SBM-NMIMS: COURSE TEACHING PLAN

Assurance of Learning AOL Specific

Course Code

Course Title Corporate Finance

Mumbai Campus : Dr.Chandan Dasgupta, Dr. Sudhanshu Pani , Prof Tarun Kehair,
Dr. Sangeeta Wats, Dr. Mayank Joshipura, Dr. Nehal Joshipura, Dr. Durgesh Tinaikar,
Dr. Samveg Patel

Bengaluru Campus: Prof. Ravichandran V

Course
Instructor/s Hyderabad Campus : Dr Showkat Ahmad Busru, Dr. Avinash Jawade

Indore Campus: Dr. Aniruddha Duraphe

Navi Mumbai Campus: Dr. Bharath Supra, Dr. Veerma Puri

Credit Value 3
Programme &
FTMBA, Trimester III
Trimester
Pre-requisite Financial and Management Accounting, Financial Statement Analysis

CLO 1) To learn estimating operating cycle and working capital requirements,

evaluating trade-offs in working capital management decisions and
comparing financing alternatives. (PLO 3a)
CLO 2) To apply time value concepts and frameworks for valuation of bonds and
stocks (PLO 2c)
Learning
Objectives
CLO 3) To apply capital budgeting techniques, estimating relevant cash flows and
cost of capital, and analysing risks, to support firm’s long term
investment decisions. (PLO 3c)
CLO 4) To learn and apply the capital structure and dividend payout theories in
making financing and dividend decisions. (PLO 2c)

After completion of the course, students would be able to:

1. Evaluate the working capital requirements for firms with growing, seasonal or
cyclical cash flows; analyze credit policy decisions and assess alternative
sources of working capital financing.

2. Application of time value concepts for financial decision making

Learning
Outcomes 3. Estimation of cost of capital as an input for investment and financing decisions
and to evaluate capital budgeting proposals by identifying relevant cash flows
using a set of objective investment criteria.
4. Understand the various capital structure theories and determine which capital
structure is best suited for a firm and to assess the implications of dividend and
share repurchase policies for shareholders.

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 This course builds upon the concepts learnt in the basic finance courses learnt in
the first two terms to cover key corporate finance decisions. The course aims to
provide participants with tools to evaluate working capital management and
financing decisions. The course covers key concepts of present and future of cash
flows, yield curve and interest rate theories, valuation of stocks and bonds, capital
Course
asset pricing theory, as well as capital budgeting decisions. It covers theories and
Description
concepts related to capital structure, dividend and share repurchase decisions, and
the frameworks of corporate valuation using various valuation techniques.

Specific 1.5 AOL CLO CLO CLO CLO

assessment Credit Instruments 1 2 3 4
methods
Class participation 10 N.A.
Quiz I 10 Embedded
10
Questions
Evaluation
Quiz II 10 Embedded 10
Pattern
Questions
Mid-Term 30 Embedded 15 15
Questions
Final Exam 40 Embedded 20
20
questions
100 25 15 30 20
Topics / Sub -topics Chapter detail Details of pedagogy
Learning Outcome if / Article Reference / adopted for class
Sessions
provided session Case Studies engagement - Class
wise Exercises etc.
Module 1: Reading Chapter 1 (BM) Class Exercises and Case
Introduction to Introduction to Discussion
Corporate Finance Corporate Finance (Pg.
Working Capital: 1-15) LO: Analyzing the
Planning, company's performance,
Management & Reading: Chapter 29 forecast fund needs.
Financing Decisions (BM): Financial
1
Computing and Planning (Pg. 785-798)
interpreting operating
cycle of the firm and
estimating working Case: Amkit Inc.
capital requirement.

Case: Toy World Inc. Case Discussion and

Estimating seasonal Problem Solving
changes in working
capital requirements, LO: Analysing the pattern of
analyzing the current assets and cash flows
2
implications of in a seasonal company
seasonal versus level Using pro forma financial
production decision. forecasts to estimate fund
needs under alternate
production methods

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 Working capital Case: Nelson Nurseries, Case Discussion and
requirements in a UV8024-PDF-ENG Problem Solving
growing firm
LO: analyzing cash flow and
3
working capital management
challenges associated with
small, growing and
profitable firm
Working capital credit Case: Multitech Ltd. Case Discussion and
policy Problem Solving
Reading: Chapter 30
Evaluating trade-offs (BM): Working Capital LO: Impact of changes in
4 between sales Management (Pg.816- working capital credit policy
volume, credit period, 822)
cash discounts and
collections

Fund-based and non- Working capital Lecture and Class Exercises

fund based facilities financing
for domestic business, Caselets on Working LO:
export and import. capital financing Maximum Permissible Bank
Finance
Fund-based facilities: Cash
5
credit
Non-fund based facilities:
Letters of credit, Bank
guarantees
Working capital facilities for
export and import
Module 2: Time Reading: Ch 2 (BM) Class Exercises
Value of Money, How to Calculate Present LO:
Valuation of Bonds Values Application in personal and
& Stocks Problem set Intermediate corporate finance decisions
6
Time value of money Page 41-44, Problems - Loan amortization schedule
Present and future 12-13, 19-22, 29-36 - Retirement planning
value of single cash - Annuity business cash
flow and annuity flows
Interest rate theories Reading: Ch 3 (BM) Lecture
& Valuation of bonds Valuing Bonds LO:
Bond price – yield Page 47-78 Bond value theorems
relationship Problem set Intermediate - Yield curve
7 Page 73-76, Problems 3, - Interest rate risk & credit
5, 10, 13, 14, 16, 17. 29 risk
Class Exercises
- Estimating bond prices &
YTM
Valuation of stocks Reading Ch-4 (BM) The Class Exercises
Dividend discount Value of Common LO:
model, Two stage, Stocks Estimating stock value
8 Three stage model Discussion
Page 79 to 96, Relationship of stock value
Problem Set Page 102- with g, ROE, k & payout
105, Problems 4-6, 18
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 Module 3: Case: Nike Cost of Case Discussion and
Cost of capital Capital Problem Solving

Cost of Debt Reading Ch-9 Risk and LO:

Cost of equity Cost of Capital Pages Estimating the weighted
Weighted Average 231-241; Page 243-254,
average cost of capital of a
9 Cost of Capital for a Problem no. 11 to 14
company
firm
To identify and explain the
mistakes in WACC
estimation.

Case: Midland Energy Class Exercises

Divisional vs. firm Resources Inc: Cost of LO:
cost of capital capital Learn the significance and
10 Reading: computation of divisional
Leveraged Betas and the cost of capital of a firm
Cost of Equity

Module 4:
Capital Budgeting Caselets on Capital Case Discussion and
Decisions Budgeting Decisions Problem Solving

Capital investment Reading: Chapter 5 LO: Making capital

11 decisions: Investment (BM): Net Present Value investment using various
Criteria and Other Investment decision criteria.
NPV, IRR, Payback Criteria (Pg.109-126) Link between positive NPV
period, Accounting projects, and value added to
rate of return the shareholders.

Estimating relevant Case: Modern Pharma Case Discussion and analysis

cash flows
Reading: Chapter 6 LO: Estimating operating
Impact of tax shield, (BM): Making after tax cash flows
capex, working Investment Decisions including depreciation tax
capital, salvage value, with the Net Present shield
12 overheads Value Rule (Pg. 137- Estimating net cash flows
156) incorporating capex, net
working capital & salvage
value
Overhead cost allocation
Effect of product
cannibalization
Sustainability issues Liz Motor Corp: Capital Case discussion and
in Capital investment Budgeting for and ESG analysis:
decisions project
LO: Analyse the cost-
13 Product No: W32397- benefits associated with
PDF-ENG heavy capital investments
required toward new
technology for ESG projects
and discuss the financial
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 feasibility challenges
associated with such
investments.
Capital investment Case: Phuket Beach Case Discussion and
decisions for Hotel Problem Solving
mutually exclusive
projects LO: Identifying relevant
cash flows
14
Impact of various evaluation
criteria on the decision
making,
Sensitivity analysis &
Scenario analysis
Risk analysis and Mini Case: Southern Case Discussion and analysis
Real options in capital Airways
budgeting LO: learn to identify, analyse
15 and value real options
involved in capital
investment projects

Module 5: Reading: Chapter 17 Lecture and Class

Financing and (BM): Does Debt Policy Discussion
Dividend decisions Matter? (Pg. 453-470)
and comprehensive LO: Implications of
case analysis Reading: Chapter 18 alternative capital structure
Modigliani and (BM): How Much theories
Miller’s irrelevance Should a Corporation
16 theory Borrow? (Pg. 478-503)
Static trade-off: Tax
shield benefit versus
cost of financial
distress
Agency costs
Pecking order
hypothesis
Financing Choice: Mini Case: Divya Case discussion and
Planning Capital Electronics analysis:
Structure and
Leverage Analysis Reading: Note on LO: Analyzing Financing
Leverage (soft copy will choice using EBIT-EPS
17 be distributed) framework and quantifying
operating, financial and total
risk using degree of
operating, financial and
combined leverage.

Dividend decision and Reading: Chapter 16 Lecture and Class

payout policy (BM): Payout Policy Discussion
Cash dividends share (Pg. 425-437)
18 buyback, stock LO: Different forms of
dividends and splits payout
Impact of payout on firm
value
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 Dividend payout and
firm valuation:
Walter and Gorden
models, Traditional
approach, radical
approach
Comprehensive Green Zebra Grow Fast Case discussion and
Corporate Finance or Slow analysis:
Case- spread over two
sessions Product no: NA0619- LO: Analyze the growth
PDF-ENG related strategic dilemma
and build a financial
feasibility model using
learning from financial
19-20
statement analysis and
forecasting, evaluating
capital budgeting proposal,
cost of capital, financial
choices for entrepreneurial
ventures and introduction to
relative valuation approaches

Reading Text book

List and Brealey, R.A., Myers, S. C., Allen F., Mohanty, P. (2018). Principles of Corporate
References Finance. 12 th Edition. McGraw Hill Education India (BM)

Reference Book:
Chandra, Prasanna. (2019). Financial Management: Theory and Practice. 10th
Edition. McGraw Hill Education India (PC)

Case Problems in Finance / edited by W. Carl Kester, Richard S Ruback, Peter

Tufano. 12th Edition. (2005) McGraw Hill International Edition (KRT)

Anthony, R; Hawkins, D. F., and Merchant, K. (2013). Accounting- Text and

cases, McGraw Hill Education India, 13th edition, [AHM]

Note:

Quiz 1 and Quiz 2 will be conducted after fifth and fifteenth session respectively.

Mid-Term will be conducted after tenth session.

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Prepared by Faculty Team Area & Program chairpersons

Faculty Chair AOL Approved by Dean SBM

Approved by Associate Deans

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