25557 Corporate Finance: Theory and Practice

Subject level: Undergraduate

Handbook description

This subject consolidates and further develops the concepts of corporate finance introduced in the core business finance subject. This includes an examination of various analytical techniques used in capital budgeting decisions and capital structure decisions. Capital structure, estimation of the cost of capital and the dividend decisions are examined from an empirical and theoretical viewpoint. Other topics include the dividend decision and the relationship between financing decisions and the costs of capital.

Subject objectives/outcomes

On successful completion of this subject, students should be able to:

1. Understand the implications of financial theories for corporate finance policy
2. Apply quantitative techniques to evaluate risky investment alternatives, financing choices and working capital management policy
3. Analyse the implications of financial decisions on corporate strategy and the value of the firm.

Contribution to graduate profile

This course expands and develops the conceptual framework underpinning the firm's investment, financing and dividend decisions. It examines the applications of the theoretical models to resolving problems encountered in corporate finance.

Teaching and learning strategies

The course will be taught using a combination of lectures and tutorials. Both printed and electronic learning materials are available. In the lectures, theories underlying each topic are explained with their applications illustrated through applications to financial problems. The materials are reinforced through discussion of tutorial problems.

Content

• Financial decision making under conditions of uncertainty
• Net present value analysis, project evaluation and issues in valuation
• Risk analysis and appraisal of risky projects
• Capital structure policy and Modigliani and Miller's work
• Financing decisions, dividend policy and the cost of capital
• Working capital management
• International finance and multinational financial management.

Recommended text(s)

Brealey, R. and Myers, S. (2003) Principles of Corporate Finance, 7th ed. McGraw-Hill, New York.

Indicative references

Bishop, S., Faff, R., Oliver, B. and Twite, G. (2004) Principles of Corporate Finance, 5th ed. Pearson/Prentice-Hall, Australia.

Brealey, R., Myers, S., Partington. G. and Robinson, D. (2000) Principles of Corporate Finance, McGraw-Hill, Australia.