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Syllabus
Course title
FINANCIAL MANAGEMENT
Instructor András Danis, PhD
Office Room C315, Quellenstraße 51, Vienna
Contact Moodle direct message, or via Program Coordinator (Ms. Anita Apor) Office hours TBA
Credits 2 US credits (4 ECTS credits) Module Financial Management Course level Master’s
Course location Classroom TBA, Budapest campus Course time Tuesdays, 1:30-5:20 pm CET Prerequisites None
Course drop Described by the MS in Finance Regulations
1. COURSE DESCRIPTION
This introductory course will provide a broad understanding of key concepts in finance and the principles of corporate financial management.
Content. We will begin with the fundamentals of asset pricing in the present value framework, and the pricing of financial assets (securities) such as bonds and stocks. We will then turn to corporate financial management, introducing key techniques to make investment (capital budgeting) and financing (capital structure) decisions. Then, we will discuss portfolio theory and develop models that underlie the calculation of expected returns in asset and investment valuation. We will conclude wiht a brief introduction to firm valuation.
Relevance. Understanding the problems covered in the course are important to all students seeking a career in business. For the importance of finance education please see “Financial Illiteracy
Rampant in the Corporate World”, Financial Times 15 Aug 2014.
2. LEARNING OUTCOMES
Key outcomes. By the end of the course, students will be able to
• Explain how financial markets determine asset prices using the present value concept
• Price financial assets (securities) such as bonds and stocks
• Derive implied expected returns from observed market prices
• Explain the Capital Asset Pricing Model (CAPM), use CAPM to estimate expected returns
• Explain the objectives of corporate financial managers, how they use key financial statements to make informed decisions, how company structures affect their decision making
• Explain how a company makes investment (capital budgeting) decisions in a risky environment, use investment rules to evaluate investment opportunities
• Estimate the cost of capital of a firm, using the concept of Weighted Average Cost of Capital (WACC)
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• Using the concept of Free Cash Flow, estimate the amount of money a firm produces each year
• Briefly learn about firm valuation, applying the concepts of present value, Free Cash Flow, and WACC
Other outcomes. The course will also help develop skills in the following areas.
Learning Area Learning Outcome
Critical Thinking Understand the complexities of economic relationships. Exercise an independent elaboration of facts. Use the powers of inquiry and logical thinking to evaluate theoretical arguments and empirical evidence.
Quantitative Reasoning
Applying mathematical and statistical concepts to solve practical finance problems.
Technology Skills Use databases such as Eikon, Capital IQ and LexisNexis to perform company research and data collection. Use specialist software to analyze and visualize company data for problem solving.
Interpersonal
Communication Skills
Discuss case studies in class. Objectively critique findings of fellow students. Participate in class discussions and problem solving exercises.
Management
Knowledge and Skills
Evaluate possible actions, solutions and strategies for financial decision making.
Cultural Sensitivity and Diversity
Harness the international and professional diversity of students in viewing issues and problems from different perspectives.
Ethics and Social Responsibility
Evaluate and discuss challenges related to corporate governance, social responsibility, and ethical and professional behavior. For example, we will discuss the difference between Shareholder Value and Stakeholder Value, and how the two concepts differ when it comes to the responsibility of a firm.
3. COURSE MATERIALS
Most course materials will be distributed electronically on the CEULearning website.
Textbooks. Corporate Finance, by Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, and Bradford Jordan, Irwin McGraw-Hill, 12th, 11th, or 10th edition. You will experience no disadvantage at all if you buy the 11th or 10th editions. To save money, you have the option to rent the textbook instead of buying it. The CEU Library might also have a few copies of the book. The ISBN of the 12th edition is 9781259918940. It does not matter whether you use the International Edition or the Standard Edition.
Syllabus and lecture notes: These are available on Moodle. It is your responsibility to bring the printed lecture notes (i.e., slides) to each class. Please note that this syllabus is preliminary and might be updated during the semester if necessary. Moodle also contains other files such as practice exams, formula sheets, etc.
Newspaper: The Wall Street Journal, The New York Times, The Financial Times, or a similar high- quality newspaper. A subscription is not required but highly recommended. We will discuss current events in business, finance, and technology during class. Reading high-quality newspapers (print or
3 digital) is the best preparation for these discussions. I will tweet some of the articles that we will cover in class from @AndrasDanis.
Case studies. We will solve two case studies in this course. CEU will purchase these case studies for you. The details will be announced during the semester.
Databases. The CEU Library boasts a range of databases covering financial and company data, market and industry reports, global news and more. For a full list of databases visit the CEU Library.
• Refinitiv (Thomson Reuters) Eikon for Students + Datastream/Thomson ONE
- Eikon: Platform used by finance practitioners including market traders to monitor and analyze financial information. Information, analytics and news on all major financial markets including real-time pricing data, financial research, global financial news and commentary, financial estimates, fundamentals analysis, visual analysis through charting. Import/export from Excel.
- Datastream: Range of economic, securities and company financial data. Excel add-in.
- Thomson ONE: Global overviews on 55,000 public companies, one million private companies.
Reuters News, ownership, deals, private equity, key ratios, company filings, officers and directors. Investext analyst reports, active and historical research from 1,600 independent research firms, brokerages, investment banks.
• Standard & Poor’s Capital IQ
- Web and Excel-based platform combining deep global company information, credit ratings and research, and market research with powerful tools for risk assessments. Real-time and historical information on markets, industries, companies, transactions and people. Tearsheet data.
• Lexis Nexis Academic
- Global database of news, business, legal and other sources. Full text of 350 newspapers, 300 magazines and journals, 600 newsletters. Wire services including Associated Press, Business Wire and PR Newswire. Company financial information, market research, industry reports.
4. TEACHING METHOD AND LEARNING ACTIVITIES
The course will involve a mix of lectures, in-class discussions, in-class problem solving, at-home problem solving, and case studies. Specifically, learning objectives will be achieved through
• Interactive classes: The instructor will present theoretical and applied material, with questions and comments from students in class.
• Case studies: Students will form groups and read and analyze cases before coming to class. We will discuss the cases together in class.
• At-home problems: For most chapters, there is a list of recommended textbook problems to work on. It is your responsibility to solve as many of these problems as you can.
• Videos: For some theoretical material, I have recorded videos. To maximize the time we have for solving problems together in class, I will sometimes ask you to watch these videos at home before class.
5. ASSESSMENT
Grading will be based on the total score out of 100, in line with CEU’s standard grading guidelines:
Grade Name Austrian equivalent Points
4 A Outstanding Excellent (1) 100-96
A- Excellent Excellent (1) 95-88
B+ Good Good (2) 87-80
B Fair Satisfactory (3) 79-71
B- Satisfactory Sufficient (4) 70-63 C+ Minimum Pass Sufficient (4) 62-58
F Fail Insufficient (5) 57-0
To weights of the course grade are the following:
1. Final exam 70%
2. Attendance 10%
3. Class participation 20%
1. Final exam. The final exam will be a 90-minute closed-book comprehensive exam covering the entire syllabus. For the exact date, see below under Section 8. The plan is to have an online exam.
This is tentative, due to changing Covid restrictions and university rules. You will be given a very wide time window to start working on the exam (8 am to 10 pm CET), to accommodate your work
schedule as well as possible time zone differences.
2. Participation: These are mostly meant to encourage classroom discussion for the case studies and to provide an incentive to solve numberical problems in class. For example, if you make a substantial contribution to a case study discussion, you earn a point. Also, if you solve a numerical problem correctly in class, you earn a point. Participation points are updated on Moodle after every class. Please let the teaching assistant (TA) know as soon as possible if I forgot to enter your
participation points. If you tell the TA several weeks later, both the TA and I might have forgotten your contribution to class.
Etiquette: I ask that you follow some simple courtesy rules during class: arrive on time, do not leave during class, do not disturb other students, do not use laptops, tablets, or phones, and make sure that all your devices are in silent mode.
6. COMMUNICATION
If you have a general question about the course, please first check the syllabus, the lecture notes, the online forum and the announcements on Moodle. If these do not solve your problem, send me a private message on Moodle and I will be happy to help you. For questions by private message, I will do my best to respond within 48 hours. Please do not expect answers after 6 pm on weekdays, or on the weekends.
Please do not send me messages with general questions. Instead, please ask these questions on the online forum. I will answer your questions there, which hopefully will benefit other students, too.
Also, you might get a quick answer from another student.
5 Finally, please monitor the emails/notifications sent out through Moodle, as they often contain information about the case studies and the exam.
7. TECHNICAL REQUIREMENTS
A scientific calculator is mandatory for the final exam and for every class.
Students are advised to bring their laptops to class with Microsoft Excel preinstalled.
8. TOPIC OUTLINE AND SCHEDULE
9. CASE QUESTIONS
Stedman Place: Buy or Rent?
• What are the pros and cons of renting? What are the pros and cons of owning a home? First, develop these lists from the perspective of the case characters. Then,
Date Topic Chapter (10/e,
11/e, 12/e) 9/21/21 Introduction to Finance
Time Value of Money Ch. 4
9/28/21 Bond Valuation Ch. 8
Stock Valuation Ch. 9
10/5/21 Investment Criteria Ch. 5
Case Study “Stedman Place: Buy or Rent?”
10/12/21 Free Cash Flow, Capital Budgeting Ch. 6 Capital Markets, Risk and Return Ch. 10 & 11
10/19/21 Cost of Capital Ch. 13
Intro to Firm Valuation / Mergers & Acquisitions Ch. 18
10/26/2021 Case study “Dow’s Bid for Rohm and Haas”
Market Efficiency Ch. 14
10/28/2021 Final exam (tentatively online)
6 add pros and cons that are missing from the case. For instance, you could describe why it makes sense in your personal situation to buy or rent a home, or in the situation of people you know well.
• Using the concept of present value, by taking into account all cash inflows and outflows, is it better to rent or to buy in this case? Set up a cash flow stream for the buying option and a cash flow stream for the renting option. Calculate the present value of both cash flow streams and compare the two present values. Try to make reasonable assumptions for the inputs, write them down explicitly, and justify them briefly. As stated in the case, you can assume that the couple sells the house after five years.
• Try different values for the future home price. How sensitive is your answer to these different values? How does your recommendation with respect to buying vs renting change with these different future home prices?
• Is it a good point in time to buy a home in Boston? Try to find out using the web how home prices developed in the Boston area during the recent financial crisis. Do you think the couple should have known that this will happen to home prices? Why, or why not?
Dow’s Bid for Rohm and Haas
• Why does Dow want to buy Rohm and Haas? Was the $78 per share bid reasonable?
Please support your argument with a quantitative analysis of the fair value of Rohm &
Haas to Dow.
• What are the major deal risks inherent in this transaction? How and to whom does the merger agreement (i.e., the contract) allocate these key risks?
• As of early February 2009, what should Andrew Liveris (Dow’s CEO) do and what should Raj Gupta (Rohm and Haas’s CEO) do?
10. SHORT BIO OF THE INSTRUCTOR
András Danis is an Associate Professor at CEU Department of Economics and Business. He has been working at the Scheller College of Business, Georgia Institute of Technology, Atlanta, since 2012, where he is currently on leave. Dr. Danis received his PhD in 2012 from WU Vienna University of Economics and Business. Previously, he pursued his undergraduate studies at the University of Vienna, where he received a degree in Social and Economic Sciences in 2007. His research topics are the effects of credit derivatives on debt restructuring and on corporate investment. He is also working on research questions about the optimal capital structure of firms, shareholder activism, and the effect of right-to-work laws on the relation between workers and firms. Dr. Danis teaches Finance at the bachelor, master, and PhD levels. Webpage: http://andrasdanis.com
