BA 636/Fall 2005 Page
1FINANCIAL DECISION MAKING
BA 636, FALL 2006
INSTRUCTOR: Dr. Suresh C. Srivastava
PHONE: 786-4148
OFFICE: RH 308 K
OFFICE HOURS: 10:00-11:20A TR and by appointment
E-MAIL: afscs@uaa.alaska.edu
CLASS TIME: 7:00-9:45P Monday
CLASS ROOM: RH 303
OBJECTIVE
This course is intended for MBA students having a reasonable foundation in the basic
concepts of finance. It is designed to extend their knowledge of financial management
and to provide insights into the complexity of the decisions faced by financial managers.
It provides an in-depth discussion of asset pricing models, corporate valuation, capital
structure theory, financial options and real options, mergers and acquisitions, and
financial distress.
REQUIRED TEXT
Intermediate Financial Management, 9th edition; Eugene F. Brigham and Phillip R.
Daves, Thomson South-Western, 2007, ISBN 0-324-31987-8.
SUPPLEMENTARY READING
It is strongly advised that students cultivate the habit of reading financial publications;
preferably daily financial paper; but certainly a weekly paper. The recommended
financial newspapers are Wall Street Journal, or Barron's.
PREREQUISITES
BA 603 and Graduate Standing or Faculty Permission.
COURSE EVALUATION BREAKDOWN OF GRADES
Midterm Test I 25% 90 - 100 A
Midterm Test II 30% 80 - 89 B
Final Examination 25% 70 - 79 C
Project 20% 60 - 69 D
<60 F
Some course resource is available on Blackboard at: http://uaaonline.alaska.edu. All
communication for this course will be through Blackboard using UAA user ID (call IT, 786- 4646, if you do not know UAA user id and password). Please check Blackboard for
announcements.
BA 636/Fall 2006 Page 2
BA 636, Financial Decision Making
Fall 2005, Schedule of Lectures
Date Topic Chapter
August 28 Portfolio Theory, Efficient Frontier, APT and F-F Three-factor model 2, 3
SEPTEMBER 4 HOLIDAY
11 Financial Options (including Web extension) 6
18 Modifying Data for Managerial Decision 7
25 Financial Planning 9
October 2 Corporate Valuation 11
OCTOBER 9 MIDTERM TEST I*
16 Capital Budgeting and Risk 13
23 Real Options 14
30 Capital Structure Theory 15
November 6 Capital Structure Theory 16
NOVEMBER 13 MIDTERM TEST II**
20 Hybrid Financing: Warrants and Convertibles 20
27 Mergers and Acquisitions 26
December 4 Multinational Finance and Bankruptcy 27, 25
DECEMBER 11 FINAL EXAMINATION***
* Based on Chapters 2, 3, 6, 7, 9 and 11.
** Based on chapters 13, 14, 15 and 16.
*** Based on chapters 20, 25, 26 and 27
Makeup lecture, if needed, will be on Saturday, December 2, 2006, 12:00-3:00P.
Suggested Problems:
Chapter Problems
2 5, 7, 8, 10, 13
3 1, 2, 4
6 1, 3, 4, 5, 6
7 6, 7, 8, 9
9 1, 2, 3, 4, 5, 7, 8, 9
11 1, 3, 4, 7, 10
13 6, 7, 8, 9, 10
14 2, 3, 4, 6
15 3, 4, 5, 6
16 1, 2, 3, 4, 5, 7
20 1, 3, 5, 6, 7
25 1, 2, 3
26 1, 2, 3, 4, 5, 6
27 1, 2, 3, 5, 7, 8, 9, 11
Additional problems may be assigned.
BA 636/Fall 2005 Page
3BA 636, Financial Decision Making
Project Outline
Comprehensive Analysis of a Dow 30 firm
I. Industry, peer and environment analysis
II. Firm analysis:
1 Collect financial information for five years.
2 Compute financial ratios and discuss strengths and weaknesses.
3 Prepare the Statement of Cash Flows for 2004.
4 Forecast future three-year growth rate of sales after adjusting for industry, peer
and environment analysis.
5 Prepare pro-forma statements for three years using the sales growth rates
computed in step 4.
6 Determine the free cash flow based on the pro-forma statement prepared in step 5.
7 Determine the Cost of Capital.
9 Estimate the current market price.
Tentative report outline
I. Firm’s profile
Organizational structure
Competition
II. Strengths and weaknesses – based on ratio and cash flow analysis.
III. Cost of capital calculation
IV. Market price and conclusion.
V. Appendices
Financial Ratios
Pro-forma statements
Free cash flow statement