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DEGREE REGULATIONS & PROGRAMMES OF STUDY 2019/2020

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DRPS : Course Catalogue : Business School : Common Courses (Management School)

Postgraduate Course: Corporate Finance (CMSE11342)

Course Outline
SchoolBusiness School CollegeCollege of Arts, Humanities and Social Sciences
Credit level (Normal year taken)SCQF Level 11 (Postgraduate) AvailabilityNot available to visiting students
SCQF Credits15 ECTS Credits7.5
SummaryThis course provides an introduction to the core concepts and skills in corporate finance. It considers the main financial decision facing a company, reviews current academic thinking on how these decisions are made and introduces analytical tools that can assist in financial decision-making.
Course description Syllabus:

1. Companies and projects: discounted cash flow
2. Discounted cash flow continued, and other applications of interest rates
3. Equity, debt and the cost of capital
4. Cost of capital continued
5a. Cost of capital: the case of the water industry
5b. Corporate investment decisions in practice
6. Takeovers, and Melrose v GKN
7. Real options
8. Real options continued
9. Managing currency and interest rate risk
10. Corporate governance, dividend policy and debt policy

Student Learning Experience

To enhance the learning process, the Course Organiser will arrange a speaker from the finance industry, who will provide the students with a practitioners perspective and illuminate the applicability of the topics covered in the course.
Entry Requirements (not applicable to Visiting Students)
Pre-requisites Co-requisites
Prohibited Combinations Other requirements For Business School PG students only, or by special permission of the School. Please contact the course secretary.
Course Delivery Information
Academic year 2019/20, Not available to visiting students (SS1) Quota:  None
Course Start Semester 1
Timetable Timetable
Learning and Teaching activities (Further Info) Total Hours: 150 ( Lecture Hours 20, Seminar/Tutorial Hours 2, Summative Assessment Hours 3, Programme Level Learning and Teaching Hours 3, Directed Learning and Independent Learning Hours 122 )
Assessment (Further Info) Written Exam 75 %, Coursework 0 %, Practical Exam 25 %
Feedback General feedback on overall exam performance will be provided in January.
Exam Information
Exam Diet Paper Name Hours & Minutes
Main Exam Diet S1 (December)Corporate Finance (CMSE11342)2:00
Learning Outcomes
On completion of this course, the student will be able to:
  1. Understanding of the core concepts and methods of analysis in corporate finance.
  2. Understanding and applying discounted cash flow analysis to value projects, including effect of gearing, estimation of the cost of capital, and assessment of the credibility of a valuation.
  3. Understanding of currency risk and interest-rate risk, and the use of financial products to manage these risks.
  4. Understanding of real options, and simple valuations of real options.
  5. Understanding of the main theories to explain a company's gearing and dividend policies.
Reading List
The main text is:
- Brealey, R.A., Myers, S.C & Allen, F., Principles of Corporate Finance, 12th edition, 2017, McGraw-Hill

Other good corporate finance texts (which will not be used) include:
- Hillier, D. et al., (2014) Corporate Finance, 2nd European Edition, New York: McGraw-Hill Education
- Damodaran, A. (2015) Applied Corporate Finance, 5th Edition, New York, John Wiley & Sons Ltd.
- Berk, J. & DeMarzo, P., Corporate Finance, Pearsons
- Megginson, W.L., Smart, S.B & Gitman, L.J., Corporate Finance, Thomson South-Western
Additional Information
Graduate Attributes and Skills Knowledge and understanding
After completing this course, students should understand:
- the core concepts and methods of analysis in corporate finance;
- how to conduct a discounted cash-flow analysis to arrive at an estimate of net present value (NPV), including how to allow for uncertainty;
- how the NPV framework of analysis relates to the assumed aim of value maximisation;
-the use of discounting and rates of return in financial calculations more broadly;
- the nature of equity and debt, the concept of the weighted average cost of capital (WACC), and the effect of gearing on WACC and on the cost of equity;
-how the cost of capital is estimated in practice;
- the strategic and product-market requirements for a large positive (NPV) to be credible;
- how a company can use the main techniques and financial products available to manage currency risk and interest-rate risk;
- what determines in simple terms the price of certain financial products used by companies, such as interest-rate swaps;
-the concept of real options, and how to conduct simple valuations of real options;
- the main theories to explain a company's gearing and dividend policies.

Cognitive skills
After completing this course, students should:
-have better awareness of finance thinking and reasoning;
-have improved their ablility to reason, solve problems, perform calculations, and explain concepts;
-understand (parts of) finance textbooks, and use them to promote good analysis and decision-making.

Subject-specific skills
After completing this course, students should be able to:
-calculate the NPV of an investment project, assess what might affect a project┐s value, and assess how reliable the estimated value is;
-estimate the cost of capital for a company or a project;
-assess exposure to currrency risk and interest-rate risk, and use financial products to manage these risks;
-identify real options available to a company, and know how to conduct a simple valuation of a real option;
-explain how finance contributes to company decision-making, and explain some of the main activities of the finance or treasury department in a company.
KeywordsNot entered
Contacts
Course organiserProf Seth Armitage
Tel:
Email: Seth.Armitage@ed.ac.uk
Course secretaryMiss Yvonne Stewart
Tel: (0131 6)51 5333
Email: Yvonne.Stewart@ed.ac.uk
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