ADVANCED TOPICS IN FINANCE Akbar Torbat, Ph

Calif= ornia State University, Dominguez Hills

College= of Busines= s and Public Policy

FIN 360= -05 BUSINESS FINANCE

Fall 2004

Wednesday 7:00 to 9:45 p.m., Room SBS= B215

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Instructor: Dr. Ak= bar Torbat,

Office: Room <= span style=3D'font-size:10.0pt;mso-bidi-font-size:12.0pt;layout-grid-mode:line'>= EAC 706, hours: Mon. & Wed.5:30 to 7:00 p.m.

Phone: (310) 243-2403

E-mail: atorbat@csud= h.edu=

CATALOG DESCRIPTIO= N:

A survey of the decis= ion framework for financial management; forecasting, and planning, major invest= ment and financing decisions, control and interaction with capital markets.=

COURSE CONTENT:

This is an introducto= ry course to the theories and applications of business finance. It provides the students with the knowledge needed to understand essentials of financial management. The course covers= major topics in finance, including risk and return, valuation of stocks and bonds, cost of capital, capital budgeting, capital structure, dividend policy, and long-term financing decisions.

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STUDENT LEARNING OBJECTIVES:

· = Explain the importance of sound financial management to the success of every business enterprise.

· = Explain the difference between cash flow and profit and analyze a basic cash flow statement.

· = Explain and calculate the major ratios used in financial statement analysis.=

· = Explain ris= k and its measurement

· = Calculate t= ime of value of money.

· = Explain val= uation of financial securities.

· = Explain cos= t of capital

· = Explain and calculate various methods of capital budgeting.

· = Explain fin= ancial leverage and the optimal capital structure.

· = Explain div= idend policy and its impact on stock valuation.

· = Calculate additional funds needed for a fast growing company.

· = Explain and calculate a cash budget, and credit policy.

READING MATERIALS:=

The textbook for= the course is Fundamentals of Corporate Finance by Stephen = ;A. Ross, Randolph W Westerfield, and Bradford D Jordan, McGraw-H= ill, 6^th Edition 2003, ISBN 0072932449.

You are expected to keep up with the financial news throughout the course. For review of the lat= est financial news you can refer to sources such as The Wall Street Journal, Financial Time and Investor's Business Daily.

COURSE EXPECTATIONS: =

Each student is expec= ted to read the assigned material and prepare the written assignments prior to class. The university standard for course workload is three hours of outside work for every hour in class, i.e., a 3-unit course requires 9 hour= s of work/week.

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EVALUATION:=

Grade for the course = will be based on a stock analysis project (30%), a midterm exam (30%), a final e= xam (30%), class participation and problem solving (10%). Students are expected to attend the class regularly and participate in class-discussions. Students who actively take part in= class discussions and make meaningful contributions will be rewarded. There will = be no make‑up exams. If th= ere is a valid reason, the score for a missed midterm exam will be added to the fi= nal exam. The students’ total scores in the class are ranked to assess ea= ch student overall performance in the course and letter grade will be assigned according to the university catalogue.&nbs= p; The following scale is used for determination of letter grade.<= /o:p>

A.......... (93= -100), A-........ (90-92), B+........ (87-89), B......... (80-86), B- ...... (77-79)

C+..... (74-76), C...= .... (67-73), C-........ (60-66), D+... 57-59, D … (50-57), F … (0-49)

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HOMEWORK:

Some problems form the textbook will be assigned for your homework on an on going basis. Homework = will not be collected.

ACADEMIC INTEGRITY:

Cheating or plagiarism is considered a gross violati= on of the University’s academic standards and is subjected to discipline according to the California Code of Regulations.

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CALCULATOR<= /b>:

Any Financial Calculator that can compute the In= ternal Rate of Return (IRR) is sufficient to meet your calculation needs. Texas Instruments, Hewlett Packard, Casio and Sharp make such calculators. It is = your own responsibility to read your calculator user's guide and have practice w= ith it so that you can be prepared to use it during the exams.

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STOCK ANALYSIS PRO= JECT

The students in the c= lass will be divided to teams of two each. Each team will review and analyze the common stock of the company assigned to the team. For your project you need= to refer to the corporation's annual reports, Forms 10k/10Qs and proxy stateme= nts. You can also get additional information and historical financial data from published investment research sources such as the Value Line, Standard & Poor and Moody's reports. The financial data for = the latest three years must be obtained from the company's original sources. You can also use the Internet for easy access to corporation news releases and financial reports. Attach copies of all data you have gathered to your repo= rt.

You will apply the co= ncepts and theories discussed in this course to the stock you analyze and write a report explaining your findings. The following is a general guideline for preparation of your report:

a) Set up the balance sheets and income statements of your company on an electronic spreadsheet s= uch as Lotus or Excel. Prepare common-size balance sheets and income statements= for the last three years. Calculate the financial ratios for the firm and compa= re them with the industry norms found in Dun and Bradstreet's Key Business Ratios or other sources.

b) Use the Capital As= set Pricing Model (CAMP) to estimate (k) the opportunity cost of your common st= ock. This is the same as the required rate of return from the perspective of investors.

c) Calculate the arit= hmetic and geometric annual growth rates (g) on sales, earnings and dividends.

d) Apply various equi= ty valuation methods (i.e. Zero Growth, Constant Growth, Nonconstant Growth, price/earnings multiple, book value, price/sales ratio, and liquidation val= ue) to calculate the "intrinsic" value of the stock. Explain which me= thod gives the most realistic estimate of the stock. Compare the intrinsic value with the market price of the stock found in the newspaper. Keep track of the stock by plotting a daily or weekly price and volume chart during the semester. Explain why your es= timate is close or far from the stock price.

e) Based on your eval= uation of the company, what do you recommend to the investors who own or intend to= buy the company's stock?

TENTATIVE READING SCHEDUALE=

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Week<= /span>

Topics

Chapters

09/01

Introduction to Cor= porate Finance

1=

09/08

Financial Statement= s, Taxes, and Cash Flow

2=

09/15

Working With Financ= ial Statements

Long-Term Financial Planning and Growth

3=

4=

09/22

The Time Value of M= oney

Discounted Cash Flow Valuation

5=

6=

09/29

Bond Valuation=

7=

10/06

Stock Valuation

8=

10/13=

Mid-term Exam

Group project me= eting after the exam.

10/20

Net present value a= nd other investment criteria

9=

10/27

Return, Risk, and Security Market Line

13

11/03

Options<= /span>

14

11/10

Cost of Capital

15

11/17

Financial Leverage = and Capital Structure

17

11/24

Dividends and Divid= end Policy

18

12/1

Student Presentatio= ns (Project is due)

12/8

Review and Student Presentations

12/15

Final Exam<= /o:p>

Week<= /span>	Topics	Chapters
09/01	Introduction to Cor= porate Finance	1=
09/08	Financial Statement= s, Taxes, and Cash Flow	2=
09/15	Working With Financ= ial Statements Long-Term Financial Planning and Growth	3= 4=
09/22	The Time Value of M= oney Discounted Cash Flow Valuation	5= 6=
09/29	Bond Valuation=	7=
10/06	Stock Valuation	8=
10/13=	Mid-term Exam Group project me= eting after the exam.
10/20	Net present value a= nd other investment criteria	9=
10/27	Return, Risk, and Security Market Line	13
11/03	Options<= /span>	14
11/10	Cost of Capital	15
11/17	Financial Leverage = and Capital Structure	17
11/24	Dividends and Divid= end Policy	18
12/1	Student Presentatio= ns (Project is due)
12/8	Review and Student Presentations
12/15	Final Exam<= /o:p>