Finance

CONTENT:

This module incorporates the most recent theoretical and empirical developments in corporate finance and explores the traditional theoretical principles in force alongside the most recent developments. You are expected to get involved in discussions and debates of theoretical issues and their applications in corporate life and you are encouraged to develop and adopt a critical approach. In the series of lectures we explore and discuss all the major issues in corporate finance such as the capital structure and the cost of capital, dividend policy, security pricing, agency theory, option and derivatives, corporate restructuring and mergers acquisitions and divestments, corporate governance and ethics and international finance.

Topics covered include:

• Investment appraisal: theory and techniques. Problems and issues in investment appraisal.
• Information and Agency theory
• Financial objectives and relationship with corporate strategy
• International financial management
• Capital asset pricing model: de-gearing and re-gearing beta; the arbitrage pricing model.
• Sources of finance: cost of equity
• Sources of finance: cost of debt (long-term and medium term debt instruments, shortterm debt). Raising short and long term finance through Islamic finance
• Theory of capital structure: Modigliani and Miller with and without taxes; Adjusted Present Value model.
• Estimating the overall cost of capital
• Impact of cost of capital on investments
• Risk and uncertainty: subjective probabilities; mean-variance approaches; sensitivity analysis; scenario planning.
• Risk management
• Options and derivatives
• Hedging techniques for foreign currency risk
• Hedging techniques for interest rate risk
• Internal sources of finance and dividend policy
• Distribution decisions: theories of dividends, share buy-back
• Financial small and medium sized enterprises (SMEs)
• Financing start-ups
• Initial Public Offerings (IPOs)
• Business valuations
• Efficient Market Hypothesis
• Models for valuations of shares
• Valuation of debt and other financial assets
• Discounted cash flow valuation
• Mergers, Acquisitions and hostile takeovers
• Valuing synergies with Real Options
• Valuation of Small and Medium Sized Enterprises
• Valuation of not-for-profit organisations

Autumn Semester:

• Financial statement analysis – Arbitrage and financial decisions
• Time value of money
• Interest rates
• Risk and return in capital markets
• Optimal Portfolio Choice
• Guided Learning Assignment Week
• CAPM and the cost of capital
• Managing working capital
• Dividend policy
• Capital budgeting
• Financial distress
• Corporate Governance and Ethics

Spring Semester:

• Equity valuation
• Bond valuation - Fixed income securities
• Capital structure and the cost of capital
• Capital structure and the value of the firm
• Mergers and acquisitions
• Corporate restructuring and divestments
• Financial options
• Option valuation
• Business valuations
• Valuing synergies with real options
• Valuation of not-for-profit organisations

TEACHING:

Lectures and seminars, supplemented by the extensive use of MyFinanceLab

ASSESSMENT:

• Study Option 1:
  • Coursework: Homework and Tests (30%)
  • Exam (70%)
• Study Option 2 (Indicative): Problem Sheet And Essay (100%)