Chapel Garden

Finance 470: Capital investment and Structure

INSTRUCTOR: Riaz Hussain

OFFICE: 417 Brennan Hall

OFFICE HOURS: 1:15-2:50 PM on Monday and Wednesday; and 6:15-7:15 PM on Monday and Tuesday. Other office hours by appointment.

TELEPHONE: Office 941-7497, secretary 941-4048, home 347-8077, fax 941-4825, e-mail: Send an email

OBJECTIVE: The objective of the course is to study the techniques of capital budgeting and the capital structure of the firm. The students are required to know analytical methods for making long-term capital-intensive investment decisions. They learn the financing of long-term projects; the cost of capital and the optimal capital structure of a firm; leasing; and dividend policy.

TEXTS: Capital Budgeting and Structure, by Riaz Hussain, 2003, The University of Scranton.

PREREQUISITES: Fin. 351, or an equivalent undergraduate course in finance..

EXAMINATIONS: There will three midterm tests (70 minutes each) and a comprehensive final examination (two hours). The test dates are:

First Test: September 22, 2003

Second Test: October 22, 2003

Third Test: December 1, 2003

Each test will comprise of 3 problems designed to determine students' ability to analyze financial situations. The tests will be closed book, but the students are allowed to bring in a formula sheet.

GRADING: A student's final grade depends upon: rank in the class, the number of problems done correctly in the tests, the percentage score averaged for all the tests, the overall quality of students in the class, and the instructor's subjective evaluation of the student's performance.

SUBJECT: The topics covered in this course include:

1. Time value of money, future value and present value, payment schedule.

2. Techniques of capital budgeting, internal rate of return, net present value, taxes and depreciation.

3. Capital budgeting under uncertainty, inflation, and options.

4. Capital asset pricing model, and its applications to capital budgeting and cost of capital.

5. Cost of capital, cost of debt and equity, weighted average cost of capital.

6. Optimal capital structure, tax shield, leveraging and beta.

7. Minimizing weighted average cost of capital, maximizing earnings per share, EBIT-EPS analysis.

8. Leasing.

9. Investment analysis.

10. Dividend policy.