IDC 2012-2013 Finance Seminar Topics in Advanced Corporate Finance Class Meeting Times: Sunday: 12:15 -1:45 and

d Monday: 10:15 11:45 Instructor: Professor Linda Canina Email: lc29@cornell.edu Office: C304 Office Hours: Monday 11:45 13:45 and by prearranged appointment (through email) Teaching Assistant: Uri Olivero Email: Olivero.idc@gmail.com; Cell: 050-5553363 (Note: Please call only between 19:00-22:00 Sunday to Thursday) Office Hours: By prearranged appointment (through email) Course Description: The objective of this course is to analyze the major issues affecting the financial policy of a corporation. This will be accomplished through discussions of the theoretical and empirical work as well as through analysis of real-life cases. The primary topics covered deal with the major issues of financial policy facing the firm, such as payout policy, capital structure and related financing choices, the role of venture capital financing, the decision to go-public, the impact of agency problems between firm management and security holders and between different classes of security holders on corporate governance and different ways of solving such agency problems, as well as mergers/takeovers and other restructuring decisions. Many of the topics covered here are the same as in the course Principles of Finance, but the emphasis is different. The emphasis here shifts from learning the principles to applying them to make managerial decisions. One of the aims of the course is to develop students ability to make judgments in a realistic setting. In addition, students are expected to develop their capacity to articulate judgments both orally and in writing. Since this is an advanced course, students are expected to produce professional level work. In addition, knowledge of the concepts covered in Principles of Finance, as well as the other first and second year required courses such as Microeconomics, Introduction to Accounting, Managerial Accounting, Statistics I and II, Business Communications I and II, Investment Theory, Critical Thinking, Econometrics and Research Methods is assumed. Upon completion of this course the students will be able to:1) apply finance theory in realistic situations; 2) account for agency issues and incentive effects in financial decisions; 3) understand the key corporate finance activities from the managerial and investment banking perspectives; 4) appreciate and analyze the interactions between financial decisions; and 5) analyze and present case analysis.

Grading: The breakdown of the performance measurement to be used in the class follows: I. Group (2-3 people) Three Written Case Analyses One Oral Presentation of Case Analysis II. Individual Quizzes Final Exam Total 150 Points (30%) 175 Points (35%) 500 Points (100%) 150 Points (30%) [50 Points Each, 10% Each] 25 Points (5%)

Foundations/Reference: One of the following texts virtually all of you should own or at least be familiar with having taken the required core finance course. If you own another edition of a book or any other corporate finance textbook that will suffice as well. Note that these books are on reserve at the library. These texts are just background reading for concepts you should already know. Principles of Corporate Finance by Brealey, Myers, and Allen, McGraw Hill. Corporate Finance by Ross, Westerfield and Jaffe, McGraw-Hill/Irwin Fundamentals of Corporate Finance by Ross, Westerfield and Jordan, McGraw-Hill/Irwin

Topics/Cases/Readings: All Readings and cases may be purchased through the Course link: http://cb.hbsp.harvard.edu/cb/access/16140176. Note that the cases are required (you must obtain a copy) and the readings are optional. I. Introduction A. Description of course, requirements and expectations B. Brief review of the fundamental principles in Finance II. Cost of Capital A. Determining what firms can be considered comparable when estimating the cost of capital B. Estimating CAPM equity and asset betas from capital market data C. Understanding the effect of leverage on equity betas D. Evaluating how appropriate the estimated cost of capital is for different types of real investments Case Analysis: Marriott Corporation: The Cost of Capital (Abridged) (HBS Product Number 289047-PDF-ENG)
This case provides you with the opportunity to explore how a company uses the capital asset pricing model (CAPM) to compute the cost of equity capital for the company and for each of its divisions. You will calculate betas based on comparable companies, lever betas to adjust for capital structure, determine the appropriate riskless rate and market risk premium to use. In addition, you will compute the WACC for the company and for each of its divisions.

III. Capital Budgeting Case Analysis: New Heritage Doll Company (HBS Product Number 4212-PDF-ENG)
This case provides you with the opportunity to apply the standard financial tools for assessing the attractiveness of two proposed capital investments.

IV. Capital Structure Optional Readings:

Richard Passov, How Much Cash Does Your Company Need?, Harvard Business Review, November 2003, Reprint number R0311J Justin Pettit, Is a Share Buyback Right for your Company?, Harvard Business Review, April 2001, Reprint number R0104K

Case Analysis: Blaine Kitchenware (HBS Product Number 4040-PDF-ENG)

This case provides the setting to discuss the implementation of a target debt policy. It focuses on the theory of optimal capital structure and the practical problem of determining an optimal debt ratio.

V. Mergers and Acquisitions Optional Readings:

Carliss Y. Baldwin, Constance E. Bagley, and James Quinn, M&A Legal Context: Basic Framework for Corporate Governance, Background Note, (HBS Product Number 803200-PDF-ENG) 3

Carliss Y. Baldwin, Technical Note on LBO Valuation (A): LBO Structure and the Target IRR Method of Valuation (HBS Product Number 902004-PDF-ENG) Carliss Y. Baldwin, Technical Note on LBO Valuation (B): The Equity Cash Flow Method of Valuation Using CAPM (HBS Product Number 902005-PDF-ENG) Mohanbir Sawhney, Robert C. Wolcott, and 12 Different Ways for Companies to Innovate, Sloan Management Review, April 2006, Product Number: SMR207-PDF-ENG Michael E. Porter, From Competitive Advantage to Corporate Strategy, Harvard Business Review, May 1987, Product Number 87307-PDF-ENG

Case Analysis: Mellon Financial and the Bank of New York. (HBS Product Number 208129PDF-ENG)
This case provides the opportunity to value synergies, determine exchange ratios and assess how equity consideration affects the NPV of a merger for both sets of shareholders.