Subject Outline

Subject for Subject Code & Title Subject Title Subject Credits Section Instructor Office Phone Email Instructors Profile: Dr. Sudhindra Bhat is an MBA in Finance and has a degree MFM (Master of Financial Management). He has also completed M.Phil. and Ph.D. in Finance. Dr. Bhat is a professor of finance & accounts. He served for KPMG and Bharati Airtel,, ABA, Adarsh Group etc., He is a visiting professor and consultant for various foreign universities specially AUT, New Zealand, Dallas university, Sweden school of economics, SP Jain Singapore & Dubai. Dr. Bhat is author of 3 books, Management accounting, Financial Management, Security Analysis & Portfolio Management. Dr. Bhat also a PHD guide for Alagappa university, VTU, AIMA and Aligarh Muslim university. Subject Description: Corporate finance is a specific area of finance dealing with the financial decisions. Finance is about money and market, but it is also people. The secret of success in financial management is to increase value. The subject raises the awareness of the role, purpose, and centrality of the finance function in effective corporate governance. This subject focuses on fundamental financial management from the perspective of inside the corporation or operating entity. It builds upon the concepts from the core finance subjects, where topics covered objective of finance, profit v/s wealth maximization, time value of money, financial markets & institutions, measuring risk and return, cost of capital, capital budgeting decision, optimal capital structure, long-term and short-term sources of fund, working capital management decision and capital market. 1 : : : : : : : : : MBA Semester I, July 2011 13 Batch MGT 522 Corporate Finance 3 Credits A Dr. Sudhindra Bhat Alliance University Central Campus, NF 010 080 - 30938291 sudhindra.bhat@alliance.edu.in

Class Meets Office Hours

: :

As per Deans Office schedule By appointment only

Objectives of the Subject : 1. 2. 3. 4. 5. To introduce concepts and objectives of corporate finance To understand concept of time of value in financial decisions To study different techniques of investment decisions To understand relationship between capital structure and the value of the firm. To explore the sources of long term finance & design financial strategies.

Prescribed Text Book Required materials : Financial Management, I. M. Pandey, Latest Edition Vikas Publishing House Pvt. Ltd.

Subject Culture and Pedagogy: 1. 2. 3. 4. 5. 6. Lecture and Discussion Classroom Case discussion and analysis Presentation by students in Group Class exercises and Tests Surprise Test and Quiz Individual / Group Assignments

Subject Structure
Unit Content Overview of Corporate Finance: Scope of finance, Objective of corporation, Finance function. Financial Managers role, Agency Problem, Financial goal: Profit Maximization vs. Wealth Maximization. Time Value of Money: Time lines, Future value Single & Annuity, Present value Single & Annuity, Simple & Compound interest, Payment perpetuities, Growing Annuities, Semi-annual & other compounding period, Amortized loans * Problems Cost of Capital: Concept of opportunity cost of capital, Methods of calculating cost of capital Cost of debt, Preference & Equity capital, CAPM model, Determination of Weighted Average Cost of Capital (WACC). * Problems Investment Decisions Capital Budgeting Nature of Investment Decision, Types of Investment decision, Investment Evaluation Techniques NPV, IRR, PI, PBP, ARR, and Compare & Contrast NPV & IRR. * Problems Assigned Reading Session No. Learning Outcomes The learner will understand the role of the Corporate Finance Manager and the concept of profit vs. wealth maximization in an organization. Assessment Criteria

I.

Part 1 Chapter 1

1,2

Explain the role and business objectives of the finance manager.

II.

Part - 1 Chapter 2

3, 4, 5

The learner will understand the concept of present value, future value, amortization schedule, effective and nominal rate of interest, multi period of compounding, sinking fund factor.

Explain the methods of calculating present & future value and use of discounting & compounding techniques with the help of problems & cases.

III.

Part - 2 Chapter 9

6,7,8, 9

The learner will understand the concept and calculation of cost of capital of a business.

Describe and calculate the cost of debt capital, preference share capital & equity share capital. Calculate the weighted average cost of capital and discuss its usefulness. Explain the principles, benefits and limitations of the different methods of investment appraisal - Net present value (NPV), the internal rate of return (IRR), accounting rate of return, payback period, Profitability Index and Discounted PBP and be able to perform calculations in order to assess investment through problems & Cases.

IV.

Part - 2 Chapter 8

10, 11, 12, 13

The learner will be able to evaluate investment decisions using a variety of appraisal techniques like NPV, IRR, PI, ARR, PBP, DPBP & conflict between NPV & IRR.

Unit

Content Capital Structure Introduction, Planning the Capital Structure, Profitability Aspect, Liquidity , Control, Leverage Ratios of other firms in the Industry, Financial & Operating and Combined Leverage. Dividend Policy: Factors affecting dividend policy, Bonus Shares & Stock Splits, Stock Repurchase, Share Splits in India, Issues of Bonus shares in India Working Capital Management : Nature of working capital Planning of Working Capital, Management of Working Capital in India, Estimation of working capital investment. * Problems Receivables management Objectives, Credit Policies, Credit Terms, Collection Policies & factoring. Inventory Management Nature, Need & Objectives Cash Management - Motives, Objectives of holding cash, Factors determining cash needs. . Long-term sources of financing: Equity / Ordinary Shares Issue Procedures, Term Loans, Debentures / Bonds and Securitization, Hybrid Financing Instruments. Lease Financing and Hire Purchasing, Venture capital Financing Theoretical Framework & Venture Capital Scenario in India

Assigned Reading Part - 3 Chapter 14 Chapter 15

Session No.

Learning Outcomes The learner will understand the factors affecting the capital structure of the firm, the concept of financial, operating & combined leverage & its impact on shareholders return & risk.

Assessment Criteria

V.

14, 15

Explain the practical consideration in determining the capital structure of the company through presentations.

Part - 3 Chapter 17

16, 17

The learner will understand the factors that determine a companys dividend policy and forms of dividends and the conceptual understanding of buy back of shares.

Explain and discuss the effects of dividends on shareholders wealth through presentations and different forms of dividend distributions.

VI.

Part 6 Chapter 27 , 28, 29, 30

18, 19, 20, 21

The learner will able to understand the different elements of working capital concept, operating & cash conversion cycle, and estimation of working capital. The student should have conceptual understanding of credit, cash & Inventory management.

Calculate the estimation of working capital through problems and case studies. Explain the concepts of receivables, inventory & cash management.

VII.

Part 4 Chapter 20, 22, 23

22, 23, 24

The learner will understand the main sources of debt and equity funding and the significance of financial gearing. The student should have conceptual understanding of venture capital financing, lease & hire purchase financing.

Identify and explain the main long term sources of debt, equity, preference finance available to any size of business. Explain the differences between various sources of capital, and the advantages and disadvantages of each source of funds.

Reference Materials: 1. Financial Management Theory and Practice [6/E] Prasanna Chandra TMH 2. Financial Management I M Pandey, Tenth edition - Vikas Publication. 3. Financial Management- Theory & Practice II edition- Dr. Sudhindra Bhat, Excel Publication 4. A Focused Approach Corporate Finance Michael C. Ehrhardt & Eugene F. Brigham 5. Principles of Corporate Finance [7/E] Brealey Myers - Tata McGraw-Hill

Scheme of Evaluation Grading System

: :

Refer to Alliance Learning Experience Program Catalogue Refer to Alliance Learning Experience Program Catalogue