Course Title: Corporate Finance
Course code: FIN 431
Credit hours: 3
The purpose of this course is to provide students an understanding of key aspects of corporate finance and develop skills to analyse issues in corporate finance for sound financial decision making in business.
This course has been structured as specialization course in Finance and built on the foundation of two core courses Essentials of Finance and Financial Management. For students choosing to concentrate on Finance, will have an opportunities to cover some additional but important aspects of corporate finance which were not covered in core courses. This course offers students advance knowledge on corporate finance and equip them with additional tools and techniques of corporate finance so as to prepare them to analyze financial problems in a wider context. This
course deals with introduction to corporate finance, short-term financing, lease financing, long-term corporate financing: capital structure determination, and international corporate financial management.
By the end of this course, students should be able to:
- understand the significance of corporate finance,
- evaluate different options for short-term financing;
- evaluate the leasing versus buying alternatives,
- evaluate different options for long-term financing;
- evaluate warrants and convertibles as options of financing;
- determine capital structure that enhances the value of the firm, and
- understand the basics of international corporate finance.
Unit I: Introduction to Corporate Finance 2 hours
Significance of finance; features and determinants of optimal capital structure.
Unit II: Short-term Corporate Financing 7 hours
Need for short-term financing: short-term versus long-term financing: unsecured short-term financing; accruals and deferred income, trade credit, short-term bank loan, commercial paper,secured short-term financing: inventory financing. and accounts receivable financing
Unit III: Lease Financing 7 hours
Introduction to lease financing; forms of lease financing; evaluating lease financing in relation to debt financing :return to lessor, equilibrium annual lease payment, present value of lease alternative, present value of borrowing alternative, and other considerations.
Unit IV: Long-term Debt and Preferred Stock Financing 7 hours
Features of long-term debt financing; secured and unsecured bonds, major provisions of preferred stock issues, the use of preferred stock in financing decision, and refunding decisions on debt and preferred stock.
Unit V: Common Stock Financing 5 hours
Common stock financing apportionment of control,income and risk: rights of holder of common stock; nature of voting rights, cumulative voting, and pre-emptive right.
Unit VI: Convertibles, Exchangeables and warrants 5 hours
Convertible securities : conversion price and conversion ratio, conversion value and premium over conversion value, other features, financing with convertibles, forcing conversion; value of convertible securities: debt-plus-option characteristic, straight bond value, premiums, relationship among premiums; exchangeable bonds: features, use in financing ,valuation of an exchangeable; warrants: features, valuation of a warrant, premium over theoretical value and relationship between values.
Unit VII: Capital Structure Determination 7 Hours
A conceptual look: net operating income approach, traditional approach, the total-value approach:arbitrage support; presence of market imperfection and incentive issues; the effect of taxes, taxes and market imperfection combined; financial signaling and pecking order approach.
Unit VIII: International Corporate Finance 7 Hours
Introduction; foreign exchange markets and exchange rates, purchasing power parity ,rate parity; and exchange rate risk.
1. Van Horne, J. C. Wachowicz, J. M. Jr. & i, S. N. Fundamentals of financial management. New Delhi: Pearson Education
2. Ross, S. A. Westerfield, R. W. & Jordan, B. D. Fundamentals of corporate finance. New Delhi: Tata McGraw-Hill Education India Pvt. Ltd.
1. Brigham, E. F. & Houston, J. F. Fundamentals of financial management. New Delhi: Cenage Learning India Pvt. Ltd.
& Rana, s. B. Financial management.
2. Paudel, R. B., Baral, K.J. Gautam, R.R. and Rana , S.B. Financial management Kathmandu: Asmita Book Publishers and Distributors (P)Ltd.
Pradhan, R. S.. Capital structure management. Kathmandu: Landmark Publications.