25844 Managerial Corporate Finance

Subject level: Postgraduate

Handbook description

This subject introduces and exposes students to corporate financial management by initially considering an economy with no risks and no market imperfections, and then relaxing these assumptions to consider a more realistic economic environment. Topics covered include capital budgeting, cost of capital, capital structure and valuation, dividend policy, mergers and acquisitions and private equity. Particular attention is paid to different tax environments and agency relationships within the firm.

Subject objectives/outcomes

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

1. Understand how the cost of capital is defined and measured.
2. Understand why options are important in project appraisal.
3. Determine how a firm can add value through its capital structure choices by considering dividend policy, tax, financial distress and agency effects.
4. Determine the winners and losers from takeovers and other acquisition strategies.

Contribution to graduate profile

This subject provides students with an intensive examination of corporate financial theory and policy by considering issues such as the essential nature of risk and uncertainty, capital budgeting, financial structure, cost of capital and dividend policy. Students will be exposed to several asset pricing models that incorporate risk and their implications for these financial decisions. The behavioural assumptions embedded in these asset-pricing models will be relaxed and the implications of the resulting agency relationships for corporate financial practice will be examined. Critical issues of financial leverage, choice of capital structure, and valuation of the firm are examined as a part of the overall corporate strategy of the firm. As presented in the textbooks, we take a prescriptive and descriptive perspective in learning the subject material. Real asset valuation methodology permits corporations to create value for their shareholders by generating arbitrage opportunities between the markets for real assets and financial assets.

Teaching and learning strategies

The subject uses lectures, workshop discussion, exercises and case studies to allow participants to build their understanding of the important financial decisions required of firm management. These methods will be supplemented with both printed and electronic learning materials and resources. The UTS web-based communication tool (UTSOnline) will be used to share information and encourage interaction between staff and students. A prescriptive and descriptive perspective in learning the subject material will be taken.

Content

• Review of capital budgeting and capital market theory
• Asset-pricing models and risk
• Cost of capital, risk analysis and real options
• Efficient Market Hypothesis and financing decisions
• Dividend policy and the Australian imputation system
• Capital structure theory
• Corporate governance
• Valuation and capital budgeting in a leveraged firm
• The market for corporate control with a focus on mergers and acquisitions, leveraged buyouts, initial public offerings and private equity

Assessment

Assessment item 1: Mid-Semester Exam (Individual)

Assessment item 2: Case Study (Individual)

Assessment item 3: Exam (Individual)