Subject Code/Name: BFC2140 – Corporate Finance Workload: One 2-hour lecture
One 1-hour tutorial
Assessment: • Midsem: 30%
• Tute attendance/participation: 10%
• Exam: 60%
Recorded Lectures: Yes
Past exams available: Yes - 2 were given out with solutions, but there are more available from past students if you ask nicely
Textbook Recommendation: Fundamentals of corporate finance – The second edition is prescribed, but the 1st is almost identical so buy second-hand if you can. Has the weekly tute questions in it, so best get your hands on a copy. I didn’t really use it much for the learning of the theory, but others who did said it did its job.
Lecturer(s):Dr Hue Hwa Au Yong (Weeks 1-6)
Dr Jason Choo (Weeks 7-12)
Both are great lecturers. Au Yong sticks to the lecture slides, but her explanations are pretty clear. Writes the answers to the lecture examples on transparencies, and they don't get recorded unfortunately. The slides on Moodle get updated though so all's well. Jason talks more generally about finance. He follows the slides, but also talks about what is generally happening in the finance world. While not directly related to the material, they can be interesting tangents.
Year & Semester of completion:Semester 1 2014
Rating: 3 out of 5
Your Mark/Grade: HD
Comments: This unit is required for accounting and finance majors, and can be a part of a few others. Its one of you staple second year commerce subjects, so chances are you'll be doing it even if you don't major in finance.
Very well run unit. You would know exactly what was happening, what topics would be covered, what questions would be set, and tutorial answers came out quickly. No complaints what so ever about the lecturers or the administration side of things.
However the actual course material isn’t too amazing. I’m not a huge finance guy, and seemed to just go with the flow of the unit. I wouldn’t say I didn’t like it, there was just nothing that really jumped out at me. I liked the lectures though, and most of the stuff that you learn is fairly interesting.
The
topics covered include:
Financial Maths: Should really be called “formulae that you will need”. Not a great deal of maths involved, just number plugging really. You don’t need to know the derivations of any of the formulae, just what each of the variables represents, and when to use each formulae.
Valuation of bonds and equities: All in the title. What is a bond, how do you price a bond etc.. For share valuation you mainly look at constant dividend growth models. P/E ratios are touched on but not in depth. A little bit on risk too.
Project Evaluation: Remember NPV and IRR from first year accounting? These are touched on again, as well as a few other methods such as MIRR and payback period. You also look at projects with different lives and decision tree analysis (with probabilities of events occurring). You look at the advantages/disadvantages of each, which eventually leads you to the idea NPV is the best. Simulation and sensitivity analysis are touched on.
Risk and Return: High risk requires a higher rate of return. Diversification of portfolios and a few more types of risk. You look at very basic stats/probability calculations such as expected returns, standard deviation, covariance a normal distributions. The Capital Asset Pricing Model (CAPM) is introduced.
Cost of Capital: Looks into how the discount rate used for project evaluation is calculated, from the cost of equity and the cost of debt as the weighted average cost of capital (WACC).
Working capital management: Accounting, with a few formulas thrown in. Looks at how current assets are managed, trade-offs between carrying and shortage costs, reordering of stock, and funding strategies.
Capital Structure: How much debt and equity are be used to finance projects and companies. Looks at various factors that should be considered when considering how to finance companies.
Dividend policy: the decisions and effects of different policies in how dividends are paid out by companies.
Mid-sem/exam: The mid-sem is multiple choice and short answer. IS almost entirely number plugging with a couple of theory questions tacked on the end. Past tests with solutions are given out, and the actual test is very similar to the past ones. Same thing holds for the exam, but with no multiple choice and more theory questions.
Tutes aren’t especially helpful. You just run through that particular weeks questions, and the answers are uploaded to moodle at the end of the week anyway. But they are marked, so best to show up.
Overall not particularly challenging unit, is pretty accessible if you don’t leave everything last minute. Don’t be worried about the maths that is involved; if you are ok with plugging numbers into a formula then you should be alright. Not much higher level maths is involved.