M ASTER I N B USINESS A DMINISTRATION

C O U R S E S Y L L A B U S

FIRST YEAR – FIRST SEMESTER

Subject: Financial Management I

Course Code: FMI

Faculty : Profs. F.U. Bustos, Prof. H.G. Tan
Class: MBA 2007
Sessions: First Semester, 20 sessions

Course Description:

FMI is a required course for all first-year MBA students, not just the finance major. Thus, it will
cover a lot of topics in an introductory manner. The emphasis is breadth rather than depth. It is
assumed that a student interested in a career in finance will get the in-depth exposure in specific
areas of finance in the second year elective. It will begin with a general overview and then go into
some detail on basic financial concepts, financial tools and techniques, and financial instruments.

Objectives:

1. To introduce the students to the world of finance. Anyone involved in the management of a
business needs to have some minimal knowledge of business finance.

2. To introduce students to basic financial concepts such as the time value of money, risk and
return. How should the Enterprise finance its investments? Specifically, How should the
Enterprise structure and restructure its capital? And how should the Enterprise manage its
liabilities and cost of capital?
How should the enterprise distribute its wealth? Specifically, what should its dividend
policy be? And how should its executives, stockholders and employees be compensated?

Learning Methodologies and Approaches Used:

Case discussions will dominate the course methodology. While there will be assigned readings
for every major topic, these will not be specifically discussed in class. Students are strongly
advised to read these readings before going to the actual session as several surprise quizzes based
on the readings will be given. There will be a midterm and final examination that will include
both multiple choice objective type questions as well as a case.
Course Outline:

Module 1 Flow and Management of Funds

Session 1 Overview and introduction to the course

Read: Chapter 1, B & H
The Finance Man and His Functions
Case: The Evolving Finance Function

Session 2 Managing Current Assets

Read: Chapter 15, B & H
Case: Ski Equipment Inc., pp. 606 – 609, B & H

Session 3 Case: Office Mates

Session 4 Financing Current Assets

Read: Chapter 16, B & H
Case: Bats and Balls, Inc., pp. 640 – 641, B & H

Session 5 Case: Ohio Rubber Works, Inc.

Module 2 Enterprise Profitability and Sustainability

Session 6 Financial Planning and Forecasting

Read: Chapter 17, B & H
Case: New World Chemicals, Inc., pp. 680 – 681, B & H

Session 7 Case: The Body Shop International PLC: An Introduction to

Financial Modelling

Session 8 Sustainable Growth

Read: Managing Growth, Chapter 4, Higgins’ Analysis for Financial
Management
Case: Dell’s Working Capital

Module 3 Enterprise Monitoring and Evaluation System

Session 9 Financial Statement Analysis

Review: Chapter 2, B & H
Read: Chapter 3, B & H
Case: D’Leon, Inc. Part II, pp. 112 – 115, B & H

Session 10 Midterms

Module 4 Investment Strategy

Session 11 Capital Budgeting Process

Read: Chapter 10, B&H
Case: Allied Components Company, pp. 420 – 421, B & H
Session 12 Case: Investment Analysis and Lockheed Tri-star

Session 13 Cash Flow Estimation and Risk Analysis

Read: Chapter 11, B & H
Case: Allied Food Products, Inc., pp. 449 - 451

Sessions 14 Case: 21st Century Educational Profit, FM book

Reading: Other Topics in Capital Budgeting, Ch. 13, B&H

Session 15 Case: Arundel Partners: The Sequel Project

Read: Capital Projects as Real Options: An Introduction

Module 5 Divestment Strategy

Session 16 Case: Star Cablevision Group (A)

Reading: Harvesting, Chapter 16, Entrepreneurial Finance, Smith & Smith

Module 6 Financing Strategy and Policy

Session 17 Readings: The Finance Man & His Functions

Tactical Execution of Corporate Financial Policy
Case: Continental Carriers, Inc,

Session 18 Case: Campus Deli Inc., pp. 643-645, B&H

Reading: Capital Structure and Leverage, Chapter 14, B&H

Module 7 Distribution Strategy and Policy

Session 19 Lecture/Discussion: Distribution Strategy and Policy

Case: Southeastern Steel Company, pp. 688-689, B&H
Reading: Distributions to Shareholders: Dividends and Share Repurchases

Session 20 FINAL Exams

FIRST YEAR – SECOND SEMESTER

Subject: FINANCI AL MANAGEMENT II

Course Code: FM II
Faculty: Prof. E. B. Perez
Class: MBA 2007
Sessions: Second Semester: 20 sessions
Course Objective
The course objective is to develop the MBA student's familiarity and facility with corporate
finance, valuation, and investments. The focus will be on tools to use in decision-making.

Course Description
Financial Management is delivered from a corporate perspective of Finance.

Learning Methodology and Approaches Used

The course is primarily case-driven with various assignments, lectures, and discussions woven
into the class sessions.

Evaluation and Feedback System

Preliminary Test 10%

Midterm Exam 10%
Final Exam 20%
Individual Class Participation 30%
Group Presentation 30%
-------
100%

Basic Text
Corporate Finance, by Brealey, Myers, and Allen, 8th Edition (earlier editions are acceptable).
Additional readings are to be assigned if necessary.

Learning Teams

10 Learning Teams of no more than 4 each.

Class Activities

A group presentation every other session starting from session 2. Presentations no more than 40
minutes. There will be 3 examinations: Preliminary (10%), Midterm (10%) and Final (20%), of
3 hours each, extendible to 4 with open materials including web.

Course Outline:
Session # Topic / Cases / Readings

1 Lecture: Corporate Finance, Risk and Return

Reading: Chapters 7,8, and 27

2 Case: Procter & Gamble: Cost of capital

Reading: Chapters 2,4, and 7

Abstract:
To assess whether a company should enter the household products market, Procter and
Gamble's weighted-average cost of capital is Computed. Clorox's cost of capital is also
computed as a check on the P&G estimate. The case emphasizes the conceptual as well
 as mechanical aspects of computing cost of capital for a company with homogeneous
business risk and stable capital structure. A student lotus worksheet file is available on a
computer diskette for use with this case.

SUBJECTS: Finance; Cost of Capital; Valuation; Consumer Products; Financial

Management
SETTING: Washington, D.C.

3 Case: Pepsico Inc Cost of Capital

Reading: Chapters 2,4, and 7

Abstract:
A Wall Street Journal article is quoted as stating, "At PepsiCo, Inc., cola was king, but it
is quietly being dethroned." PepsiCo is composed of three lines of business: softdrinks,
restaurants, and snack foods. Using data from comparable pure-play companies, the
student is asked to compute divisional costs of capital and see if they can be reconcilled
with the company's reported cost of capital of 11 percent.

SUBJECTS: Finance; Cost of Capital; Soft drinks Industry; Fast Foods

4 Case: Pioneer-Petroleum Corporation

Reading: Chapters 2, 5, 6,7, and 9
Abstract:
Pioneer is an integrated oil company. Its operations include exploration and
development, production, transportation, and marketing. The case focuses on Pioneer's
cost of capital calculations and its choice between a single company-wide cost of capital
or divisional costs of capital. Provides students the opportunity to learn how to calculate
a company-wide weighted average cost of capital. An appropriate measure of the cost of
equity capital is presented so that students are able to challenge their understanding of
key concepts by critiquing the company's measure and suggesting their own.

SUBJECTS: Finance; Capital Budgeting; Capital Cost; Petroleum

SETTING: West Coast; Alaska

5 Case: E I Du Pont de Nemours and Co., (1983)

Reading: Chapters 17 and 18*

Abstract:
Reviews changes in Du Pont debt policy from 1965 to 1982. This period ended with a
dramatic increase in Du Pont's debt level attendant upon the merger with Conoco.
STudents are asked to develop a new debt policy for Du Pont in the 1980s.

SUBJECTS: Finance; Capital Structure; Chemicals; Consolidations and Mergers; Debt

Policy; Financing
SETTING: United States

6 Case: Case: MCI Capital Structure

Reading: Chapters 17, 18, and 19

7 Case: Carrefour S.A.

 Reading: Chapters 18, 29 and 30*

Abstract:
Involves a very rapidly growing retail chain that is financing itself in an unusual (and at
first glance) risky fashion.

SUBJECTS: Finance; Expansion; Food Retailing; Financing; Growth Management; Risk

Analysis; France
SETTING: France

8 Case: Massey Ferguson Ltd

Reading: Chapters 17, 18 and 19*

Abstract:
Massey-Ferguson began fiscal year 1981 in default on $2.5 billion of outstanding debt.
The company's future depends on the ability of lenders, the governments of Canada and
Ontario, and management, to agree on a refinancing _lan. The case reviews Massey's
performance and position in the industry and raises questions about the company's ability
to compete in the long run. Provides information on the firm's claimants in order to focus
students on the issues of a refinancing.

SUBJECTS: Finance; Accounting, Control and Managerial Economics; Control Systems;

Machinery and Equipment; Planning-Long-Range; Profit Planning; Farm Equipment;
Management Accounting; Planning Systems; Multinational

SETTING: Canada, United States

9 Case: The Home Depot, Inc

Reading: Chapters 13, 14 and 18*

Abstract:
This aggressive retailer is adding store space at the rate of 25 percent per year. The case
presents an external-financing requirement amounting to $1.4 billion over the next five
years. Students must decide how to meet this requirement wisely, acknowledging the
relationship between business strategy and financial policy. Analysis of the firm's share
price reveals a substantial overvaluation in the market. A student Lotus worksheet file is
available on a computer diskette for use with this case.

SUBJECTS: Accounting and Control; Financial Analysis; Financial Ratios; Retailing

SETTING: USA

10 Case: Intel Corporation 1992

Reading: Chapter 16*

Abstract:
Intel Corp., the world's dominant designer and manufacturer of microprocessors (the
"brains" of the personal computer), has accumulated a larage tranche of cash at an
unprecendented rate. Has the company grown up to the extent that it can begin
disbursing cash to its grown up to the extent that it can begin disbursing cash to its
shareholders? What kind of disbursement policy should it choose? Intel will continue to
face competition from imitators of its processors in the future, yet it is not clear whether
 its cash holdings can or will be a competitive weapon in this competitive battle. The case
focuses on financial policy issued and on how they then interact with a very unusual and
dynamic form of product-market competiion and innovation. Can be used as a one-or-
two day exploration of the following issued: complementarity externalities and costs of
finance, appropritability of returns of investments, the role of finance in high-tech and
rapidly innovating sectors, the strategic uses of cah, analysis of capital structure and cash
disbursement policies, the use of financial policy as a competitive weapon, and timing in
the sale and purchase of equity linked instruments.

SUBJECTS: Finance; Capital Structure; Computer Industry; Dividend Policy; Financial

Strategy; Semiconductors; Financial Policy and Strategy
SETTING: United States

11 Case: United Telecoms, Inc

Reading: Chapters 15, 16, 18 and 19*

Abstract:
In late 1990, this company faced a large external financing requirement and needed to
reassess its traditional approaches to financing. The tasks for the student are to
recommend financing tactics to be employed for the next two years and to make a
general assessment of the firm's historical financing policy. Student and instructor Lotus
worksheet files are available on computer diskettes for use with this case and teaching
note.

SUBJECTS: Finance; Financial Policy; Investment Banking; Security Analysis; Strategy

Implementation; Telecommunications; Financial policy and Strategy
SETTING: Kansas City, MO.

12 Case: Merit Marine Corporation

Reading: Chapters 15 and 27*

Abstract:
With the aid of the bank's capital markets division, the lending officer is faced with
restructuring a customer's balance sheet to extend the maturity and to fix a larger portion
of the firm's interest payments. The alternatives include an interest-rate swap and private
placements. The objective of the case is to illustrate the lending officer as merchant
banker. A student LOTUS worksheet file is available on a computer diskette for use with
this case.

SUBJECTS: Finance; Banking; Swaps; Commercial Lending; Financial Policy;

Investment Banking; Liability Management
COPY YR.: 1985
SETTING: Tampa, Florida
LENGTH: 17

13 Case: The Super Project

Reading: Chapters 2,3,5, 6

Abstract:
Describes the proper use of incremental analysis for capital investment decisions.
 SUBJECTS: Finance; Managerial Economics; Capital Investment; Cost Analysis;
Decision Analysis; Foods; Investment Analysis; Return on Investment; Financial
Management
SETTING: United States

14 Case: RETO S.A.

Reading: Chapters 9, 10, 11 and 12*

Abstract:
Includes twelve questions that add a new dimension to the question of whether a small
firm should acquire a piece of equipment and subsequently replace it with another.
Raises issues concerning time value of money, taxes, accelerated depreciation, working
capital, replacement equipment, timing of investment, inflation, and specific price
change. Based on Robinson Corporation (A) by R. F. Vancil.

SUBJECTS: Finance; Accounting, Control, and Managerial Economics; Capital

Budgeting; Inflation; Machinery & Equipment Relevant Cost; Capital Investment;
Investment Analysis; Present Value; Return on Investment

15 Case: Texas High-Speed Rail Corporation

Reading: Chapters 9, 10, 11, 12, and 22

Abstract:
The finance director of the Texas High Speed Rail Corp. (THSRC) is considering
modifications to the financing program designed to support the development,
construction and operations of THSRC's planned high-speed rail system. The current
plan achieves many objectives, including raising $6.5 billion from private sources, but a
few problems remain to be addressed. These include temporary overfunding, unutilized
tax losses, and certain important contingencies. Designed to highlight the shortcomings
of simple valuation tools in a static analysis when applied to a dynamic project. The
class discussion should isolate specific analytical issues, which may then be addressed in
a subsequent class sessions.

SUBJECTS: Financial Planning; Financial Planning; Financial Strategy; Financing-

Long-Term; Project Evaluation; Railroads; Transportation
SETTING: Texas, U.S.A.

16 Case: Interco
Reading: Chapters 6, 11, 19 and 32

Abstract:
Interco has been advised by Wasserstein Perella to reject a $70 per share offer for the
company. The case deals with the various types of analysis employed by Wasserstein
Perella and allows a discussion of the actions of Interco's board as well as Wasserstein
Perella.

SUBJECTS: Finance; Present Value; Valuation; Apparel Industry; Footwear Industry

17 Case: Philip-Morris Kraft

Reading: Chapters 19, 32 and 33
 Abstract:
Gives students the opportunity to explore the effect of substantial free cash flow on
corporate acquisition and operating strategies. Students are also given the opportunity to
extract information from the common stock prices of the participating firms. A variety
of valuation techniques are employed to assess the plausibility of a restructuring plan.

SUBJECTS: Finance, Acquisitions, Cash/Funds Flow, Foods, Restructuring, Tobacco,

Financial Management

18 Case: RJR Nabisco

Reading: Chapters 23,24, and 32

Abstract:
Gives students the opportunity to explore issues facing the board of directors in a
leveraged buyout. RJR Nabisco is valued under different operating strategies and the
source of gains in leveraged buyouts is stressed.

SUBJECTS: Finance; Foods; Leveraged Buyouts; Tobacco; Valuation; Financial

Management

19 Case: The Procter and Gamble Co. Mexico 1991

Reading: Chapters 23,24, 25, 27 and 28

20 Case: Dozier (A & B)

Reading: Chapters 27 and 28*

Abstract: This case deals with the origins of exchange rate risk and offers an introduction
to hedging techniques. The case emphasizes the relationship between interest rates and
exchange rates. Students are introduced to management of exchange risk in a
competitive-bidding situation.

SUBJECTS: Finance; International Finance; Valuation; Security Analysis; Marketing;

Investment Banking; Financial Management

Knowledge, Competencies, Skills, Values and Attitudes Sought

Module Knowledge Skills/Competencies Values & Attitudes

1 The core decisions in
finance
2 Financial rates and flows
3 The opportunity cost of
capital
4 Types of securities
5 The capital structure
6 The financial markets
7 Project finance
Classifying financial
relationships
Risk vs return analysis
Classifying financial
securities
Costing financial securities
Costing the corporate cost
of capital
data analysis in cost
the project estimation cost
of capital
Developing an overview of
finance
The basic value drivers
Viewing a corp.
Viewing financial security
The corp.: a collection of
projects
how financial markets work
Facility in costing corp.
capital
8 The corporate capital balance sheet analysis agency theory view of the
structure firm
9 Theories of capital trade-off analysis a corp. as a set of claims
structure
10 Sources of capital deriving financial rates understanding the firm-
capital link
11 Contingent claims estimating the long-run understanding capital
analysis structure structure
12 Efficient markets analyzing price changes lessons of market efficiency
13 Corporate financing security analysis patterns of corp financing
14 Issuance of securities costing financial securities how corporations issue
securities
15 The dividend controversy dividend analysis How companies decide on
dividends
16 Does debt policy matter? Leverage analysis how leverage affects returns
17 The overall distribution distribution analysis how much should a firm
decision retain?
18 NPV NPV analysis NPV is best
19 Incremental cash flow cash flow analysis what to discount
20 Risk beta analysis diversification and value
additivity
21 Capex and risk risk and dcf analysis the capm
22 Practical issues in Capex sensitivity analysis a project is not a black box
analysis
23 Organizing capex problems in capex and capex and performance of
solutions the corporation
24 Corporate valuation methods of valuation the valuation viewpoint
analysis
25 “ “ Subsidiary valuation
26 “ “ DCF valuation
27 “ “ Valuation is an IPO
28 “ “ Valuing a hostile bid
29 Financial distress Debt analysis Capital structure and
distress
30 Restructuring restructuring analysis contingent claims analysis
31 “ “ “
32 Stock markets capital market analysis foundations of the NPV rule
33 Project finance project analysis business and financial risk
34 Financing programs refinancing program refinancing and financial
analysis distress
35 operating cycles current asset-liability components of WCR
analysis
36 Cash Management “ tracing cash and wcr
37 WCR management “ Linkages between LT and
ST financial decisions
38 basic international rates international risk analysis the international framework
39 intl. invest. decisions intl. restructuring analysis Int’l capex analysis
40 financing intl. operations costing intl financing Borrowing decisions
analysis offshore
S UBJECT : FI NANCI AL MANAG E ME NT 3

Course Code: FM-3

Faculty : Professors. F. U. Bustos and H.G. Tan
Class: MBA 2007
Sessions: Second Semester 20 sessions
Course Objectives:
1. To review concepts taken up in Financial Management I and II so that even the non-finance
major students’ knowledge, skills and competencies in Finance will allow them to tackle the
demands of the second year MBA courses.

2. To hone the students’ analytical, critical, creative, integrative and systemic thinking skills.

3. To instill values and attitudes that would make students more cognizant of their business
social responsibility.

Course Description

The course covers all topics taken up in the first two finance courses of the first year
MBA program. The contents of each topic, where applicable will be based on the CFA Institute’s
Chartered Financial Analyst (CFA®) Level 1 examination.

Learning Methodologies and Approaches Used

1. The case method will dominate the course methodology.

2. There will be assigned readings for almost all classes. While these will not always be
specifically discussed in class, students are strongly advised to go over these readings
beforehand as several quizzes based on the readings will be given.
3. Students are expected to prepare a mini-WAC for each session in which a case is assigned.
A mini-WAC is a one-page write-up of the specific financial management issue embodied
in the case. This may or may not be graded for all sessions.
4. Each student will also be required to do a financial journal for a company of his choice. As
in Finance 1, the journal will be a practical application of the various concepts taken up in
class. Companies must be submitted to the professors as early as possible to avoid
duplication, First come, first served policy.
5. There will be a midterm and final examination that will include both multiple choice
objective type questions as well as a case.

Evaluation and Feedback Systems

The Student Performance will be graded based on the following criteria:

1. Class Participation 20 to 25%

2. Quizzes 10 to 15%
3. Mini-WACs 10 to 15%
4. Journals 10 to 15%
5. Midterm Exam 20 to 30%
6. Final Exams 30% (exemptions will be made)
 100%

Textbooks:
1. Fundamentals of Financial Management --- Brigham and Houston (B&H)
2. Corporate Finance --- Brealey, Myers and Allen (BMA)

Course Outline

Session # Cases, Readings and Exercises

Module 1 Financial Tools

1 Topic : Financial Statement Analysis

Case: General Motors Case (A)
Readings: Chapter 2&3, B & H

2 Topic : Financial Statement Analysis

Case: General Motors Cases (B) and (C)
Read: Chapter 29 (BMA)

3 Topic : Financial Planning and Forecasting

Case: Ceramic Structures Engineering, Inc.
Read: Chapter 17, B & H

4 Topic : Cash Budgetting and Financial Planning

Case: Gilrest Patio Furnishings, Inc. Parts I and II
Read: Chapter 31 (BMA)
Module 2 Working Capital Management

5 Topic : Credit Policy and A/R Management

Case: Englehardt Kitchens, Inc.
Read: Chapter 15, B & H
Chapter 30, BMA

6 Topic : Working Capital Policy

Case: Conover Container Corporation
Read: Chapter 16, B & H
Chapter 31, BMA

Module 3 Investment Strategy and Policy

7 Topic : Capital Budgeting Basics

Case: Simpson and Selph, Ltd.
Read: Chapter 10, B&H

8 Topic : Cash Flow Estimation and Risk Analysis

Case: Chapman Coal Corporation
Read: Chapter 11, B & H

9 Topic: Real Options

Case: Lotis Electronics, Inc.
 Readings: Chapter 12, B&H
Chapter 22, BMA

10 Midterm Exams

Module 4 Financing Strategy and Policy

11 Topic : Long-Term Financing Choices

Case: Colorado Business Instruments
Readings: Chapter 14, BMA
Chapter 20, B&H
12 Topic: Optimal Capital Structure
Case: Sanitary Solutions, Inc.
Readings: Chapter 13, B&H
Chapter 18, BMA
Module 5 Distribution Strategy and Policy

13 Topic: Dividend Policy

Case: Traner Furniture Company
Readings: Chapter 14, B&H
Chapter 16, BMA
14 Topic: Management Compensation
Case: Gerald Weiss’ Stock Options
Readings: Chapters 12 and 21, BMA

Module 6 Corporate Governance

15 Topic : Control, Governance and Financial Architecture

Case: Governance at Metallgesellschaft
Readings: Note on Corporate Governance Systems: The United States,
Japan & Germany
Chapter 34, BMA

16 Case: California PERS (A)

17 Case : Electricity Generating Authority of Thailand

Module 7 Valuation Concepts

18 Topic: Decision To Go Public

Case: Grafton Timber Company
Reading: Chapter 15, BMA
19 Topic: Privatization
Case: PNB (A)
Reading: Chapter 8, B&H
20 Final Exams
Knowledge, Competencies, Skills, Values and Attitudes Sought

Session Knowledge Skills & Competencies Values & Attitudes

1-2 Financial Statement How to analyze financial Value of financial statement
Analysis statements analysis as first step in financial
problems analysis
3-4 Financial Planning Use of AFN and % of sales Importance of financial planning in
and Forecasting method managing future growth of a firm.
5-6 Determine correct working Importance of correct working
Working Capital capital policy capital financing policy.
Management Different corporate strategies
require different working capital
policy
7-9 Capital Budgeting How to evaluate alternative Capital budgeting sometimes goes
Process investment opportunities beyond numbers in a real world
using various methods and setting
risk assumptions
10 Midterm Test-taking skills Integration Accuracy and analytical
Examination and evaluation exercise thoroughness
11 Review of FRICTO How to make long-term Appreciation of the pros and cons
and Morato Models financing choices of various financing options
12 Optimal Capital How to approximate the Appreciate that while leverage
Structure optimal capital structure creates value for the firm it also
increases risk. Thus, the greater the
risk the greater the reward and vice
versa.
13 . Dividend Policy How to determine the Appreciation of why firms adopt
appropriate dividend policy different dividend policies.
for different stockholders’
objectives.
14 Management How to reward executives Appreciation of why firms adopt
Compensation and value stock options. different management reward
systems.
15-17 Corporate Determining appropriate Value of corporate governance for
Governance and financial governance structure finance function.
Financial for firms from different parts
Architecture of the world.
18 Initial Public When and how a firm decides Importance of correct timing,
Offering (IPO) to go public. approach and valuation in an IPO.
Decision and How to value stock in an IPO.
Valuation
19 Privatization When and how a government Significance of privatization and the
corporation should be importance of a correct valuation
privatized. How to value a during the process.
government corporation in an
IPO.
20 Final Examination Test-taking skills Appreciation of the inter-
Integrative and evaluative relationship of the different areas of
exercise finance.