FIN 454 Corporate Finance
Class BBA/BSAF
Instructor Dr. Fawad Ahmad
Office Location Room # 207, 2nd floor, Aman Tower, Main Campus
Counseling Hours Main Campus: Monday & Wednesday 1:00 p.m. to 3:00 p.m.
Class details
Class Timing and Class # 70175/ Class # 70182: Main Campus 10:00-11:45, Room # 18
Room Class # 70175/ Class # 70182: City Campus 11:30-12:45, Room # 18
Session Day(s) Monday & Wednesday
Credit Hours: 3 Credit Hour
Email [email protected]
Contact # 021 38104701 Extension: 3060
Course TA Muhammad Ismail Memon
Course Description
The course is designed to extend and refine the core concepts developed in the introductory finance
courses. The course covers many special topics in the area of corporate finance. The course does not
“assume market efficiency.” Rather, it starts with the realization of the unrealistic assumptions of
traditional finance and discusses the techniques for challenging the traded prices for being efficient
and investors’ decisions for being rational. The course includes the evaluation of complicated
corporate investment decisions like mergers and acquisitions and international project evaluation
as well as the financing decisions like raising capital by publicly traded companies and the privately
run businesses. Finally, the Option pricing theory is discussed in the context of looking at options
application in corporate finance like the options embedded in capital projects and in financing
instruments. The course will also provide awareness of the corporate finance deals taking place in
Pakistan’s market. Overall, the course is designed to provide the undergraduate students with a
deeper understanding of the financial implications of various decisions made in a business.
“My unbiased view of the world - It’s all corporate finance.”
(Aswath Damodaran)
BBA/BSAF Program Learning Goals
1. Communication Skills
Students will become effective speakers, listeners, writers and team members
2. Knowledge of All Business Disciplines
Students will gain a broad based understanding of a range of business disciplines
2. Critical Thinking
1
Students will develop the ability to classify, analyze and evaluate the available data using
appropriate techniques for effective decision making.
4. Ethics
Students will have an awareness and understanding of ethical issues.
5. Glocal Mindset
Students will develop a focus on global connections with local contexts through awareness of
diversity across cultures and markets.
Corporate Finance Course Learning Outcomes
Successful completion of this course will enable the student to:
1. Differentiate among the three forms of market efficiency and quantify the abnormal return
on equity using different models.
2. Explain the biases involved in investment decision making and understand how to make
the most appropriate decisions in the presence of these biases.
3. Understand and evaluate the important business transactions like mergers, going public
and leasing.
4. Evaluate the capital projects where multiple currencies through incorporating the
international parity relations and with real options through incorporating options pricing
models.
Skills/Abilities
The course will inculcate skills on team working, analyzing and decision making.
Teaching and Learning Methodology
1. Students are required to read the topic prior to the lecture. During lecture, we will discuss
the topic and solve selected examples or questions.
2. In-class and home assignments will be used as a companion to the lectures.
3. Course folder comprising of practice questions (additional to the ones in text book) will be
uploaded on Learning Management System (LMS). Students must bring the course folder
(with practice questions) in every session. Students are expected to solve all questions given
in the course folder. Additional course materials (readings, articles, cases, etc) and important
announcements will be posted on the LMS.
4. Home assignments, comprising of short questions, will be given on weekly basis. All
assignments must be submitted hand-written (not typed). The assignments have to be
submitted on LMS only. Scanned copy or a picture of each worked page with student’s name
on top of the page is to be submitted on LMS. The assignments submitted on email/drop box
or any other mode will not be accepted.
5. We will have the guest speaker sessions on selected topics.
Knowledge of
Communication Critical Glocal
All Business Ethics
Program Goals Skills Skills Mindset
Areas
2
Course
Learning Outcomes
1 X X X
2 X X X X
3 X X X
4 X X
Mapping to
Chapters/ Course
Session Topic
Readings Learning
Outcomes
Introduction
• Discussion of the Course Outline
• Review of the Basic Finance Concepts
Chapter # 6 (Mishken Capital Market Efficiency
& Eakins, 2018) • Three forms of market efficiency
CLO 1 • Empirical evidence against market efficiency
• Problems with CAPM
• Multifactor model for equity returns
Behavioral Finance
• Traditional versus behavioral perspectives
• Building blocks of behavioral finance
• Utility theory and Bayes formula
Chapter # 22 • Cognitive errors and emotional biases
Ross, Westerfield & CLO 2 • Bounded Rationality and Prospect Theory
Jordon (2022) • Implications of behavioral biases on investment
decisions and on corporate finance
Class Exercise: Behavioral experiments and discussion of
responses
Mergers and Acquisitions
• Types and motives
Chapter # 26
• Payment methods
Ross, Westerfield & CLO 3
• Target company valuation
Jordon (2022)
• Bid evaluation
• Do mergers benefit the shareholders?
International Corporate Finance
• Exchange rates: direct, indirect and cross rates
Chapter # 21 • FOREX market: transaction types, forward
CLO 4
Ross, Westerfield & premium/discount
Jordon (2022) • International parity conditions
• Analyzing Foreign Projects
• International risk factors
CLO 3 Risk Management
Chapter # 23
• Managing Financial Risk
3
Ross, Westerfield & • Hedging with Forward Contracts
Jordon (2022) • Hedging with Future Contracts
• Hedging with Swaps
• Hedging with Option Contracts
Leasing
• Operating versus financial leasing
• Motives for leasing
Chapter # 27
CLO 3 • Evaluation by lessee: Lease or buy?
Ross, Westerfield &
• Evaluation by lessor: Leasing or lending?
Jordon (2022)
• Setting the lease payment: who benefits from
leasing?
Case Study
Options Applications in Corporate Finance
• Basics of options pricing
• Binomial and Black-Scholes Models
Chapter # 24 & 25
• Options application in corporate finance:
Ross, Westerfield & CLO 4
- Investment Analysis (Capital Budgeting)
Jordon (2022)
- Firm Valuation
- Capital Structure
- Corporate Securities
Course Wrap-up What we know and do not know about Corporate Finance
Text Book and Pre Course Reading Material, Important Dates.
Course Text Books:
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2022). Fundamentals of Corporate Finance.
McGraw Hill, 13th edition.
Mishkin, F. S., & Eakins, S. G. (2018). Financial Institutions and Markets. Person.
Recommended Books:
Damodaran, A. (2001). Corporate Finance: Theory and Practice. Hoboken, NJ: John Wiley & Sons
Brealey, R. A, Myers, S. C., Allen, F., & Mohanty, P. (2015). Principles of Corporate Finance. India:
McGraw Hill
Behavioral Finance, Individual Investors and Institutional Investors. CFA-II Program Curriculum.
Corporate Finance. CFA-II Program Curriculum.
Derivatives & Portfolio Management. CFA-II Program Curriculum.
Individual Coursework Assessment
Requirement
Determine the current value of the equity of the company. Use two evaluation methods of your
choice (i.e., Price/Earnings Ratio, Discounted Cash Flow). Do you believe that the stock of this
company is currently overpriced, fairly priced, or underpriced?
Choice of company
4
Every student is assigned a company for which you can access the annual report’s data from the
respective company website or data stream.
The data you need may be available from many different resources (e.g., Thomson Reuters),
including (but not limited to) information from the most recent report and accounts of the
company.
How to submit
Only submissions via LMS will be assessed.
Only an excel file will be accepted for the assessment.
Submissions in the form of email and any submission beyond the deadline will not be accepted.
Deadline: 14th Week
Total Marks: 10 marks
Prerequisite Skills and Knowledge to take this Course
Pre-requisite: Financial Management (FIN401)
Assignments and Quizzes: DEADLINES AND DUE DATES:
Assessment Due Date Remarks
Ongoing (Sunday, 11 p.m.) Home assignments will be given on weekly
Home Assignments
basis.
Ongoing (end of session/ as Practice questions/spreadsheet
announced in class) assignments will be given in some
Class Assignments
sessions. Class participation will be
marked in discussion of assignments.
Ongoing The quizzes may be in advance or from the
Quizzes previous topic. There will be a perfect zero
if you miss the quiz.
Final Paper Final Exam Week Final Exam Week
This course follows absolute grading.
Assessment Due Date Percentage
Class participation Ongoing 5%
Quizzes Week 3, 5, 9 10%
Assignment Week 13 10%
Final Project Week 14 10%
Mid-term exam Week 7 30%
Final exam Exam Weeks 35%
This course follows absolute grading.
5
Comments and/or Suggestions
• Active class participation will be rewarded by adjusting the grade upwards when it is on the
margin.
• Since subsequent topics build on previously learned material, it is imperative that students
keep up with the material. In addition, you should ensure that lectures are understood
properly.
• A student who misses a class is responsible for obtaining any handouts and information on
course content, assignments, due dates, test dates, etc.
• Unethical behavior (cheating, plagiarism, proxy attendance) will be strictly penalized.
Technology Requirements
• Financial calculator is allowed for the course. If you are planning to buy the financial
calculator, Texas Instruments, BA II Plus is recommended.
• Bring calculator, old-fashioned pen and paper in every class.
Academic Conduct
IBA policy
Attendance Policy
IBA policy
Plagiarism Policy
IBA policy
Withdrawal Policy
IBA policy
