This module aims to provide students with a fundamental understanding of the core theoretical and empirical aspects involved in corporate finance. In particular, the aims are that students will:

Understand aspects of theories in corporate finance;

Become familiar with a range of mathematical techniques commonly employed in corporate finance with particular emphasis on bond valuation, stock valuation, firm valuation and assessing the probability that the firm will default on its debt obligations;

Be aware that all mathematical models, which are dependent on a set of underlying assumptions, have limitations in the sense that the answer to a particular problem might change once the underlying assumptions change.

(LO1) Understand the principles of bonds and stocks valuation

(LO2) Understand how credit rating agencies assign credit rating scores to bonds

(LO3) Develop an understanding of issues involved in capital budgeting under uncertainty, market efficiency

(LO4) Understand portfolio theory, asset pricing models (CAPM, APT) and portfolio management

(LO5) An ability to analyse financial data in order to derive the optimal capital structure of firms

(LO6) Understand how option pricing theory can be used to firm valuation and assess the probability that a firm will default on its debt obligations

(LO7) An ability to analyse data in order to calculate Value at Risk as a single number summarising the total risk in a portfolio of financial assets.

(LO8) Understand the principles and practices involved in leasing, mergers and acquisitions

(S1) Problem solving skills

(S2) Numeracy

(S3) Commercial awareness

(S4) Communication skills

Teaching Method: Lecture
Description: Lecturer will rely on power point presentation to introduce the learning outcomes of each topic, proceed with a detailed analysis of the topic (theory and empirical applications) and engage with students in terms of questions and answers.
Scheduled Directed Student Hours: 36
Attendance Recorded: Yes
Notes: There will be three hours of lectures per week.

Self-Directed Learning Hours: 114
Description: Students are expected to go through (a) the teaching material and exercises provided by the power point slides and (b) the relevant reading list

Costs Information:
There are no additional costs for students.

There are the following non-modular requirements:
ACFI204 or ACFI213

This module is a pre-requisite for the following modules:
ACFI341

Skills/Other Attributes Mapping

Skills / attributes: Problem solving skills
How this is developed: Start with the problem in hand and us e mathematical models to provide an empirical answer. Lecture examples and exercises will address this.
Mode of assessment (if applicable): Examination

Skills / attributes: Numeracy
How this is developed: Use mathematical models to provide an empirical answer to the problem in hand. Lecture examples and exercises will address this.
Mode of assessment (if applicable): Examination

Skills / attributes: Commercial awareness
How this is developed: Rely on the empirical answer of a given problem to explain what this means for a particular firm in today's complex and rapidly changing financial environment. Detailed discussion of lecture examples will help students achieve commercial awareness.
Mode of assessment (if applicable): Examination

Skills / attributes: Communication skills
How this is developed: Through detailed interpretation of empirical results. Lecture examples will address this.
Mode of assessment (if applicable): Examination

Bond and stock valuation. Term structure of interest rates. Credit rating agencies. Empirical models of credit ratings. What credit rating models imply for a possible BREXIT;

Capital budgeting and risk. Market efficiency;

Capital structure of firms;

Dividend policy: theory and empirical evidence;

Portfolio risk and return. Asset pricing (CAPM and APT);

Option pricing theory and applications in corporate finance;

Value at Risk;

Leasing, mergers and acquisitions;

Firm valuation from A to Z: A detailed example using option pricing;

Revision.

All lecture notes will be available in VITAL. Students are expected to read all lecture notes and go through the reading list. Reading of the journal papers (which are quite technical), although recommended, is only optional. All Topics (with the exception of Topic 1, Topic 2, Topic 3 and Topic 5) are new. The content of Topics 1, 2, 3, and 5 (which have been introduced in previous modules ) will be developed further.

Teaching will be conducted by a 3-hour weekly lecture. Students are expected to attend all lectures. The third hour of the lecture will be delivered by the tutor. The tutor will be using this third hour for delivering a number of exercises together with solutions to the students. Although students will be encouraged to ask questions during the first two hours of the lecture, it is expected that the third hour of the lecture will be much more interactive. To enhance interaction between the tutor and the students, students are expected to have tried the exercises in advance.