Business 3019

Corporate Finance
Lakehead University

Philippe Gregoire Office: RB 1011

Phone: 343-8320 Classes: M,W 4:00-5:30pm
Email: Philippe.Gregoire@lakeheadu.ca Room: RB 1023
Course website: http://foba2.lakeheadu.ca/gregoire/3019/
Backup website: http://www.geocities.com/lufinance/index3019.html

Prerequesite: Business 2039

Course Description:

This course will include study of the current literature in the field of corporate finance.
Emphasis is on empirical findings and the application of theory to practice. The analysis
of cases with the aid of computer-based applications software is a dominant feature of this
course.

Suggested Textbooks:

Ross, S.A., Westerfield, R.W., Jordan, B.D. and Roberts, G.S. (2002), Fundamentals of
Corporate Finance: Fourth Canadian Edition, McGraw-Hill Ryerson Limited, Toronto.

Ross, A.S., Westerfield, R.W., Jaffe, J.F. and Roberts, G.S. (2003) Corporate Finance:
Third Canadian Edition, McGraw-Hill Ryerson Limited, Toronto.

Davis, A.H.R. and Pinches, G.E. (2002). Canadian Financial Management, Addison
Wesley Longman, Toronto.

Ogden, J.P., Jen, F.C. and OConnor, P.F. (2002), Advanced Corporate Finance, Poli-
cies and Strategies, Prentice Hall, Upper Saddle River, New Jersey.

Methodology of the Course:

There is no required textbook for this course. The above textbooks will be used interchange-
ably throughout the semester, although most of the material will be taken from Corporate
Finance: Third Canadian Edition by Ross, Westerfield, Jaffe and Roberts. Copies of the
sections covered in class will be available at the library reserve.

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Student Evaluation:

Assignments: 10%
Report on the Cost of Capital: 15%
Presentation on the Cost of Capital: 10%
Presentation Critique: 5%
Case Studies (2): 30%
Final Exam: 30%

Assignments

A series of assignments will be given to you throughout the semester. These assignments will
provide a good idea of the questions that will be asked on the final exam. There is no limit
to group sizes for the assignments. That is, if you all collude and submit one assignment
for the whole class, I will accept it. A deadline will be specified for each of them and late
assignments wont be graded.

Estimating the Cost of Capital:

This work can be done in groups of (at most) four students. Each team will choose two pub-
licly traded companies and will estimate the cost of capital for each of them. The methodology
used for your calculations must be carefully explained and justified. Using these estimates,
you will have to tell whether each firm is under- or overvalued and to explain the differences
between the two firms. Different teams cannot choose the same company. A first draft of
this report has to be submitted no later than Friday, February 28. Reports should be
(approximately) 15-20 pages long (single spaced, 12 pt), including graphics, tables and ref-
erences (there wont be any penalty if you exceed 20 pages but you should be worried if you
cannot write at least 15 pages). Each team will also present its work to the rest of the class
and discuss another teams work. Discussant teams will be assigned randomly. Documents
from presenting teams must be available at least three days prior to each presentation.
This project is worth, overal, 30% of your final mark and is due the last day of classes.

Case Studies:

You will have to analyze two cases, most likely on the topics Long-Term Financing, Cap-
ital Structure Theory or Dividend Policy. These cases can be done in groups of (at most)
four. Groups need not be the same as for the cost of capital project. Each case is worth
15% of your final mark, comes with a specific deadline and late cases wont be graded.

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Final Exam

The last requirement for this course is an exam, worth 30% of your final mark. This will be
the only exam of the course.

Course Outline:

Estimating the Cost of Capital

Davis and Pinches, Chapter 6
Ogden, Jen and OConnor, Sections 9.6 and 9.7

The Principal-Agent Problem

Ogden, Jen and OConnor, Chapters 3 and 4

Private Equity and Venture Capital

Ogden, Jen and OConnor, Chapter 11

Capital Structure
Davis and Pinches, Chapters 12 and 13
Ross, Westerfield, Jaffe and Roberts, Chapters 15 and 16

Dividend Policy
Davis and Pinches, Chapter 14
Ross, Westerfield, Jaffe and Roberts, Chapter 18

Long-Term Financing: Equity

Davis and Pinches, Chapter 10
Ross, Westerfield, Jaffe and Roberts, Chapters 14 and 19

Long-Term Financing: Debt

Davis and Pinches, Chapter 11
Ross, Westerfield, Jaffe and Roberts, Chapters 14 and 20

Financial Planning and Short-Term Finance

Davis and Pinches, Chapter 21
Ross, Westerfield, Jaffe and Roberts, Chapter 27

Cash Management
Davis and Pinches, Chapter 22
Ross, Westerfield, Jaffe and Roberts, Chapter 28

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 Credit Management
Davis and Pinches, Chapter 23
Ross, Westerfield, Jaffe and Roberts, Chapter 29

Mergers and Acquisitions

Davis and Pinches, Chapter 16
Ross, Westerfield, Jaffe and Roberts, Chapter 30