EMBA

Course Objectives

After the completion of this course, the graduates will be able to demonstrate adequate working knowledge of capital budgeting concept and analysis, and divided policy choices. The graduates will learn how corporate finance concepts, such as time value of money, cash flows, liquidity, cost of capital, and dividends, are used in the valuation process.

Course Details

Unit I: An Overview of Financial Management

Definition and importance of financial management, responsibility of financial manager, organization of financial functions and goals of the corporation agency problems of stockholders vs. managers and creditors, mechanism used to motivate managers to act in the interest of stockholders best interest.

Unit II: The Time Value of Money

Concept and calculation of present value and future value of a single sum of money, regular annuity and an annuity due, and present value of perpetuity calculation of future value and present value of a series of uneven cash flows; difference between the stated annual interest rate and the effective interest rate, calculation of effective rate given the stated annual interest rate and frequency of compounding.

Unit III: The Cost of Capital

Definition and calculation of component costs: cost of debt cost of preferred stock, cost of internal equity (three different methods) and cost of external equity, definition and calculation of weighted average cost of capital, marginal cost of capital and breaks marginal cost of capital.

Unit IV: Valuation of Securities

Valuation of fixed income securities: bond and preferred stock, yield to maturity and yield to call; common stock valuation using dividend discount model under constant and supernormal growth.

Unit V: Dividend Policy

Dividend payment procedure and impact on stock price , dividend payout schemes; stock dividends, stock splits, stock repurchase and their impact in stock and capital structure.

Unit VI: The Basics of Capital Budgeting

Definition, differences between accounting profit and cash flows, estimation of cash flows for expansion projects and replacements; evaluation of projects payback period, discounted payback period ,, net present value , and internal rate of return; comparison of projects with unequal lives of mutually exclusive projects.

References

Brigham, E. F., & Houston, J.F. (2004). Fundamentals of Financial Management (10^th ed.). Harcourt Asia: New Delhi.

VanHon, J.C. (2002). Financial Management and Policy. (12^th ed.). Pearson Education: New Delhi.