Corporate Finance Online Class http://people.stern.nyu.edu/adamodar/New_Home_Page/webcastcfonline.

htm

Philosophy Topics & Setup Regular classes Executive Online Classes Seminars/Short
programs sessions

Other This is a course of 36 short webcasts (about 12-20 minutes apiece), designed both to capture
what I do in my regular semester-long corporate finance class and to supplement my book, Applied
Corporate Finance (Fourth Edition), John Wiley & Sons. With each session, you can download slides for that
session and a post-class test to go with it (and solutions). If you have my book, the relevant sections of the
book are highlighted. The first part are the webcast related to the class and the second part are in-practice
webcasts, designed to help you apply the concepts to real companies. The class webcasts are on You Tube
and you will need to be online, to watch them. The in-practice webcasts are downloadable to your computer
or device and can be watched at your convenience. I have also created a version of this class on iTunes U,
and you can get to that class by clicking here. I owe a debt of gratitude to David Schumacher, who helped
record and edited these videos. He was a master at making me look good (or at least as good as I could look).

Session Webcast Short Description Supplementary ACF 4th Edition

Material
Class Overview
1 What is corporate De ine what corporate 1. Slides Preface, Chapter 1
inance? inance covers and its irst 2. Post-class test &
principles solution
2 The Objective in Explain why we need a 1. Slides Chapter 2
Decision Making I: singular objective, why we 2. Post-class test &
Utopia and Let pick maximizing stock solution
Down prices & what can go
wrong.
3 The Objective in Look at alternative 1. Slides Chapter 2
Decision Making II: corporate governance 2. Post-class test &
Reality and mechanisms and why stock solution
Reaction price maximization may
still be the best one.
4 Hurdle Rates I: De ine risk at its core, 1. Slides Chapter 3
De ining and examine how conventional 2. Post-class test &
Measuring Risk models measure risk & solution
de ine the marginal
investor.

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5 Hurdle Rates II: Go through processes for 1. Slides Chapter 4

Risk free Rates estimating risk free rates 2. Post-class test &
not only in safe currencies solution
but also in risky ones.
6 Hurdle Rates III: De ine what an equity risk 1. Slides Chapter 4
Equity Risk premium is and evaluate 2. Post-class test &
Premium Basics standard approaches for solution
estimating that premium.
7 Hurdle Rates IV: Present an alternate 1. Slides Chapter 4
Implied, Country approach to estimating 2. Post-class test &
and Company ERP equity risk premium for a solution
mature market and builds
on it to get country and
company equity risk
premiums.
8 Hurdle Rates V: Describe the regression 1. Slides Chapter 4
Regression Betas approach to estimating 2. Post-class test &
beta and what the rest of solution
the regression output tells
us about a company.
9 Hurdle Rates VI: Connect betas to 1. Slides Chapter 4
Beta Fundamentals fundamental choices that a 2. Post-class test &
company makes about what solution
business to be in, how to
run that business & how
much to borrow.
10 Hurdle Rates VII: Develop an alternate 1. Slides Chapter 4
Bottom up Betas - approach for estimating 2. Post-class test &
Basics betas that is more robust & solution
intuitive.
11 Hurdle Rates VIII: Continue with the alternate 1. Slides Chapter 4
Bottom up Betas - approach and extend it to 2. Post-class test &
Extensions private businesses. solution
12 Hurdle Rates IX: De ine what goes into debt 1. Slides Chapter 4
Debt and its Cost and what it costs to borrow. 2. Post-class test &
solution
13 Hurdle Rates X: Determine the weights to 1. Slides Chapter 4
Weights & Cost of use to estimate a cost of 2. Post-class test &
Capital capital & explain how and solution
why it differs from cost of
equity.
14 Investment Contrast earnings with cash 1. Slides Chapter 5
Returns I: Setting lows and explain how to 2. Post-class test &
the Table estimate the accounting solution
returns on a project
(company).
15 Investment Go from earnings to cash 1. Slides Chapter 5
Returns II: Getting lows to incremental 2. Post-class test &
to time-weighted time-weighted cash low solution

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cash lows based measures of return.

16 Investment Look at the effect of 1. Slides Chapter 6
Returns III: currency choices on 2. Post-class test &
Wrapping up loose investment analysis and solution
ends examine how best to deal
with uncertainty in your
analysis.
17 Optimal Financing Look at the pluses and 1. Slides Chapter 7
Mix I: The trade off minuses of using debt, as 2. Post-class test &
opposed to equity. solution
18 Optimal Financing Explain the basics of the 1. Slides Chapter 8
Mix II: The cost of cost of capital approach to 2. Post-class test &
capital approach deriving the optimal debt solution
ratio for a company.
19 Optimal Financing Evaluate why moving to the 1. Slides Chapter 8
Mix III: Following optimal debt ratio bene its 2. Post-class test &
up the cost of stockholders in a company solution
capital approach & deal with concerns.
20 Optimal Financing Extend the cost of capital 1. Slides Chapter 8
Mix IV: Wrapping approach to commodity 2. Post-class test &
up the cost of and private companies and solution
capital approach examine the determinants
of optimal debt ratios.
21 Optimal Financing Look at the Adjusted 1. Slides Chapter 8
Mix V: Alternate Present value approach as 2. Post-class test &
Approaches well as sector averages as solution
guides to optimal debt
ratios.
22 Moving to Optimal Examine whether and how 1. Slides Chapter 9
Financing Mix quickly a irm that has too 2. Post-class test &
much or too little debt solution
should move to its right
mix.
23 The Right Type of Determine the right kind of 1. Slides Chapter 9
Financing inancing for a company 2. Post-class test &
and evaluate existing debt solution
to see if it measures up.
24 Dividend Policy: Describe historical 1. Slides Chapter 10
Trends & Measures patterns/trends in dividend 2. Post-class test &
policy and look at measures solution
of dividends paid.
25 Dividend Policy: Look at the reasons (good 1. Slides Chapter 10
The Trade off and bad) why companies 2. Post-class test &
initiate and change solution
dividends.
26 Dividend Policy: Evaluate how much 1. Slides Chapter 11
Assessment companies can afford to 2. Post-class test &
return to stockholders and solution
compare to cash returned.

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27 Dividend Policy: Use the dividend 1. Slides Chapter 11

Action and follow assessment to make 2. Post-class test &
up judgments on whether solution
companies should return
more or less cash to
stockholders.
28 Dividend Policy: Examine how companies 1. Slides Chapter 11
End Game end up with dysfunctional 2. Post-class test &
dividend policies and how solution
they can change those
policies.
29 Valuation: First Lay out the different ways 1. Slides Chapter 12
Steps in which you can approach 2. Post-class test &
valuation and de ine the solution
key drivers of value.
30 Valuation: Cash Look at the estimation 1. Slides Chapter 12
lows & Discount processes and challenges 2. Post-class test &
Rates associated with cash lows solution
and discount rates in
valuation.
31 Valuation: Future Evaluate the different ways 1. Slides Chapter 12
Growth in which you can estimate 2. Post-class test &
growth and why it has to be solution
tied to fundamental actions
by the irm.
32 Valuation: Put in place key constraints 1. Slides Chapter 12
Terminal Value on the inputs used to get 2. Post-class test &
the terminal value. solution
33 Valuation: Loose Examine how to get from 1. Slides Chapter 12
Ends the present value of cash 2. Post-class test &
lows to the value of equity solution
per share.
34 Valuation: The De ine control as the 1. Slides Chapter 12
value of control difference between two 2. Post-class test &
values, status quo and solution
optimal, and examine
implications.
35 Valuation: It is all Estimate the price of an 1. Slides Chapter 12
relative asset or stock based on 2. Post-class test &
how similar assets or solution
stocks are trading at.
36 Corporate Finance: Provide a narrative that ties 1. Slides
Closing Thoughts irst principles to models
and tools.

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Topic Description Webcast Supporting material

The first step in understanding a company
is to recognize how corporate governance
works in the company. Taking a look at
who is on the board of directors and 1. Presentation
Corporate
whether the rules of the game are skewed Webcast 2. HP Annual Report
Governance
in favor on incumbent managers is a part of 3. HP DEF14A
this process. In this webcast, I use HP to
illustrate how you can use public data to
make this assessment.
Knowing who owns stock in your company
Stockholder is useful on many levels. In particular, it
composition (for can alert you to potential conflicts of
Webcast Presentation
risk interest that may arise down the road and
measurement) how a company's policies may reflect those
conflicts.
The risk free rate should be easy, right? In
some cases, it may be, but it can be
difficult to get risk free rates in some
Presentation
Estimating the currencies, especially when there is default
Webcast Moody's ratings
risk free rate free entity. In this webcast, I look at the
CDS spreads
ways in which you can extract default
spreads for governments to get to a risk
free rate in a currency.
I have been a strong proponent of implied
equity risk premiums, forward looking
estimates that are extracted by looking at 1. Presentation
Estimating stock prices today and expected cash flows 2. Spreadsheet
implied equity in the future. While I have an implied Webcast 3. S&P 500 on
risk premium equity risk premium spreadsheet on my buybacks
website, I try to get some of the mystery 4. S&P 500 earnings
out of both the process and the inputs in
this webcast.
1. Bloomberg beta
A regression of returns on your stock page
against returns on a market index is the 2. Spreadsheet for
standard approach to estimating betas. analysis
Reading a
While I do not like these "single slice of 3. Disney Annual
regression beta Webcast
history" estimates, the regression still Report (2012)
page
provides useful information about the 4. Excel regression
performance of a stock during the beta page
regression period and its riskiness. 5. Disney (Raw Data)
6. S&P (Raw Data)
A single regression beta is a flawed 1. United Technologies
Estimating a
measure of relative risk. A bottom up beta, Webcast 10K
botttom up beta

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which builds up to the beta of a company

from its businesses, is not only more
2. Spreadsheet for
precise but also more flexible and forward
bottom up beta
looking. In this webcast, I describe the
mechanics of estimating a bottom up beta.
You need the market value of debt and a
pre-tax cost of debt to compute a cost of
capital. To get the market value of debt,
you first have to determine what items on
Home Depot 10K
the balance sheet qualify as debt and
Debt and the Home Depot 10Q
convert the book value of the debt into Webcast
cost of debt S&P rating for HD
market value. You also have to bring lease
Spreadsheet
and other contractual commitments into the
equation. Finally, all of this will require
that you estimate a current, long term cost
of borrowing.
In assessing whether a company's existing
investments are good or not, we draw on
accounting return measures: return on
Measuring Walmart 10K (2013)
invested capital and return on equity.
accounting Webcast Walmart 10K (2012)
However, navigating what should be in
returns Spreadsheet
invested capital and what should not, and
how to adjust for accounting
inconsistencies is tricky.
Knowing what a typical project for a firm
looks like is useful not only to undertstand
Identifying a
cash flow patterns & risks in investment Webcast Presentation
"typical" project
analysis but also in structuring financing
and dividend policy.
1. Presentation
The first step in assessing whether a firm
2. Spreadsheet
can borrow, and if so, how much, is to look
The trade off on 3. Marginal tax rates
at the benefits of debt and weigh them Webcast
debt by country
against the costs, at least on qualitative
4. Effective tax rates
terms.
by sector (US)
To assess the optimal debt ratio, you can
use the cost of capital approach, where you 1. Dell 10K
The optimal debt
minimize cost of capital (in the standard Webcast 2. Dell optimal capital
ratio
approach) or maximize firm value (when structure
there are indirect bankruptcy costs)
The "right' debt for a firm reflects its assets
1. Presentation
and cash flows. To design this debt, you
2. Spreadsheet
Debt design can either start with the typical project and Webcast
3. WMT financial
work intuitively to the right debt or try a
summary
more quantiative approach.

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As a company, should you pay dividends?

And if so, how much? In this session, I
Dividend Trade look at the trade off on dividends and why
Webcast 1. Presentation
off some companies may come under more
pressure than others to initial and increase
dividends
With every firm, there are three key
questions that lie at the heart of dividend
1. Spreadsheet
Dividend policy policy: (1) How much cash does this firm
Webcast 2. Disney Annual
assessment return to stockholders, (2) How much
Report (2012)
could it have returned and (3) Do you trust
management?
1. Spreadsheet
Valuation is the end game, where all of the
2. Apple 10K (Sept
aspects of corporate finance - investing,
Valuation Webcast 2012)
financing and dividend policies - come
3. Apple 10Q (Mar
together in one number.
2013)

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