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Corporate Financing Decisions Course Guide

This 3 credit hour course on corporate financing decisions covers measuring and evaluating a firm's capital structure and cost of capital, theories of capital structure, security structure, financial performance analysis, methods of raising capital such as lending, leasing, and public equity/debt issues, resolving financial distress, and harvesting business investments. The course objectives are to equip students with concepts and skills in financing a firm's capital needs and managing its financial assets. Prerequisite courses include Finance I and II. Textbooks and reference materials are also listed.

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135 views1 page

Corporate Financing Decisions Course Guide

This 3 credit hour course on corporate financing decisions covers measuring and evaluating a firm's capital structure and cost of capital, theories of capital structure, security structure, financial performance analysis, methods of raising capital such as lending, leasing, and public equity/debt issues, resolving financial distress, and harvesting business investments. The course objectives are to equip students with concepts and skills in financing a firm's capital needs and managing its financial assets. Prerequisite courses include Finance I and II. Textbooks and reference materials are also listed.

Uploaded by

shraddha amatya
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© © All Rights Reserved
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(Credit hours 3)

Corporate Financing Decisions


BBA, Specialization, Finance

Course Objectives:
The course aims to equip students with basic concepts and necessary skills in raising capital for and
managing financial assets of a firm. Finance I and Finance II are pre-requisite for this course. The
course will cover the following topics.

Course Contents:
1. Measuring Capital Structure and Cost of Capital 6 hours
Cost of capital, cost of debt capital, cost of equity capital, weighted average cost of capital, its use and
limitations. Measuring capital structure, calculating required return.

2. Theories of Capital Structure 6 hours


Factors affecting capital structure: MM proposition under perfect market assumption; Adjustment for
market imperfections-tax, financial distress, agency problem, incentive effect of debt, information
asymmetry; Static Tradeoff Theory; Pecking order theory of capital structure.

3. Security Structure of Firm 6 hours


Common stock, Preferred stock, convertible debt, warrants and options, and relevant components of
Nepalese laws ad regulations (e.g, Company Act, Securities Board's regulations) affecting security
design.

4. Measuring and Evaluating Financial Performance 9 hours


Analysis of financial statements- Balance Sheet, Income Statement, and Cash Flows. Breakeven
analysis, analysis of financial ratios, Economic value added (EVA) and limitations of such analysis.
Applications of the concepts learnt in analyzing companies and industries in the local market.

5. Methods of Raising Capital


Commercial Lending (by banks and financial institutions): credit analysis, loan covenants, principles
and applications.
Leasing: significance, types of leases, accounting for leases, the financing decision, lease vs. borrow,
lessor's point of view, lessee's point of view
Public issue of debt and equity: merits and demerits, rights offering, effect on the position of old and
new shareholders
Venture Capital Its structure in the developed market; prospects for adopting in Nepalese environment

6. Liquidation or turnaround of distressed firm 3 hours


Financial distress; resolving financial distress; private workout and liquidation; legal and regulatory
constraints.

7. Harvesting Business Investment 3 hours


Planning exit strategy; systematic liquidation, initial public offering, selling to acquiring firm, and
current and potential use of these techniques in local market.

Text Books:
1. James C. Van Horne: Financial management and Policy, Prentice- Hall of India Pvt. Ltd
2. Brealey, Richard A. and Stewart C. Myers: Principles of Corporate Finance, McGraw-Hill

Reference Books:
1. Leach, J. C, Melicher, Ronald W, Entrepreneurial Finance, Thomson south -Western
2. Brealey, Richard A. and Stewart C. Myers: Principles of Corporate Finance, McGraw-Hill
3. Brigham, Gapanski, Ehourhardt: Financial Management and Theory, Practice, 9 th edition,
4. Archer, Readings in Finance.

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