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Lee Kong Chian School of Business

Academic Year 2016/17


Term 1
FNCE 201 CORPORATE FINANCE
Instructor Name
Title
Tel
Email
Office

: Dr. Gennaro BERNILE


: Associate Professor of Finance
: 6828 5478
: gbernile@smu.edu.sg
: LKCSB #4066

CLASS TIMINGS AND VENUES


G2
G1

Wednesday
Wednesday

08.15
15.30

11.30
18.45

LKCSB Seminar Rm 3.2


SIS Seminar Rm 2.4

COURSE DESCRIPTION
This course focuses on the analysis of financial problems confronting a corporate financial manager, a theme begun
in the introductory Finance course. The main objective of this course is to help students develop further
understanding of current theories and their implications for solving financial problems. The main topics covered
include shareholder value maximization and managing of corporate growth, corporate capital investments, capital
structure policy, corporate payout policy, real options, investment banking and capital raising, mergers and
acquisitions, working capital management. Throughout the course, we will study the typical issues that
corporations face in making investment and financing decisions with an emphasis on valuation. Research results
from recent empirical work, case studies, and their implications for corporations will also be discussed.

LEARNING OBJECTIVES
By the end of the course, students will be able to:
Develop a workable capital structure policy
Assess the risk and consequences of financial distress and bankruptcy
Extract value from an optimal mix of financing alternatives
Formulate an effective working capital policy with sustainable growth
Establish an appropriate corporate payout policy
Understand corporate governance
Understand corporate transactions such as a merger or acquisition
Understand how the market reacts to relevant corporate announcements

PRE-REQUISITE/ CO-REQUISITE/ MUTUALLY EXCLUSIVE COURSE(S)


Please refer to the Course Catalogue on OASIS for the most updated list of pre-requisites / co-requisites for
this particular course. Note that if this course has a co-requisite, it means that the course has to be taken
together with another course. Dropping one course during BOSS bidding would result in both courses being
dropped at the same time.

ASSESSMENT METHODS
Group Project Presentation and Report: 35%
Class Participation: 10%
News Reading Recommendation: 5%
Final Exam: 50%

Academic Integrity
All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication, facilitation of acts
of academic dishonesty by others, unauthorized possession of exam questions, or tampering with the
academic work of other students) are serious offences. All work presented in class must be the students own
work. Any student caught violating this policy may result in the student receiving zero marks for the
component assessment or a fail grade for the course. This policy applies to all works (whether oral or
written) submitted for purposes of assessment. When in doubt, students are encouraged to consult the
instructors of the course. Details on the SMU Code of Academic Integrity may be accessed
at http://www.smuscd.org/resources.html.

INSTRUCTIONAL METHODS AND EXPECTATIONS


Group Project: The objective of the project is to allow you to analyze the corporate financial strategies of a
firm (of your choice). I will discuss the topics and requirements for the group project in the first class.
The first order of business for students is to promptly organize into teams. I do not assign or
otherwise determine teams. You are responsible for finding your group members. The group must include
4 or 5 students. Each team must choose an official team name (be practical and professional). Please,
provide me your team information (name of the team, names and email addresses of each team
member) via e-mail as soon as possible, and no later than the end of our third class. Team
composition must stay constant throughout the course. I must approve any exceptions to the rules
above. All team members will receive the same team grade without exception.
There will be a time slot of 10/15 minutes for you to present your work near the end of the term. The group
also needs to submit a written report before the presentation. The written report consist of 20% of your
final grade and your presentation 15% of your final grade.
To score well on the written reports, you should make them professional, convenient to read, and easy to
understand. I do not want anything resembling Power Point presentations. Rather, reports should be written
in complete sentences and paragraphs, with headings and footnotes and a table of contents. The ideal length
of the written report is about 10 pages including tables, figures, and appendix (font 12, double spacing).
Class Participation: Participation is a central part of the learning process for you and your classmates.
When you contribute, you enhance your own understanding of the material and you help others learn. Your
participation mark reflects your contribution to the class environment. The grade of class participation is a
positive function of your concentration and activeness in class, and a negative function of your disturbing
behavior such as being late, leaving early, chatting, using mobile phones, and browsing internet in class. I do not
allow the use of laptops during classes. Also, I expect all mobile devices to be turned off during class and you
will most definitely be penalized for any use of or class disruption caused by your phone.
Final Exam: Closed-book, closed-notes (no cheat sheet). Scientific or financial calculators are allowed, but no
other devices (phones, tablets, etc.). The exam lasts 2 hours and there will be no make-up exams under any
circumstances. Time of the exams will be announced in the first class.

CONSULTATIONS
You are welcome to see me for questions at any time. Though I spend most of my time in the office, you
should contact me for an appointment before coming. My office and contact information are listed at the top
of this course outline. I am also readily available to answer your questions by email. I do my best to reply
within 24 hours.

RECOMMENDED TEXT AND READINGS


Textbook:
Jonathan Berk and Peter DeMarzo
Corporate Finance 3rd Edition
Pearson International Edition, 2010
Additional readings will be assigned occasionally. Students are expected to keep abreast of current
developments in the business world by reading leading business newspapers/magazines like the Wall Street
Journal, Financial Times, The Economist, and Business Week.

TENTATIVE LESSON PLAN


Sequence
1
2
3
4
5
6-7

Topic
Course Logistics
Introduction of Corporate Finance Topics
Capital Structure I
M&M Theorem and Tax Implications
Capital Structure II
Implications of Bankruptcy Costs
Capital Structure III
Implications of Conflicts of Interest
Debt Financing

Readings
(Berk/DeMarzo)
Ch. 1
Ch. 14, 15
Ch. 16
Ch. 16
Ch. 24

Equity Financing
IPO, SEO, Venture Capital, Private Placements
School Recess (October 6-12)

Ch. 23

9-10

Payout Policy

Ch. 17

10-11

Mergers and Acquisitions (if time permits)

Ch. 28
Ch. 29

13

Executive Compensation & (if time permits)


Corporate Governance
Group Project Presentation

14

Study Week, Q&A

15

Final Exam (November 21, 2016, 8.30am)

12

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