COURSE TITLE: CORPORATE FINANCE

Programme code Programme Term Delivery

Core
P001 PGDM 2

Short Title: CF

Full Title: Corporate Finance

Course No of
2GC12 Credits: 3 30
Code: Sessions

Reviewed By: Area Chair Approved By: Director / Associate Dean

Corporate finance is a core subject to understand the functioning of an

organization from the cash-flow perspective as against the recording
perspective. This course employs various concepts from time value of money
Course Overview:
and risk and return to make four major corporate finance decisions:
Investment Decision (Capital Budgeting), Working Capital Decision, Financing
Decision (Capital Structure decision) and Dividend Decision.

Course Outcomes: * Level ** Linkage

On successful completion of this course the learner will be able to: To PO

1 Define various long and short term sources of funds 1 1, 4

Understand the concept of Time Value of Money and Risk & Return in 1, 2, 6
2 2
Corporate Finance
3 Develop the cost of capital for given project/firm. 3 1, 2, 5, 6

Evaluate various capital budgeting tools and techniques while making 1, 2, 6, 8

4 5
investment decision.
Examine the concept of ‘leverage’ analysis of the firm and the rationale of 1, 2
5 4
capital structure theories, dividend decisions and working capital decision.

* Use Bloom's Taxonomy Verbs ** Use Bloom's Taxonomy Levels (1 to 6)

Course Content & Assessment
No. of
Module Module Contents
Sessions
Module 1: Scope of Corporate Finance-Nature of Corporate Finance- Goal of the
Overview Of Firm-Agency costs and Corporate Governance-Role of Corporate
Corporate Finance finance in the firm.
And Financial Overview of Financial Markets — Financial instruments-common 4
Markets stock, debt and convertibles. Introduction to financial markets and
Institutions-Stock Exchanges-Stock Indices- Sources of long term and
short-term finance.
Module 2: Time Value of Money- Basis of TVM, finding Future value, Present
Time value of Value, Future value of Annuity, Present value of Annuity, Periodicity
money and risk of compounding and discounting. 8
and return Introduction to Risk and Return, CAPM and SML and its application in
concepts corporate finance.
Module 3: Cost of capital — Cost of Debt- Cost of Redeemable and Irredeemable
Cost of capital Debentures- Cost of Equity-Cost of Preference Shares -Weighted
average cost of capital. Relevance of tax in computation of cost of 5
capital.

Module 4 : Capital Budgeting –DCF vs Non-DCF Techniques of Capital Budgeting,

Capital Budgeting Estimating
techniques Project Cash Flows, Risk Analysis of Project’s cash Flows: Scenario
(Investment analysis to assess the risk of the project.
Decision) Investment appraisal techniques — Pay back, Accounting rate of
return, Net present Value, Internal Rate of return, Modified Internal 6
Rate of Return, Capital Rationing and Profitability Index, Issues in
Capital budgeting: Projects with different lives – comparison of
projects using project replication and equivalent annuities; Excess
capacity – use of idle assets.

Module 5: Leverage analysis — operating lever age and Financial Leverage,

Capital structure Combined Leverage, Break-even point, EBIT-EPS analysis.
Theories(Financing Capital structure theories – Relevance and Irrelevance Theories-
5
Decision) Impact of inclusion of Debt on the Firm Value (Tax Advantage vs
Financial Distress and Agency cost).

Module 6: Dividend Policy — Dividend policy in Practice, Dividend Valuation

Dividend analysis Theories, Stock buyback, Bonus Issue, Stock Split.
& Working Capital Gross Working Capital, Net working Capital, Credit Policy. 2
Decision (Dividend
Decision)
 Assessment Breakdown Marks

Continuous Assessment 40

Term End Written Examination 60

Continuous assessment Break-up: (Minimum One Assignment Per Credit)

Indicative – to be completed by the faculty member at the time of developing the Session plan
Course
Out of
Outcome
Type Description 40 Module Coverage
Addressed
Marks
(SL. No)
Assignment
Test
Project
* At least 2 types of continuous assessments should be used 2 credit and at least 3 types for 3 credit course.

Resources

Required Book Resources

1. Ross, Westerfield, Jaffe, Kakano. Corporate Finance. TMH, Latest edition.

Recommended Book Resources

2. Brealey R.A. and S.C.Myers. Principles of Corporate Finance. McGraw-Hill, Latest Edition.
3. Brigham and Herhardt, Financial Management Theory and Practice. Cengage Publications, Latest
Edition.
4. Aswath Damodaran. Corporate Finance Theory and Practice. John Wiley & Sons, Latest Edition.
5. James C Van Horne and John M Wachowicz. Fundamentals of Financial Management. Prentice Hall,
Latest Edition.
6. MY Khan and PK Jain. Basic Financial Management. Tata McGraw-Hill Publishing Company Limited:
New Delhi, Latest Edition.
7. Megginson and Smart. Introduction to Corporate Finance. Cengage, Latest Edition.