CORPORATE FINANCE

Program

Updated A.Y. 2018-2019

Tor Vergata , Business Administration & Economics Corporate Finance , 2018-2019 , year 3

PROFESSOR Professor: Prof. Vittorio de Pedys Contact : vdepedys@escpeurope.eu , vdepedys@yahoo.it , de.pedys@economia.uniroma2.it Office : Room 3C-4, 3rd floor Building B

DESCRIPTION This course provides students with the essential concepts in finance, as well as operational decision-making tools. Financial managers’ issues will be covered and analyzed. The basic principles of corporate finance will be illustrated and discussed through lessons, lots of exercises, video tutorials and case discussions.

TEACHING APPROACH The course will be taught in highly practical manner. Students are required to bring their laptops as Excel will be extensively used . Basic proficiency with Excel will be required and achieved during the course. Most sessions will be require students to carry out quantitative exercises that crystallize the concepts illustrated.

OBJECTIVES Upon completing Corporate Finance, the student will: • understand the role and decisions of a financial manager, • be able to explain and apply the concept of NPV , DCF and IRR, in capital budgeting and selecting investments • be able to explain the concept of risk in financial markets applied to discount rates, • be able to explain and calculate company cash flow at various levels (Operational Cash Flow, Free Cash Flow, Change in Cash) using company financial statements (Profit & Loss and Balance Sheets), • be able to illustrate the main themes regarding financing to companies and understand the Debt/Equity structure, • be able to evaluate simple and complex investments with the instruments of financial theory. • Be able to evaluate the enterprise and equity value of a company.

CONTENT

1. Introduction to main concepts of finance • The function of finance • Firm and Financial statements and reports • The role of Financial Manager • The most important concepts in Finance

2. constructing cash flows • Importance of cash flows • Learning to build a cash flow in steps • Cash flows and firm evaluation

3. Value of money in time • Compounding and discounting • Present value and net present value • Perpetuities, annuities

4.Investments decisions • Methods: payback, IRR, profitability, EVA • confronting different decision methods : advantages and pitfalls • Financial analysis and planning

5.International Capital markets • what they are, how they work • different market segments and instruments traded • derivatives and structured finance overview

6. Bonds and debt capital • Difference with equity • Bond mathematics • Interest rate risk : duration • Other borrowing risks • Fixed income capital markets: New bonds issue

7. equity capital • Definition of equity capital • Share evaluation methods • Equity capital markets and IPOs

8. Capital Budgeting • a real case of a multinational corporation : FIAT Group • investment decisions to be made by students

9. Cost of capital • Capm model • WACC

10. Firm’s capital structure • Equity and debt financing • Optimal capital structure

11. Risk and return • Measure of return • Variance, standard deviation, correlation

12. Portfolio theory • Effects of diversification • Efficient frontier • Measures of portfolio risk

13. Firm evaluation DCF method: terminal value Multiples method

TEACHING MATERIAL Exercises, readings, pre-readings, video tutorials, slides provided by the Intructor and found on the course website for enrolled students.

EXAM The exam will be in written form , composed of open-ended conceptua questions and numerical exercises

RECOMMENDED TEXTBOOK

Brealey, Myers, Allen : “Corporate Finance” , 2006 , 8th ed. McGraw Hill 

Berk, DeMarzo : “Corporate Finance”, 2014, 3rd ed, Pearson