AMERICAN INTERNATIONAL UNIVERSITY BANGLADESH

Faculty of Business Administration

Department of Finance
BBA Program

COURSE OUTLINE
Term: Summer 2011 2012
I.

Course Code and Title : FIN4001: Corporate Finance

Credit
: 3 credit hours favorite
Office Location

: Kashfia Sharmeen
: Campus 1, 7th Floor, Room # 15

Office Tel

: 988-6116, 988-7935/ Ext. - 539

E-mail

: kashfia_sh@aiub.edu

Prerequisite

: Financial Management (BBA-3116)

Instructor

II.

Course Description :
Finance is the language of business and therefore it is very important for any business student to have a
sound understanding of financial information. Corporate Finance deals with investment and financing
decision, hence the aim of this course is to make students familiar with investment and financing
decision-making process in corporate level. Topics that will be covered in this course are alternative
investment rules, NPV and capital budgeting, Capital market theory, capital structure, dividend policy,
mergers, acquisition, divestures etc. As stipulated in the university catalogue, students should already
have completed required courses in accounting, business mathematics & statistics, and economics.
III.

Course Objectives
This objective of this course is to provide students a numerical and comprehensive understanding
about the concepts, significance and instruments of corporate finance so that they would be able to
know about the basic of all other higher level financial studies and can able to build a smooth
pathway for further lessons.

IV.

Topics to be Covered
Topics

Introduction

Introduction to
Corporate
Finance

Net present
value and
other
investment

Specific objective(s)
Introduction with the students, discussion
of the course outline, the mission and the
vision of AIUB
1. Definition of corporate finance
2. Type of corporate firm
3. The importance of cash flow
4. The agency problem and control of the
corporation
1. Discuss different methods of investments
appraisal: payback period, ARR, net present
value, IRR, PI
2. Advantages and Drawbacks of methods
Page 1 of 4

Time
frame
Lecture
1
Lecture
2,3

Lecture
4,5,6

Suggested
activities
Engaging
students in
discussion
Engaging
students in
discussion

Teaching
Strategy(s)
Power point
presentation

Problem
solving and
discussions

Power point
presentation,
white board
and case

Power point
presentation
and white
board

rules

Making capital
investment
decision
Risk and
return: lessons
from market
history
Return and
risk: The
capital asset
pricing model
(CAPM)

-----

3. Problems with IRR

4. Comparison between NPV and IRR
5. The practice of capital budgeting
1. Incremental cash flow
2. Inflation and capital budgeting
3. Sensitivity analysis
1. Definition of return and their types
2. Return statistics
3. Average stock and risk free returns
4. Risk statistics
5. Risk premium
1. Individual securities
2. Expected return, covariance and variance
3. The return and risk for portfolios
4. The efficient set of two assets and many
securities
5. The optimal portfolio and type of risk
6. market equilibrium and Beta
7. relation between risk and return (CAPM)
Review for the Mid-Term Examination

Capital Structure:
Basic concept

Capital Structure:
Limit to the use of
debt

Dividend and other

payout

method

Lecture
7,8

Problem
solving and
discussions

Lecture
9,10

Problem
solving and
discussions

Lecture
11,12,13,
17

Problem
solving and
Group
discussions

Lecture
14
MIDTERM EXAMINATION
1. The Capital structure question and Lecture
pie theory
18, 19,
2. Maximizing firm value versus
20
stockholders value
3. Financial leverage
4. Modigliani and Miller proposition in
the world of without corporate tax
5. Modigliani and Miller proposition in
the world of with corporate tax
6. The implication and insight of M&M
proposition
1. Cost of financial distress
Lecture
2. Type and consequences of financial
21, 22,
distress cost
23
3. Agency cost and Protective
covenants towards bondholders
4. Signaling
5. The Peaking-Order theory
6. Growth and debt to equity ratio
7. Firms evaluation of capital structure
1. Different type of payout
Lecture
2. Standard method of Cash dividend
24,25
payout
3. Irrelevance of dividend policy (The
indifference proposition of Modigliani
and Miller) :Assumptions, the
benchmark case
4. Arguments for Relevance for
Page 2 of 4

Power point
presentation
and white
board
Power point
presentation
and white
board
Power point
presentation,
white board
and case
method

-----

Problem
solving and
Group
discussions

Power point
presentation
and white
board

Problem
solving and
Group
discussions

Power point
presentation
and white
board

Problem
solving and
Group
discussions

Power point
presentation
and white
board

Mergers and
Acquisitions

--------

dividend policy
5. Personal Tax and dividends
6. Real world factors favoring a highdividend policy
7. What we know and do not know
about dividend policy
8. The pros and cons of paying
dividends
1. Mergers & Acquisitions Overview,
2. Basic forms of Acquisitions
3. Synergy and its sources
4. Friendly verses hostile mergers
5. Do mergers add value?
Review for the Final Examination

Lecture
26,27

Group
discussions,
Case
analysis

Power point
presentation

Lecture
28

--------

---------

FINAL EXAMINATION
V.

Course Requirements

Quizzes:
Altogether 4 quizzes may be taken during the semester. The quizzes generally based on previous class
lectures. No makeup quizzes will be taken.

Assignment:
The topic of the assignment will be informed in the class. All the assignments will be individual based
and they must be submitted by the deadline. No late submissions will be accepted.

Class behavior & policy:

A. Students are expected to attend class and be on time. Students must have 80% attendance of the total

number of classes. Otherwise, the students will receive a UW grade. It is entirely the responsibility of
the students to collect the materials that has been missed due to failure of attending any classes for any
reason whatsoever. Let it be reminded that lectures will not be repeated. Withdrawal from class is not
automatic. The student who desires to withdraw is responsible for processing the withdrawal.

B. Attendance will be taken at the beginning of the class. Students will be considered as LATE if
they come after the roll-call. Three (3) LATE will be count as ONE ABSENCE.
C. Students are encouraged to actively participate in the class discussion and ask relevant questions.
D. Students must turn off their cell phones prior to entering the classroom.
E. Honesty is the best policy. Any sort of academic dishonesty will result in severe consequences and
may lead to receiving a failing grade for the course.

VI. Evaluation
The final grade for this class will be based on the points achieved on the following areas:

Mid Term Session

Quizzes
Assignment & Homework
Class Attendance & Participation
Mid-Term Examination
Total

Final Session
20%
10%
20%
50%
100%

Quizzes
Assignment & Case Study
Class Attendance & Participation
Final-Term Examination
Total

Page 3 of 4

20%
10%
20%
50%
100%

Weight Converted into

40%

Weight Converted into

60%

VII. Textbook/Reference Materials

Required text
Ross, S. A., Jaff, J. and Westerfield, R. W. 2010. Corporate Finance, 9th edition, McGrawHill: New
York
References
1.
Brealey, R. A. and Myers, S. C. 2003. Principles of Corporate finance, Seventh Edition,
McGraw-Hill: New York
2. Bearley, R. A., Myers, S. C. and Marcus, A. J. 2001. Fundamental of corporate finance, Third
Edition, Irwin: New York
3. McLaney, E. and Atrill, P. 2008. Accounting: An Introduction, 4th edition, FT Prentice Hall: UK
4. Van Horne, J. C. and Wachowicz, J.R. 2001. Fundamentals of Financial Management, thirteenth
edition, FT Prentice Hall: UK
5. Fielding, John, 1989. Is Beta Better? Management Accounting, Vol. 67 (10), Pp. 38-40
6. Gregory, Alan, 1990. Why Bata is Better: The Usefulness Of Beta In The Investment-Appraisal
Process, Management Accounting, Vol. 68 (1), Pp. 42-43
7. Young, M. S. 1983. A Note on the Nonequivalent of NPV and IRR, The Appraisal Journal, Pp.
459-461
8. www.finance.yahoo.com
9. www.valuepro.net
10. www.ibbotson.com
11. Newspapers and Magazines
1. The Wall Street Journal
2. The financial times
3. Business Week
4. The daily Star

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