PART 1

INTRODUCTION:

The focus of this course is to understand every decision that a business makes that has financial
implications. There would be seldom any decisions that a manager makes that does not have financial
implications! In that sense, this course is important for every business manager across various domains.
This course is designed to give an introduction to the fascinating world of finance, and provides a
foundation for other advanced courses.

The course is divided into five modules: time value of money, valuation of bonds and stocks, capital
budgeting, risk and return, debt policy and dividend policy. The concepts and applications covered by
this course are directly relevant for every management student, irrespective of the area of
specialization. Topics include: the goals of the firm and investors, valuation of equity and debt
instruments, capital budgeting, issues in risk and return, portfolio theory, asset pricing models, issues
in capital structure and the efficiency of capital markets.

COURSE OBJECTIVES:
The learning goals associated with this course are:
 Explain and apply the fundamental concepts of finance such as time value of money
 Value equity and debt instruments, and understand capital budgeting decisions for a firm
 Understand portfolio theory and how it can be used to price risky assets.
 Estimate the appropriate cost of capital for investment appraisal purposes.
 Analyse issues determining capital structure.
 Analyse issues determining dividend policy

COURSE LEARNING OUTCOMES (CLO):

Successful completion of this course will enable the student to:
CLO 1: Identify the major decisions made by managers of business entities, explain the role of financial
manager in firms and explain agency costs.
CLO 2: Apply the concepts of time value of money for financial decision making (PLG 1).
CLO 3: Understand the concept of investment decision and interpret the implications of classic
tools of investment analysis i.e. net present value, internal rate of return, payback etc (PLG 2).
CLO 4: Understand how risk and return are defined and measured, explain how diversification reduces
risk, explain why systematic risk is important to investors and explain the relation between risk
and return proposed by the Capital Asset Pricing Model.
CLO 5: Appreciate the importance of capital structure for the firm and the resulting cost of capital for
the firm.
CLO 6: Appreciate the importance of dividend policy for the firm.

COURSE CONTENT:
 Finance and the Financial Manager
 Present and Future Value calculations
 Valuation of bonds and equities
 Capital Budgeting
 Risk and Return
 Cost of Capital and Capital Structure Decisions
 Dividend policy

PRESCRIBED TEXT BOOK:

Brealey, R., Myers, S. C., Allen, F and Pitabas Mohanty (latest), Principles of Corporate Finance (11th
edition), McGraw Hill.

OTHER READINGS AND REFERENCES:

 Eugene F. Brigham and Michael C. Ehrhardt (2012), Financial Management, Cengage Learning,
12/ed.
 I M Pandey, (2011) financial management, Vikas publishing house 11/ed.
Srivastava, Mishra (2017) Financial Management, Oxford publications 2/ed
POLICY ON PLAGIARISM:
All students should be familiar with the Institute’s policy on academic integrity. Plagiarism in any form
will not be tolerated. Student will be penalized with 50% of his / her marks in case it is found that the
student has indulged in plagiarism.

ASSESSMENT SCHEME AND WEIGHTAGE:

{a} END-TERM

Duration (in
Evaluation Weightage (%) Open/close Book CLO Tested
minutes)
End-Term 50% 150 Closed CLO 2 & CLO 3

{b} OTHER ASSESSMENTS

Evaluation Unit of
S. No. Weight Time CLO
Item Evaluation
After completing
1 Quiz 1 Individual 10% -
session 9
After completing
2 Case Analysis Group 10% -
session 13
After completing
3 Quiz 2 Individual 10% -
session 22
Project & Viva After completing
4 Group 20% -
Voce session 17

PART 2: SESSION PLAN

Session Topic/other minor

No events Method Case # Readings Concepts

The role of financial

Goals and Governance manager
1 of the Firm Lecture Chapter 1
Agency Issues

Corporate Chapter Basics of Corporate

2 Lecture
Governance 33 Governance
 3 Calculating Present
Time Value of Money Lecture Chapter 2 and Future Values

Time Value of Money: How to value

Perpetuities and Chapter 2 Perpetuities &
4 Annuities Lecture Annuities?

177012 – (HBS
Growing Perpetuities background note) Growing Perpetuities
Lecture Chapter 2
5 & Annuities Cash flow & time Growing Annuities
value of Money

6 Valuing Bonds Lecture Chapter 3 Valuation of Bonds

7 Valuing Bonds Lecture Valuation of Bonds

How common stocks

8 Valuation of stocks Lecture Chapter 4 are traded and
valued?

How common stocks

9 Valuation of stocks Lecture Chapter 4 are traded and
valued?

QUIZ 1 (10%)
Net Present Value
Internal Rate of
Net Present Value and
10 Return
Other Investment Lecture Chapter 5
Choosing Investments
Criteria
when resources are
limited

Session Topic/other minor Case #

Method Readings Concepts
No events

Applying the NPV rule

Capital Budgeting: Separating
Making Investment Discounted Cash Investment and
11
Decisions with the Net Lecture Flow Analysis 9- Chapter 6 Financing decisions
Present Value Rule 298-068 HBS Equivalent annual
cash flows
Investment Decision Chapter 6
12 New Investments
Criteria
Investment Decision Chapter 6 Replacement
13 Criteria Investments

CASE ANALYSIS ON CAPITAL BUDGETING (10%)

 294107 – Why
Introduction to Risk Manage the Risk? Chapter 7 Risk and Return
14 Lecture
and Return (HBS background
note)
Introduction to Risk Measuring Portfolio
15 and Return Lecture Chapter 7 Risk and Calculating
Portfolio Risk
Portfolio theory and How individual
Chapter 7
16 Capital Asset Pricing Lecture securities affect
and 8
Model portfolio risk?
The relationship
Portfolio theory and between Risk and
17 Capital Asset Pricing Lecture Chapter 8 Return - Validity and
Model the Role of the Capital
Asset Pricing Model
PROJECT (20%) – VIVA VOCE AND PROJECT SUBMISSION
Chapter MM theory on
18 Debt Policy Lecture leverage
17
Trade-off ( Tax
advantage vs.
19 Chapter
Debt Policy Lecture financial distress) -
18
Pecking order theory
and Agency theory -
How much should a
company borrow?
20 Chapter
Debt Policy Lecture (Optimal Capital
18
Structure Concept)

Session Topic/other minor Case #

Method Readings Concepts
No. events

Weighted Average
Weighted Average Chapter Cost of Capital
21 Lecture (WACC); Marginal
Cost of Capital 17
Cost of Capital
Weighted Average
22 Weighted Average Chapter Cost of Capital
Lecture 17 (WACC); Marginal
Cost of Capital
Cost of Capital
QUIZ 2 (10%)
 Chapter
How Firms pay
23 Dividend Policy
16 dividend

Dividend Policy & Chapter How Firms pay

24
Review of the Course 16 dividend

PLG MAPPING FOR THE COURSE

Addressed by
PLG# Programme Level Learning Goal Course? CLO No.
(Yes / No)

Application of Fundamentals
PLG1 Traits: Demonstrate application of functional / conceptual YES CLO 2
knowledge to business situations
 Problem Identification and Solution
PLG2 Traits: Demonstrate ability to identify a problem, critically assess YES CLO 3
various alternatives and suggest appropriate solution

Integrative Thinking
PLG3 Traits: Demonstrate ability to identify inter-linkages among NO -
functional areas within an enterprise and assess the impact of
external environment on its performance

Effective Communication
PLG4 Traits: Demonstrate proficiency in Oral and Written NO _
Communication

Ethical Responsibility
PLG5 Traits: Demonstrate awareness and assess impact of ethical NO _
behavior on business

Leadership
PLG6 Traits: Demonstrate capability to take leadership role in a NO _
business situation

Endorsed by: ____________________

Signature &Date: _________________