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EMBA Program in Mexico City FINANCIAL MANAGEMENT: Spring 2011

Professor: Dr. Ramesh K. S. Rao Voice Mail: 512-475-8756 Fax: 512-471-5073 E-Mail: Professor: Prof. James (Jim) Nolen Voice Mail: 512-471-5798 Fax: 512-471-5073 E-Mail: Teaching Assistants: John Walker (Mexico City) Email : Email 2 : Mobile : 04455-16962736 Mudit Naugraiya (Austin) Email: Mobile: 716-725-3661

Course Objectives
to introduce the concepts and theories of modern financial management, to develop an appreciation for the usefulness of these theories for financial decision-making, to develop the student's financial decision-making skills, to provide an overview of current financial management theories and practices. Text Required: Corporate Finance by Ross, Westerfield and Jaffe, 9th ed., McGraw-Hill Irwin Supplemental: Financial Management, Concepts and Applications, 3rd ed., 1995, Ramesh K.S. Rao, SouthWestern Publishing Co., Cincinnati, a division of International Thompson. The required chapters will be made available to you (Blackboard and the readings package). Course Structure and Grading The course consists of lectures, five homework assignments (not graded), class case discussions, a team-based take-home case final, and four in-class exams. Lectures: The lectures are designed to provide an understanding of the major elements of finance. The emphasis is on the logic underlying each concept, on how each concept is used in finance, and on how the concepts are interrelated. The lectures are not note taking drills; rather, they are

dynamic sessions in which information is presented by the instructor via visual aids and through direct interaction with the class. Homework Assignments: Five Problem Sets are posted on Blackboard for problem-solving practice. These will not be graded. These assignments contain problems in addition to those in the RWJ text and Rao Chapters. It is important that you work through these on your own and compare your answers with the solutions. Solutions to these problems are also posted on Blackboard. Those needing additional problem-solving practice should attempt more RWJ problems. Solutions to these are posted separately on Blackboard. Case Discussions: No written analysis will be required to be turned in but you should have prepped the case before class and be prepared to discuss your analysis of the case. Instructors may cold call students to give their analysis of the case. You may work with your study group in preparing the case analysis. Exams (400 points): There are four exams worth 100 points each. Starting with Session 2, the first 45-minutes of each finance session will be an in-class exam covering the material from previous session(s). Details will be provided in class. Final Exam Case Analysis (100 Points): A team-based written analysis of the take-home case is required. The case will be assigned on March 26th and the written analysis is due May 6th at 5 PM (17:00). Your case analysis should not exceed 10 pages (double spacing) including spreadsheet exhibits. You will be graded on the accuracy and completeness of your analysis. Study questions are attached to the case.

Session 1: Nolen (January 9)

Topics: Financial Statement Analysis, Dividend Policy, Working Capital Management, Asset Forecasting and External Funds Requirements Readings (Required): Financial Statement Analysis RWJ Chapter 2: Financial Statements and Cash Flow RWJ Chapter 3: Financial Statement Analysis and Financial Models Working Capital Management and Asset Planning RWJ Chapter 26: Short-Term Finance and Planning Dividend Policy RWJ Chapter 19: Dividends and Other Payouts Blackboard PP Decks: Financial Statement Analysis.ppt Working Capital.ppt Asset Forecasting.ppt Dividend Policy.ppt

You should now be able to do Problem Set I (it contains questions from Chapters 2, 3, 26, and 19).

Session 2: Rao (January 28 and 29)

In-Class Exam: The first 45-minutes of session 2 will be the administration of an in-class exam covering topics presented in previous session. Topics: Review of Time Value and Wyoming Gas from Austin Intensive Sessions Readings: (Required) RWJ Chapter 4: Discounted Cash Flow Valuation RWJ Chapter 8: Interest Rates and Bond Valuation RWJ Chapter 9: Stock Valuation RWJ Chapter 5: Net Present Value and Other Investment Rules RWJ Chapter 6: Making Capital Investment Decisions You should now be able to do Problem Set II.

Session 3: Rao (February 25 and 26)

In-Class Exam: The first 45-minutes of session 3 will be the administration of an in-class exam covering topics presented in session 2. Topics: More on NPV, Valuation, Risk and Return, Introduction to Capital Markets, Financing and Market Efficiency Readings: (Required) RWJ Chapter 7: Risk Analysis, Real Options and Capital Budgeting Applied Research Technologies (Blackboard) RWJ Chapter 10: Risk and Return: Lessons form Market History RWJ Chapter 11: Return and Risk: The Capital-Asset-Pricing Model (CAPM) RWJ Chapter 14: Efficient Capital Markets and Behavior Challenges (I will summarize key issues on this topic) RWJ Chapter 20: Issuing Securities to the Public You should now be able to do Problem Set III.

Session 4: Rao (March 25 and 26)

In-Class Exam: The first 45-minutes of session 4 will be the administration of an in-class exam covering topics presented in previous session(s). Topics: More on Risk and Capital Budgeting, Debt and Equity, financial distress resolution. Readings (Required): RWJ Chapter 15: Long-Term Financing: An Introduction RWJ Chapters 16, 17: Capital Structure Basics Rao Chapter 16: Resolving Financial Distress Rao Chapter 11: Managing Total Risk with Derivative Securities You should now be able to do Problem Sets IV. You should read RWJ Chapters 13 and 18 (covered next session) and begin working with your study team on the final case analysis that is due via e-mail to Professor Nolen no later than May 6th at 5:00 p.m. The case, entitled Flash Memory, Inc. is a capital budgeting decision and the case, study questions and an excel template have been provided on Blackboard for your use. The case analysis is limited to 10 pages including spreadsheet exhibits.

Session 5: Nolen (April 22 and 23)

In-Class Exam: The first 45-minutes of session 5 will be the administration of an in-class exam covering topics presented in session 4. Topics: Business Valuation, Cost of Capital, & Mergers and Acquisitions Readings (Required): RWJ Chapter 13: Risk, Cost of Capital, and Capital Budgeting RWJ Chapter 18: Valuation and Capital Budgeting for the Levered Firm Readings (Optional): RWJ Chapter 29: Mergers & Acquisitions Blackboard PP Decks: Risk_Cost_of_Cap_Cap_Bud_Ch 13 Ch 18 Valuation_and_Cap_Bud Valuation 2008.ppt M&A Chap 29 You should now be able to do Problem Set V (it contains questions from RWJ Chapters 13, 18 and 29)

Final Case Due (May 6th at 17:00) Team-based case analysis. Flash Memory, Inc. Maximum of 10 pages including spreadsheet exhibits. Use a 12-point font and double line spacing in text analysis. You will e-mail your teams analysis to Professor Nolen at no later than May 6th at 5:00 PM (17:00).