UNIVERSITY OF SOUTHERN CALIFORNIA MARSHALL SCHOOL OF BUSINESS CORPORATE FINANCIAL STRATEGY (FBE 432) SYLLABUS, FALL 2007 Prof. Oguzhan Ozbas Course objective: The objective of this course is for you to learn the financial tools needed to make good business decisions. The emphasis will be on linking finance to other aspects of corporate strategy. Teaching methods: The course will build on corporate finance theory with applications to real business decisions. Each session will involve class discussion. In some instances, discussion will be centered on lectures; in others, it will be centered on a business case. As opportunities arise, we will discuss current events in the world of corporate finance. Your participation is critical to the success of the course. You are expected to study all cases and readings, come to class, and participate in class discussion. Prerequisites: Business Finance (BUAD 306). Some background in financial statement analysis can be useful. Course packet: There is a course packet that contains the case studies, the corresponding study questions, and some readings for the course at the USC Bookstore. Lecture Notes: Lecture notes and all other additional course material will be posted on Blackboard, which can be accessed at http://blackboard.usc.edu. You will need to download them before each class. Readings/Books: • Higgins, Analysis for Financial Management, 8th ed., Irwin, McGraw-Hill (required) • Ross, Westerfield and Jordan, Fundamentals of Corporate Finance, 7th ed., Irwin, McGraw-Hill (from BUAD 306) • Grinblatt and Titman, Financial Markets and Corporate Strategy, 2nd ed., Irwin, McGraw-Hill (optional) Requirements/Grading: • Class Attendance & Participation: 20 % • Case Write-ups: 40 % • Final: 40 % (open-book)Case Write-ups: You should form groups of 4-5 students, and hand-in a single write-up per team. To lessen the workload and provide flexibility around certain dates, each team is allowed to take advantage of two silver bullets. However, starred cases cannot be used as silver bullets. Your write-ups, which summarize your analysis and recommendations, must not exceed two pages of reasonably sized text (at least 11 points, and preferably double-spaced). Supporting appendices should be concise and clear. Short remark regarding case notes: Business cases provide a somewhat unstructured and open-ended learning experience. This is inherently uncomfortable (perhaps more so for some individuals than others) and, as a result, some students ask for copies of case notes after class discussion. My policy (and that of all other USC professors who teach cases), however, is not to distribute these notes. If you are particularly uncomfortable with not having case notes handed out, you should probably not take this class. Office Hours: Open office hours will be Wednesdays at 3:30pm in HOH 514, and additional office hours will be announced preceding the final exam. In addition, I am generally available at other times, and am always happy to discuss any issues with you either after class or in my office. I will also attempt to answer questions via e-mail on a timely basis. Contact Information: email [email protected] – office (213) 740-0781 Institute Policy regarding Academic Integrity: The use of unauthorized material, communication with fellow students during an examination, attempting to benefit from the work of another student, and similar behavior that defeats the intent of an examination or other class work is unacceptable to the University. It is often difficult to distinguish between a culpable act and inadvertent behavior resulting from the nervous tensions accompanying examinations. Where a clear violation occurs, however, the instructor may disqualify the student’s work as unacceptable and assign a failing mark on the paper. Institute Policy regarding Disabilities: Any student requesting academic accommodations based on a disability is required to register with Disability Services and Programs (DSP) each semester. A letter of verification for approved accommodations can be obtained from DSP. Please be sure that the letter is delivered to me as early in the semester as possible. DSP is located in STU 301 and is open 8:30am-5:00pm, Tuesday through Friday. The telephone number for DSP is (213) 740-0774.SCHEDULE Part I: Financing Objective: The aim of this part of the course is to develop a framework to think about how firms finance their operations and how this interacts with overall corporate strategy. Session #1 – Tuesday, August 28 Introduction • For background, you may want to read: o Higgins, chapter 1: “Interpreting Financial Statements” o Higgins, chapter 2: “Evaluating Financial Performance” Session #2 – Thursday, August 30 Case Study: Butler Lumber Company (Session I) • Reading: Higgins, chapter 3: “Financial Forecasting” Session #3 – Tuesday, September 4 Case Study: Butler Lumber Company (Session II) * • Reading: Higgins, chapter 4: “Managing Growth” Session #4 – Thursday, September 6 Lecture: Capital Structure Session #5 – Tuesday, September 11 Lecture: Capital Structure (continued) Session #6 – Thursday, September 13 Case Study: UST Inc. Session #7 – Tuesday, September 18 Case Study: Massey-Ferguson, 1980 Session #8 – Thursday, September 20 Lecture: Capital Structure: Informational and Dynamic Considerations Session #9 – Tuesday, September 25 Case Study: MCI Communications Corp., 1983 * Session #10 – Thursday, September 27 Lecture: Dividend Policy Session #11 – Tuesday, October 2 Case Study: Intel Corporation, 1992Session #12 – Thursday, October 4 Lecture: Risk Management • Reading: Froot, Scharfstein and Stein, “A Framework for Risk Management,” Harvard Business Review, 1994 Session #13 – Tuesday, October 9 Case Study: American Barrick Resources Corporation PART II: Valuation and Investment Objective: The aim of this part of the course is to develop tools to evaluate real investment opportunities, such as building a new plant or acquiring another company. Session #14 – Thursday, October 11 Lecture: Free Cash Flows Session #15 – Tuesday, October 16 Case Study: Sky Television versus British Satellite Broadcasting Session #16 – Thursday, October 18 Lecture: WACC Session #17 – Tuesday, October 23 Lecture: APV • Reading: Luehrman, “Using APV: A Better Tool for Valuing Operations,” Harvard Business Review, 1997