Corporate Finance
Code
2253
Teacher in charge
Cláudia Custódio
Teaching language
Objectives
This course covers variety of topics in finance, with the focus on optimal corporate financial decisions. This course is roughly divided in two parts. The first part, valuation, focuses on how to create value of the left hand side of the balance sheet, i.e. explains how companies should select the assets they want to invest in. For instance, attention will be paid to how firms should account for different levels of risks in real investments and how the discount rates used to value future cash-flows should reflect those risks. In more detail, we will cover an introduction to present value techniques; basics of financial statements and cash flow calculation; alternative investment rules, project evaluation and real options. The second part is called financing and investigates how companies finance their activities best.
The aim is to understand what factors determine the optimal capital structure and how the interplay of those factors can affect financing decisions in a way that creates value on the right hand side of the balance sheet. For instance, we will explain that there can be a trade-off when selecting a debt/equity ratio between on the one hand exploiting the tax shields created by debt finance and, on the other hand, the need to minimize the bankruptcy risk associated with leverage. In more detail, we will study the financing decision in project valuation using the weighted-average cost of capital and the adjusted present value methods; capital structure; bankruptcy and financial distress; and firm s payout policy.
Prerequisites
Subject matter
Bibliography
Teaching method
Classes have mainly a practical content. Main concepts will be presented in a more formal/lecture style but also covered through small cases and short problem sets. Case studies are used to integrate the different topics covered.
Evaluation method
-Final Exam: 60%
-Mid-term: 20%
-Problem-sets: 20%