UNIVERSITY OF EMBU

COURSE OUTLINE

SECTION A: TITLE OF THE COURSE

BFI 325- Corporate Finance

Lecture Hours: 35
Lecturer –Susan Kambura Mbuba Tel No. 0724-414581
Preriquisite :BFI 112 Fundamentals of Financial management

SECTION B: COURSE PURPOSE

The course is designed to give students a deep understanding of the corporate financial
management of both publicly held and private corporations and provided opportunities to apply
these concepts to contemporary business situations.

SECTION C: LEARNING OUTCOMES

By the end of the course, the learner should be able to:
1. Explain the goals of the firm and the role of the finance manager.
2. Describe the four main financial decisions that a finance manager makes in a firm.
3. Discuss the methods of dealing with risks in capital budgeting.
4. Analyze the implications of the capital structure decisions on the value of the firm.
5. Evaluate the implications of the dividend policy decisions on the market value of the firm
and cost of capital.

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SECTION D: COURSE CONTENT
Overview of business finance and the role of the financial manager. Capital investment
decisions: Measurement of relevant cash flows for capital budgeting, Cost of capital and capital
budgeting, capital budgeting under certainty, consideration of risk in the capital budgeting
process. Financing decisions: Operating and financial leverage, weighted average cost of capital,
Marginal cost of capital, firm value and capital structure; capital structure theories, Methods
used to set the capital structure and factors influencing the capital structure decisions of
corporations. Working capital management: The structure of assets and liabilities, Choices
concerning current and fixed assets, Short and long term liabilities, Cash budget, Short term
financial plan. Dividend policy decisions: Definition of dividend policy, Stability of dividend,
dividend theories, Factors for and against the distribution of dividends, forms of dividends.

SECTION E: COURSE SCHEDULE `

Week Topics Content Time
(Hours)

1  Overview of Financial Management 3

Introduction to financial
management
 Functions of Financial Management
 Objectives of the Firm
 Agency Problem
 Sources of finances

2 Cost of capital  Cost of equity 3

3 Cost of capital
4 Capital Budgeting
under certainty
 Cost of debt capital
 Cost of preference shares capital
 Overall Cost of Capital ( weighted 3
Average cost of Capital )
 Marginal Cost of Capital
 Time value of money 3
 Discounting and compounding
 Simple v’s compound interest
 Measurement of relevant cash flows
for capital budgeting

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 Week Topics Content Time
(Hours)

 Computation of discount rates

 Investment appraisal using various
Evaluation methods

5 Capital Budgeting  Investment under risk and uncertainty

techniques under
uncertainty
6 Capital Budgeting
techniques under
uncertainty
 Risk and returns analysis.
 Capital rationing 3
Effect of inflation and taxation on
investment appraisal. (CAT 1)
 Capital rationing 3
 Effect of inflation and taxation on
investment appraisal.

7  The nature, elements, importance of 3

Working working capital.
Capital Management  Determinants of working capital.
 Financing working capital
 Management of inventories

8  Management of accounts receivable 3

Working and accounts payables
Capital Management  Management of cash (Cash budget
and short term financial plans.

9 Financing decisions  Operating and financial leverage, 3

 firm value and capital structure;
 capital structure theories,
 Methods used to set the capital
structure
 Factors influencing the capital
structure decisions of corporations.
(CAT 2)

10 Dividend policy  Definition of dividend policy 3

decisions  Stability of dividend,
 dividend theories

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 Week Topics Content Time
(Hours)

11  Factors for and against the 3

Dividend distribution of dividends,
policy  forms of dividends.
decisions

SECTION F: TEACHING METHODOLOGY

In order to attain the learning objectives stated above the following learning and teaching
methods will be used: Blended learning (online and face to face Lectures), group discussions
and group work.

SECTION G : INSTRUCTIONAL MATERIALS

These will include: Tablet, Smart board, LCD projector & Computers, Flipcharts, URL Links
SECTION H: COURSE EVALUATION
Cats and assignments 30%
Examination 70%
Total 100%

SECTION I: COURSE TEXTBOOKS

Core Reading Materials for the Course

1. David, H., Stephen, R., Randolph, W., Jeffrey, J. & Bradford, J. (2013).
Corporate  Finance. McGraw-Hill Education: New York.
2. Eugene. B. F., Michael, E. C. & Roland, F. (2016). Financial Management Theory and
Practice. Cengage Learning.
3. Pandey, I.M. (2014): Financial Management. (10th Edn) New Delhi: Vikas publishing
house PVT Ltd.
Recommended Reference Materials
1. Eugene. B. F., & Michael, E. C. (2013). Financial management. (10th edn). Thomson
learning Inc: Australia.
2. Pettit, J. (2007). Strategic Corporate Finance - Applications in Valuation and Capital
Structure. Hoboken, New Jersey: John Wiley & Sons, Inc.
3. Brealey, R. A., Myers, S. C., & Allen, F. (2006). Corporate finance (Vol. 8).
McGraw-Hill/Irwin.

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 4. Ross, S.A., Westerfield, R.W. & Jaffe, J. (2007). Fundamentals of Corporate Finance.
(6th Edn). Canadian:McGraw‐Hill Ryerson Limited.

Journals
Journal of Finance
Journal of Accounting and Finance
Journal of Banking and Finance
Journal of Investment and Portfolio Management.
Journal of Finance & Economics

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