill Irwin, 8th Ed., 2006. Class notes You can retrieve the notes and other class material (saved as Adobe pdf, Microsoft Word, and Excel files) from the class web site. Prerequisites Finance 3320 (Financial Management) with a grade of A or B. Assessment Assessment of completing the set of learning outcomes will be made with (1) computer problem sets and written summaries of results, and (2) in-class exams and quizzes and take-home assignments. In particular, your class grade will be calculated based on 400 points. Extra credit allows for more points, so it is possible to get more than 400 points in this class. Exam 1 (October 1, 2007) 100 points Exam 2 (November 5, 2007) 100 points Exam 3 (Dec. 12, 2007, 5:30-7:30 pm) 100 points Nine regular quizzes 5 points each, 40 points total (best 8 of 9) Three computer problem sets 20 points each, 60 points total Total 400 pointsAttendance As outlined above, there are no points specifically allocated for attendance. However, attendance is still extremely important in this class. First, I will be giving six attendance quizzes during the semester (details below). Missing that day means that you won’t get the points from the attendance quiz. Second, this is a difficult course and you can quickly get lost if you miss a class. Thus, I expect you to attend every scheduled class, adequately prepared to participate in the class discussion. If you miss a class, you are still responsible for any material discussed and announcements made during the missed class. So, make sure you talk to a fellow student or me after any missed class. Classes will generally last the entire class period. Extra Credit There are four opportunities for extra-credit: (1) attendance-quizzes, (2) exam extra credit, (3) problem set extra credit, and (4) finding typos: Attendance-quizzes. There will be six attendance quizzes this semester. I will automatically drop your lowest attendance quiz score. Therefore, only the top five attendance quiz scores will be counted towards your final grade. In each attendance quiz, you will be asked to solve a finance problem or answer a finance question. These problems and questions will be from material discussed in the previous two - three classes, or from the current day’s class, and they serve as good examples of questions for upcoming regular quizzes and exams. Everyone who takes the attendance quiz will get one point. Students who answer the problem or question correctly will get an extra point (i.e., two points total). Attendance quizzes are graded credit / no credit and are open-book, open-notes. The first attendance quiz is September 5, 2007. I will not announce the dates for the other five attendance quizzes. Exam extra credit. Students will have the opportunity to work on a 2.2-point extra credit problem after each of the first two exams. The problem will be similar to the exam problems and will be graded credit / no credit. Problem set extra credit. There will be three computer problem sets assigned during the semester (details below). Each problem set is worth 20 points. In addition, I will provide an opportunity to receive two points of extra credit for problem sets #1 and #2. (There is no extra credit for problem set #3.) Each two-point extra credit assignment will require you to demonstrate the ability of your spreadsheet to calculate new solutions using different assumptions. More detail on grading the extra credit will accompany the assignments. Finding typos. To encourage careful study, I will give two points of extra credit to any student that identifies a typographical error in the textbook or other class material. The typographical error must be more substantial than a grammatical or spelling error. For example, I will give extra credit if you find incorrect solutions to problems, missing (and necessary) assumptions needed to solve a problem, and the like. Only the first student to find the error will receive credit. I will keep a list of typographical errors on the class web page. Students can receive up to a maximum of four extra-credit points for finding typos. Grading scale I will add your combined scores from the exams, regular quizzes, problem sets, and extra credit, resulting in your unadjusted score. I will then add the class curve (described below), to come up with your final curved score and use this final