C15.0007.03 Professor Crocker H. Liu
Financial Management
UC50 Tu/Thurs 9:30 - 10:45 am
(212) 998-0353 Office
(212) 995-4233 FAX
email: cliu@stern.nyu.edu
Spring 2002
9-10 Tisch Hall
Office Hours: Open Door Policy (Mo,Tu, Thu)
Website:www.stern.nyu.edu/~cliu

Texts:
Required

S. Ross, R. Westerfield, and B. Jordan (RWJ), 1999, Fundamentals of Corporate Finance (Alternate Edition), Irwin McGraw-Hill.

S. Benninga and O. Sarig (BS), 1997, Corporate Finance: A Valuation Approach, Irwin McGraw-Hill.

Recommended

S. Benninga (B), 1998, Financial Modeling, MIT Press. I highly recommend this book for those students who wish to master Excel.

Class Packets and Case Studies: Available at the NYU Main Bookstore located at 18 Washington Place.
Lecture Handouts Packet 2002 ( I've changed 35% of the contents from the previous year)
C. Liu (L), 1999, How to Use Excel for Financial Modeling Packet

Grading Policy: Late homework and late mini-cases are not accepted
Homework (Due on Tuesdays unless stated otherwise)
10%
Mini-Cases 
30%
Midterm Exam: 
30%
Final Exam:
30%

Mini-cases are due in class on the assigned date at the beginning of class. Students are not allowed to email their homework or cases to me (I've had several emailed projects in the past that have contained malicious viruses that eluded both my McAfee and Norton Anti-Virus software). The Case Projects are an individual effort.  Rationale: Employers frequently ask students to submit an example(s) of a project done solely by them which demonstrates their analytical ability, their proficiency at financial modeling, and their  effectiveness at written communication. My intent is to provide students with a portfolio of their own work which they can use in the job interview process e.g. submit it to potential employers along with their resumes and cover letters.

Grade Distribution: Grading is based on the class curve rather than the total number of points and adheres to the grading curve set by the Finance department. The professor has no control over this curve. This grade distribution is only an approximation
A (A, A-) 20%
B (B+, B, B-) 45%
C (C+, C, C-) 30%
D and F (What you receive if you cheat) 5%

Computers and Calculators: The tools of the trade.  Although not required, it is STRONGLY recommended that students own a computer (laptop or desktop).  At the peak times, the Stern computer labs are overcrowed. Students may experience a lost of their work in these labs due to computer viruses or hard drive failures.  Students should also own a business/financial calculator.  Please make sure that the calculator has net present value (NPV) and internal rate of return (IRR) functions.

What is Expected of Students:

WARNING: This is a labor intensive class. The philosophy that we use is to talk about it, read about it, and then JUST DO IT! No incompletes will be given.

COURSE SCHEDULE

Week
Date
Day
Topic
Assigned Readings/Assignment
1
1/22-1/24
Tu/Th
Capital Budgeting Net Present Value and Other Investment Criteria, Ch. 9 (RWJ)
How to Use Excel for Financial Modeling (L), pp. 8-47

Exercises (RWJ): Do on calculator AND Excel.
Ch. 9, #5,#9, #12,#14,#17,#22  pp. 274-277

2
1/29-1/31
Tu/Th
Capital Budgeting II Making Capital Investment Decisions, Ch. 10 (RWJ)

Exercises (RWJ): Do on calculator AND Excel.
Ch. 10, #2-#4, #18, #25, #27,#28 pp. 311-316

Mini-Case: Calculating Free Cash Flow to the Firm (FCFF)

4
2/05-2/07
Tu/Th
Capital Budgeting II (continued) Project Analysis and Evaluation, Ch. 11 (RWJ)

Exercises (RWJ): To be done on Excel.
Ch. 11, #5,#6,#20, #25-#26 pp. 345-349

5
2/12-2/14
Tu/Th
Long Term Financial Planning Financial Statements, Taxes, and Cash Flow, Ch.2 (RWJ)
Working with Financial Statements, Ch. 3 (RWJ)
Long Term Financial Planning and Growth, Ch.4 (RWJ)

Using Financial Reporting Information, Ch. 2 (BS)
Building Pro-Forma Financial Statements, Ch. 4 (BS)
Analyzing the Firm's Operations, Ch. 6 (BS)
J.M. Smucker: Projecting Financial Performance, Ch. 7 (BS)

How to Use Excel for Financial Modeling (L), pp. 80-134

Mini-Case: Forecasting Financial Statements
Exercises (BS): To be done in Excel
Ch. 4, #4.1 and #4.4 on page 132
Ch. 6, #6.5 pp. 198

6
2/19-2/21
Tu/Th
Stocks (Equity) Stock Valuation, Ch. 8 (RWJ)
Return, Risk, and the Security Market Line, Ch. 13 (RWJ)
How to Use Excel for Financial Modeling (L), pp. 55-70.

Exercises (RWJ): To be done on calculator AND Excel.
Ch. 8, #1,#8,#10,#11,#14,#15
Ch. 13, #14,#15,#27
Mini-case: Estimating beta and cost of equity

7
2/26
Tu
Stocks (Equity) (continued)
7
2/28
Th
Midterm Exam (Covers material up to and including Week 6) Bring calculator to class. PV tables will be given out. 
Test is closed book.
8
3/05-3/07
Tues
Bonds (Debt)  Interest Rates and Bond Valuation, Ch. 7 (RWJ)

Exercises (RWJ): To be done on calculator AND Excel.
Ch. 7, #3,#4,#5,#12,#16,#24,#28  pp. 214-216
Mini-case: Estimating cost of debt

9
3/11-3/15 Tu/Th Spring Recess
10
3/19-3/21
Tu/Th
Cost of Capital Cost of Capital, Ch. 14 (RWJ)

Exercises (RWJ): To be done on calculator AND Excel.
Ch. 14, #3, #5, #6, #9, #15, #20, #23  pp. 442-446

Mini-case: Valuation

10
3/26-3/28
Tu/Th
Raising Capital Raising Capital, Ch. 15 (RWJ)

Exercises (RWJ): To be done on calculator.
Ch. 15, #7, #10, #12 pp. 482-484

11
4/02-4/04
Tu/Th
Financial Leverage and Capital Structure Financial Leverage and Capital Structure, Ch. 16 (RWJ)

Exercises (RWJ): To be done on calculator AND Excel..
Ch. 16, #1, #4, #8, #14,#20 pp. 516-519

Mini-case: Optimal Capital Structure

12
4/09-4/11
Tu/Th
Capital Structure (continued)
13
4/16-4/18
Tu/Th
Dividend and Dividend Policy Dividend and Dividend Policy, Ch. 17 (RWJ)

Exercises (RWJ): To be done on calculator AND Excel..
Ch. 17, #1-#3, #6,#14, #17 pp. 549-552

14
4/23-4/30
Tu/Th
Options in Corporate Finance
15
5/02
Tu/Th
Short Term Finance/Cash Management Short Term Finance and Planning, Ch. 18 (RWJ)
Cash and Liquidity Management, Ch. 19 (RWJ)