FIN. 351: INTRODUCTION TO FINANCE
INSTRUCTOR: Riaz Hussain
OFFICE: 431 Brennan Hall
OFFICE HOURS: By appointment only.
CONTACT: e-mail: Send an email, Phone, office 941-7497, secretary 941-4048, home 347-8077, Fax: 941-4825. The students should check Angel frequently to read notices and updates.
OBJECTIVES: After successfully completing this course, the students will be able to:
1. Find the present value and future value of single payments, or a series of cash flows.
2. Calculate the value of a bond or a stock.
3. Rank profitable projects using the concept of net present value.
4. Understand the basics of portfolio theory.
5. Know β as a measure of risk and use it in the Capital Asset Pricing Model.
6. Calculate the cost of capital for a firm.
7. Understand the need for an optimal capital structure of a firm.
8. Understand the dividend policy of a firm.
TEXT: Introduction to Finance: A Workbook, by Riaz Hussain, Kania School of Management, University of Scranton, Scranton, PA, 2008. Please bring the workbook and a calculator with you in each class.
Recommended reading: Fundamentals of Corporate Finance, by Ross, Westerfield, and Jordan, ISBN: 0072991593.
PREREQUISITES: Junior standing, ACC 252 or 253, ECO 153-154, or permission of the instructor.
EXAMINATIONS: There will be three 70-minute tests, and a 2-hour comprehensive final examination. The test dates are:
First: Tuesday, July 20, 2010
Second: Tuesday, July 27, 2010
Third: Tuesday, August 3, 2010
Final: Friday, August 6, 2010
The tests will have six problems each and the final examination ten. The exams will be all closed book, but the students can bring a formula sheet with them. Make up exams will not be given, except in the most serious cases.
GRADING: Students are not graded on a bell-shaped curve. A student's final grade depends on the rank in class, the percentage score averaged for all the tests, the overall quality of students in the class, classroom interaction, and the instructor's subjective evaluation of student's performance
SUBJECT: The topics covered in this course include:
1. The time value of money. Present Value. Future value. Annuities. Discounting and compounding.
2. Security valuation: Valuation of a stock. Valuation of a bond. Valuation under uncertainty.
3. Capital budgeting techniques: Net present value of a project. Internal rate of return. Ranking investment proposals.
4. Risk Analysis: Uncertainty and risk. Probability. Beta of an investment. Capital asset pricing model. Portfolio risk and return.
5. Cost of capital: Cost of equity. Cost of debt. Weighted average cost of capital. Cost of new capital.
6. Capital structure of a firm: Advantages and disadvantages of debt financing. Optimal capital structure. EBIT-EPS analysis. Taxes and capital structure. Bankruptcy costs.
7. Dividend policy: Factors affecting the dividend policy of a firm. Are dividends relevant? Dividends as a residual decision.