INDIAN INSTITUTE OF MANAGEMENT, LUCKNOW FINANCIAL MANAGEMENT TERM III, PGP 1 2011-12 Faculty Number of sections Room No Telephone

ne Mail ID Faculty Number of sections Room No Telephone Email Prof. Madhusudan Karmakar 3 (Post-Midterm) 113 6624 madhu@iiml.ac.in Prof. Ajay K Garg 2 (Pre- Midterm) 128 6609 ajaygarg@iiml.ac.in Prof. A Vinay Kumar 3 (Pre- Midterm) 220 6645 vinay@iiml.ac.in Prof. Madhumita Chakraborty 2 (Post- Midterm) 140 6625 madhumita@iiml.ac.in

Prof. Manoj Anand 1 225 6639 manand@iiml.ac.in

Course Introduction: Financial Management is an introductory course in Finance This course focuses on the value of the firm and also the factors that influence this value, like various risks the firm faces while selecting a new project, changes in level of debt of the firm to mention a few. It also gives an introductory view of working capital management. Derivatives and lease financings methods are also discussed to give a fair view of instruments used by investors and firms to maximize value. This course is taught using exercises and cases. It is important that the student reads the intended reading material before coming to the class thoroughly. We repeat, students have to read the relevant reading material before attending the class! The students are expected to participate in all of the class room discussions. Course Objectives: The course intends to develop in students an understanding of executive decisions framework pertaining to new investments, financing, dividends, working capital management and attempts to stress the need for adequacy, appropriateness and responsiveness of such decisions. Following are major topics the course focuses on. The tools and techniques for evaluating investment proposals, particularly those that have long term implications; The amount of funds required to finance these investment proposals, the form and the proportion in which these funds are required; Working capital management; Whether the company should distribute all the earnings or retain a part or all of it; Evaluation of lease/hire purchase alternatives; Financial Derivatives.

Basic Text ( BT) Richard A. Brealey and Stewart C. Meyers, Franklin Allen and Pitabas Mohanty, Principles of Corporate Finance, New Delhi, Tata McGraw Hill. Latest Edition (BM) Kester, Ruback and Tufana, Case Problems in Finance, , 12th Ed, TMH

Reference books Lawrence J Gitman, Principles of Managerial Finance, Pearson Education, Ninth Edition 2001 I M Pandey, Financial Management, 9th edition, Vikas Publishing House Pvt. Ltd. Benninga, Simon, Principles of Finance with Excel, Oxford, Oxford University Press, 2006 Damodaran, Aswath (2006) Corporate Finance: Theory & Practice, John Wiley Ross, S. A., R W Westerfield, J. Jaffe & R K Kakani (2009). Corporate Finance, Tata McGraw Hill, 8th edition Components Quizzes, Projects & Assignment, Mid Term End Term Session wise Outline: Sessions Details 1 Financial Management: Functions and Objectives Read: Chapter 1(BM) 2-3 Long term Investment Decision analysis- NPV, IRR, Payback period, and Profitability Index : Concepts Read: Chapters 5, 6 & 11 ( BM) 4-7 Long term Investment Decisions : Applications Read: Chapters 5, 6 & 11 (BM) Case Lecture New Heritage Doll Company: Capital Budgeting (In Polycopy) 1. The Neogi Chemical Company. (In Polycopy) 2. Lockheed Tri Star 3. Super Project. 4. Whirlpool Europe. Lecture & Exercise Marks 40 30 30

EVALUATION

Complex Investment Decisions ( Investment decisions under inflationary conditions and adjustment for inflation) Read: (To be provided) Cost of Capital : Approaches & WACC Read: Chapters 4,7 &8 (BM) Risk, Return and CAPM Read: Diversification, CAPM and Cost of Equity Capital ( Reading material) Chapters 7 & 8 (BM) Risk Analysis in Long term investment decisions Read: Risk Analysis in Capital Budgeting (Reading material) Chapter 9 & 10 ( BM) Market Efficiency and Financing Decisions Read: Chapter 13 (BM)

9-10

Nike Inc. (In polycopy)

11-12

Mariott Corporation (Abridged)

13-14

Merck & Co. Evaluating a Drug Licensing Opportunity Lecture

15

Mid Term Exam

Sessions 16-19 20-24

25-27 28 29-30

Details Short term financing and Working capital management Read: Chapters 30 &31 (BM) Financing decisions a) Financial and operating Leverage b) Capital structure theories c) Capital Structure planning and policies d) Raising long term funds from capital markets and financial institutions Read: Chapters 17, 18, 23 & 24 (BM) Dividend Theories and Policies Read: Chapters 16 ( BM) Lease Financing vis--vis Borrow & Buy Read: Chapter 26 (BM) Financial Derivatives Read: (To be provided)

case 1. Dells Working Capital 2. Hampton Machine Tools 1. Continental Carriers. 2. American Home Products Corporation. 3. Diageo, plc

Dividend Policy at FPL Group, Inc.

Lecture & Exercise