33:390:400:(07) Corporate Finance
Spring 2023
COURSE DESCRIPTION
Corporate Finance is concerned with how to make capital investment decisions (capital budgeting) and how to finance company activities, including new investments, and how to make dividend payment decisions. This course will lecture on important topics for corporate finance, which will cover methods, theory, and policy decisions. The topics which will be addressed in the course are: how streams of cash flows are valued, how financial managers evaluate investment opportunities, how financial statements are used to evaluate a company's financial condition and its market value, how a manager chooses between mutually exclusive opportunities, and how they evaluate different types of investment. This course will also discuss the treatment of risk when evaluating a project and the required returns on a project. Alternative source of funds used to finance new projects, which include internal and external sources of funds, will be theoretically and empirically demonstrated. Lastly, long-term financial planning will be discussed.
In this course, we will also discuss portfolio theory, market model, and CAPM theoretically and empirically. In addition, long-term financial planning in terms of financial statements and financial ratio and market information will be both theoretically and empirically discussed. Overall, this course will teach students how to use finance theory, financial data, and methodology such as calculus, statistics, linear programming, and Microsoft Excel to analyze important financial topics in real world corporate strategy decision making. Therefore, this course uses an active instead of a passive approach in order to prepare students for the job market and their future success.
COURSE MATERIALS
- Required textbook and papers:
1. Corporate Finance and Strategy: An Active Learning Approach by Cheng F. Lee, John Lee, and Michael Lee. World Scientific Publishing Co., 2022, forthcoming.
2. Active and Interdisciplinary Approach to Teach Corporate Finance by Cheng F. Lee. 2022. Review of Pacific Basin Financial Markets and Policies Vol. 25, No. 3
3. Three Project Analyses of Johnson & Johnson (JNJ) in Terms of Excel Programs by Cheng F. Lee and Wen C. Yeh. Unpublished paper.
4. Financial Analysis and forecasting JNJ as a case study by Cheng F. Lee and Wen C. Yeh. Unpublished paper
- Reference textbooks:
1. Financial Analysis, Planning, and Forecasting by Cheng F. Lee and John C. Lee. World Scientific Publishing Co., 3rd Edition, 2017.
2. Corporate Finance by Stephen Ross, Randolph Westfield, and Jeffrey Jaffe McGraw-Hill, 13th Edition, 2022.
3. Statistics for Business and Financial Economics by Cheng Few Lee, John Lee, and Alice C. Lee, Springer Academic Publishers, 2013.
4. Encyclopedia of Finance 3rd Edition by Cheng Few Lee and Alice C. Lee, Springer Academic Publishers. Forthcoming.
5. Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives by Lee, C.F., Lee, A.C., and Lee, J. World Scientific Publishers, 2022.
6. From East to West: Memoirs of a Finance Professor on Academia, Practice, and Policy by Cheng-Few Lee, World Scientific, 2017.
Chapters 7 and 9 can be found here: http://www.worldscientific.com/worldscibooks/10.1142/10182
- Check Canvas Rutgers(Canvas.rutgers.edu) and your official Rutgers email account regularly.
- All the materials regarding this course are available at Canvas Rutgers or at the website: http://centerforpbbefr.rutgers.edu/Instructor's%20Manual%20for%20the%20FAPF.htm
PREVENT COVID-19 AND RELATED POLICIES
In order to protect the health and well-being of all members of the University community, masks must be worn by all persons on campus when in the presence of others (within six feet) and in buildings in non-private enclosed settings (e.g., common workspaces, workstations, meeting rooms, classrooms, etc.). Masks must be worn during class meetings; any student not wearing a mask will be asked to leave. Masks should conform. to CDC guidelines and should completely cover the nose and mouth: https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/about-facecoverings.html. Each day before you arrive on campus or leave your residence hall, you must complete the brief survey on the My Campus Pass symptom checker self-screening app.
Students who have been told to quarantine, or are experiencing symptoms of any transmittable disease, please remain at home and not attend in-person class meetings. This course will become hybrid if there are students who have been told to quarantine.
LEARNING GOALS AND OBJECTIVES
- This course is designed to help students develop skills and knowledge in the following area(s):
1. Financial statement analysis, which includes analyzing for financial statement and financial ratios.
2. Theoretical and empirical evaluation bond and stock.
3. Capital budgeting under certainty and uncertainty.
4. Interaction among investment, financing, dividend, and production policies.
5. Long-term financial planning and forecasting.
6. Mergers: theory and evidence.
7. Bankruptcy, workouts, and corporate reorganization.
- Students who complete this course will demonstrate the following:
1. Students can use financial statement analysis to determine companies' market value. In addition, students can re-enforce their knowledge of accounting.
2. Students can use accounting information, market information, and economic information to determine the value of bonds and stock. In addition, they will learn what is the timing of issue of either bond or stock.
3. Based upon capital budgeting under certainty knowledge, which they have learned from previous courses, students can more realistically perform. capital budgeting decision, which also considers both market and economic environment.
4. Students are going to know how to use option strategy to trade options. In addition, they will be able to use option theory to evaluate convertible bonds, which will be compared to a traditional approach to evaluate convertible bonds.
5. Students will be able to evaluate whether companies use appropriate investment, financing, dividend, or production policies.
6. Students will be able to do working capital management and long-term financial planning and forecasting.
- Students develop these skills and knowledge through the following course activities and assignments:
This course will have homework assignments, two tests, and three project. In addition, I will use Johnson & Johnson and other companies as examples to show how the above-mentioned objectives can be achieved.