Complete Syllabus of Corporate Finance | FIN 688 | MBS 4th semester

Credits: 3

Lecture Hours: 48

Course Objectives:

The purpose of this course is to impart knowledge and analytical skills of corporate finance on raising funds most effectively by a corporate firm. At the completion of this course the students will have a clear understanding of the financial environment in which they undertake financial decisions, analyse the impact of leverage/capital structure on value of the firm and cost of capital, raise capital from the capital market by issuing securities, analyse the alternatives of corporate and distress restructuring.

Course Description:

This course provides the broad overview of sources of financing and discusses the theories of capital structure. Then it covers different aspects of short-term and long-term financing including the leasing and hybrid financing through equity-linked securities. Finally, it covers issues related to corporate and distress restructuring.

Course Details:

Unit 1: Corporate Finance and Financial Environment LH 3

Corporate financing decisions and efficient capital markets; Financial markets and corporation; Application of agency theory to financing decision; Ethics in financial decisions; Innovations in corporate finance.

Unit 2: Theory of Capital Structure LH 7

Introduction to capital structure theory – Assumptions and definitions; Net operating income

approach; Traditional approach; Modigliani-Miller position, taxes and capital structure, effect

of bankruptcy costs, other imperfections, incentive issues and agency costs; Financial

signalling.

Unit 3: Short-term Financing LH 7

Liability structure of a company; Trade credit financing; Accrual accounts as spontaneous

financing; Unsecured short-term loans; Secured sources of short-term financing: inventory

financing and receivable financing.

Unit 4: Lease Financing LH 7

Features and types of leases; Accounting and tax treatments of leases; Return to the lessor;

Analysis of lease versus buy/ borrow decision; Source of value in leasing.

Unit 5: Issuing Securities LH 7

Public offering of securities: IPO and FPO; Selling common stock through a rights issue, value

of each right, effect of rights offering on shareholders’ wealth; Financing a fledgling –

founders and angels, venture capital; Information effects.

Unit 6: Fixed-income Financing LH 5

Features of debt, types of debt financing; Preferred stock financing; Call features and

refunding, private placement.

Unit 7: Hybrid Financing through Equity-Linked Securities LH 8

Use of warrants, valuation of warrants; Convertible securities, valuation of convertible

securities, effect of bonds/debentures with warrant and convertible financing on balance sheet

and income statement; Exchangeable debt.

Unit 8: Corporate and Distress Restructuring LH 4

Divestitures in general; Voluntary liquidation and sell-offs; Spin-offs; Equity crave-outs;

Going private and leveraged buyouts; Leveraged recapitalizations; Distress restructuring;

Gaming with the rule of absolute priority.

Basic Readings:

1. Van Horne, J. C. & Dhamija S. (2012). Financial management and policy. New Delhi: Dorling Kindersley (India) Pvt. Ltd.

2. Brigham, E. F. & Ehrhardt, M. C. (2014). Financial management: Theory and practice. New

Delhi: Cengage Learning India.

References:

1. Rose, S. A., Westerfield, R. W., Jaffe, J. & Kakani, R. K. (2014). Corporate finance. New Delhi: McGraw-Hill Education (India) Pvt. Ltd.

2. Brealey, R., Myers, S. C., Allen, F. & Mohanty, P. (2014). Principles of corporate finance. New Delhi: McGraw-Hill Book Company.