EPOKA UNIVERSITY
FACULTY OF ECONOMICS AND ADMINISTRATIVE SCIENCES
DEPARTMENT OF BANKING AND FINANCE
COURSE SYLLABUS
2023-2024 ACADEMIC YEAR
COURSE INFORMATIONCourse Title: FUNDAMENTALS OF CORPORATE FINANCE |
| Code | Course Type | Regular Semester | Theory | Practice | Lab | Credits | ECTS |
|---|---|---|---|---|---|---|---|
| BAF 233 | B | 3 | 3 | 0 | 0 | 3 | 5 |
| Academic staff member responsible for the design of the course syllabus (name, surname, academic title/scientific degree, email address and signature) | NA |
| Main Course Lecturer (name, surname, academic title/scientific degree, email address and signature) and Office Hours: | Dr. Nertil Mera nmera@epoka.edu.al , Tuesday 10:00-12:00 |
| Second Course Lecturer(s) (name, surname, academic title/scientific degree, email address and signature) and Office Hours: | NA |
| Teaching Assistant(s) and Office Hours: | NA |
| Language: | English |
| Compulsory/Elective: | Compulsory |
| Study program: (the study for which this course is offered) | Bachelor in Banking and Finance (3 years) |
| Classroom and Meeting Time: | D-101/ Thursday 09:40 AM |
| Code of Ethics: |
Code of Ethics of EPOKA University Regulation of EPOKA University "On Student Discipline" |
| Attendance Requirement: | 75% required |
| Course Description: | BAF 233 - Fundamentals of Corporate Finance: Finance function and role of financial manager, financial statements and analysis, cash flow concept, time value of money, risk versus return with a consideration of liquidity, financial forecasting, planning and control, working capital policy, current asset management, capital budgeting and related techniques. |
| Course Objectives: | The primary objective of this course is to familiarize the student with basic concepts of corporate finance which is the life blood of any business and its various decision variables in the areas of financing, investment and dividend decisions. This course will introduce you to the theories and techniques of managing capital resources and uses within the framework of shareholder wealth maximization. A substantial part of the course is devoted to the proper methods of computing cash flows and determining market values. In addition, we will examine the sources of capital available to businesses and learn how to allocate assets efficiently |
|
BASIC CONCEPTS OF THE COURSE
|
| 1 | Capital Budgeting: The process of planning and managing a firm’s long-term investments. |
| 2 | Capital Structure: The mixture of debt and equity maintained by a firm. |
| 3 | Working Capital: A firm’s short-term assets and liabilities. |
| 4 | Liquidity: The speed and ease with which an asset can be converted to cash. |
| 5 | Future Value (FV): The amount an investment is worth after one or more periods. Also compound value. |
| 6 | Present Value (PV): The current value of future cash flows discounted at the appropriate discount rate. |
| 7 | Discounted Cash Flow (DCF) valuation: (a) Calculating the present value of a future cash flow to determine its value today. (b) The process of valuing an investment by discounting its future cash flows. |
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COURSE OUTLINE
|
| Week | Topics |
| 1 | Review of Syllabus and Introduction to the Course (Chapter 1): This is an introductory lecture presenting students with the general rules, course assessment criteria, specific requirements, textbook and other learning materials, and the main chapters to be taught in this course. In addition it gives an overview of financial management. This chapter focuses on: 1.1 Finance: A Quick Look 2, 1.2 Business Finance and the Financial Manager 4, 1.3 Forms of Business Organization 7, 1.4 The Goal of Financial Management 9, 1.5 The Agency Problem and Control of the Corporation 12, and 1.6 Financial Markets and the Corporation 15) (Pages 2-21) |
| 2 | Chapter 2: Financial Statements, Taxes and Cash Flow (This chapter focuses on: 2.1 The Balance Sheet 23, 2.2 The Income Statement 27, 2.3 Taxes 31, and 2.4 Cash Flow 33) (Pages 22-49). |
| 3 | Chapter 3: Working with Financial Statements (This chapter focuses on: 3.1 Standardized Financial Statements 51, 3.2 Ratio Analysis 54, 3.3 The DUPont Identity 64, 3.4 Internal and Sustainable Growth 68, and 3.5 Using Financial Statement Information 72) (Pages 50-95). |
| 4 | Chapter 4: Introduction to Valuation- The Time Value of Money (This chapter focuses on: 4.1 Future Value and Compounding 98, 4.2 Present Value and Discounting 104, and 4.3 More on Present and Future Values 108) (Pages 97-121). |
| 5 | Review of Chapters (1-4) and Quiz |
| 6 | Chapter 5: Discounted Cash Flow Valuation - Part I (This chapter focuses on: 5.1 Future and Present Values of Multiple Cash Flows 123, 5.2 Valuing Level Cash Flows: Annuities and Perpetuities 131, 5.3 Comparing Rates: The Effect of Compounding Periods 140, and 5.4 Loan Types and Loan Amortization 145) (Pages 122-164). |
| 7 | Review Session for Midterm Exam |
| 8 | Midterm Exam |
| 9 | Chapter 5: Discounted Cash Flow Valuation - Part II (This chapter focuses on: 5.1 Future and Present Values of Multiple Cash Flows 123, 5.2 Valuing Level Cash Flows: Annuities and Perpetuities 131, 5.3 Comparing Rates: The Effect of Compounding Periods 140, and 5.4 Loan Types and Loan Amortization 145) (Pages 122-164) + Exercises. |
| 10 | Chapter 6: Interest Rate and Bond Valuation (This chapter focuses on: 6.1 Bonds and Bond Valuation 166, 6.2 More on Bond Features 175, 6.3 Bond Ratings 180, 6.4 Some Different Types of Bonds 182, 6.5 Bond Markets 186, 6.6 Inflation and Interest Rates 190, and 6.7 Determinants of Bond Yields 192) (Pages 165-204). |
| 11 | Chapter 7: Equity Markets and Stock Valuation (This chapter focuses on: 7.1 Common Stock Valuation 206, 7.2 Some Features of Common and Preferred Stock 216, and 7.3 The Stock Markets 220) (Pages 205-236). |
| 12 | Chapter 8: NPV and Other Investment Criteria (This chapter focuses on: 8.1 Net Present Value 238, 8.2 The Payback Rule 242, 8.3 The Average Accounting Return 246, 8.4 The Internal Rate of Return 248, 8.5 The Profitability Index 257, and 8.6 The Practice of Capital Budgeting 258) (Pages 237-274). |
| 13 | Chapter 9: Introduction to Capital Investment Decisions (This chapter focuses on: 9.1 Project Cash Flows: A First Look 276, 9.2 Incremental Cash Flows 277, 9.3 Pro Forma Financial Statements and Project Cash Flows 279, 9.4 More on Project Cash Flow 283, 9.5 Evaluating NPV Estimates 291, 9.6 Scenario and Other What-If Analyses 293, and 9.7 Additional Considerations in Capital Budgeting 297) (Pages 275-299). |
| 14 | Review Before Final Exam |
| Prerequisite(s): | NA |
| Textbook(s): | Essentials of Corporate Finance, Stephan A. Ross, Randolph W. Westerfield and Bradford D. Jordan, McGraw-Hill 10th edition. |
| Additional Literature: | Fundamentals of Corporate Finance, Brealey, Myers and Marcus (any edition) |
| Laboratory Work: | NA |
| Computer Usage: | Yes |
| Others: | No |
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COURSE LEARNING OUTCOMES
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| 1 | Understand the fundamental principles of corporate finance |
| 2 | Understand financial statements, taxes, cash flows and how to work with financial statements |
| 3 | Learn how to calculate the present value and the future value of a single or multiple cash flows |
| 4 | Understand the ideas behind the time value of money and be able to calculate the value of cash flows for different financial instruments |
| 5 | Learn how to apply some very important methods like NPV, IRR and payback period used in capital budgeting |
| 6 | Analyze a range of real-life financial situations using the concepts, frameworks and theories learned throughout the course |
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COURSE CONTRIBUTION TO... PROGRAM COMPETENCIES
(Blank : no contribution, 1: least contribution ... 5: highest contribution) |
| No | Program Competencies | Cont. |
| Bachelor in Banking and Finance (3 years) Program | ||
| 1 | The students gain the ability to look at the problems of daily life from a broader perspective with an increased awareness of the importance of moral/ethical considerations and professional integrity in the workplace. | 5 |
| 2 | They develop their knowledge and understanding of banking and finance including concepts, theories, and analytical tools that serve both in national and international markets. | 5 |
| 3 | They gain an understanding of the role of financial management in business firms and the essentials of corporate finance and further develop their knowledge in the field. | 5 |
| 4 | They are able to apply valuation models to estimate the price of different financial assets, measure risk and describe the risk-return tradeoff. | 5 |
| 5 | They are provided with the knowledge and understanding of the regulatory framework and functioning of banking system and central banking as well as international banking system. | 3 |
| 6 | They are able to understand and use fundamental economic theories and tools to solve economic problems in banking and financial services industry. | 3 |
| 7 | They have the ability to develop and utilize accounting, financial and economic data as well as other information to solve different business problems by making use of basic mathematical and statistical models. | 4 |
| 8 | They are expected to develop their numerical and IT skills as well as knowledge of databases in order to address the significant development in the delivery and use of financial services known as FinTech. | 4 |
| 9 | They develop their ability to think critically, do research, analyze, interpret, draw independent conclusions, and communicate effectively, both individually and as part of a team. | 4 |
| 10 | They are provided with opportunities to acquire the necessary skills and competencies to develop professionalism in the banking and financial services industry or to move on to further study within the discipline. | 4 |
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COURSE EVALUATION METHOD
|
| Method | Quantity | Percentage |
| Midterm Exam(s) |
1
|
30
|
| Quiz |
1
|
10
|
| Final Exam |
1
|
50
|
| Attendance |
10
|
|
| Total Percent: | 100% |
|
ECTS (ALLOCATED BASED ON STUDENT WORKLOAD)
|
| Activities | Quantity | Duration(Hours) | Total Workload(Hours) |
| Course Duration (Including the exam week: 16x Total course hours) | 16 | 3 | 48 |
| Hours for off-the-classroom study (Pre-study, practice) | 16 | 3 | 48 |
| Mid-terms | 1 | 10 | 10 |
| Assignments | 0 | ||
| Final examination | 1 | 15 | 15 |
| Other | 4 | 1 | 4 |
|
Total Work Load:
|
125 | ||
|
Total Work Load/25(h):
|
5 | ||
|
ECTS Credit of the Course:
|
5 | ||
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CONCLUDING REMARKS BY THE COURSE LECTURER
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|
In conclusion, the Fundamentals of Corporate Finance course serves as a cornerstone in the field of finance, offering students a comprehensive understanding of its core principles. Throughout this course, students have been equipped with essential knowledge crucial for understanding corporate finance. By integrating skills gained in complementary disciplines such as Math for Business and Economics, Financial Accounting, and Statistics, students will succeed in effectively tackling real-world financial challenges. Upon completing this course, students will learn how financial managers approach critical decision-making processes. From evaluating capital investment opportunities to deciding on optimal capital structures and managing working capital, students gain practical insights that help achieving financial success. Additionally, students grasp fundamental concepts including Future Value, Present Value, and Net Present Value, as well as learn evaluating stocks, bonds, and various projects using a diverse array of valuation techniques. Upon gaining of this foundational understanding, students are able to succeed in their professional journeys with confidence. |