Financial Management
Full Time// 2nd Semester, Course Code: ΜΕΧΡΗ337
Part Time // 2nd Semester, Course Code: ΜΕΧΡΗ-Μ337
Credits: 6
Learning Outcomes
This course focuses primarily on the analysis of the investment and financing decisions of business firms. These decisions relate to firm performance and value as well as the risk and return of these investments. The stated objective of business firms is the maximization of firm value and consequently investment evaluation is performed under this premise. Therefore, this course also analyzes project risk and firm investment strategy.
The financing and dividend policies also affect firm value and performance and are scrutinized accordingly. Students learn how to estimate the firm cost of capital and how to locate the optimal capital structure that minimizes the cost of capital, maximizing firm value. The cash pay-out to stockholders is also related to firm value and is also analyzed so that the proper pay-out mix is decided. Finally, students will be taught the workings of the capital markets where firms draw additional funding for their investments and growth. The efficiency of the capital market under different information dissemination assumptions is also examined. Students will learn how to value a leveraged firm, consisted with financial theory and practice.
Upon successful completion of the course, the students will be able to
- Analyze and evaluate firm investment project using alternative methodologies, (usage of Excel).
- Analyze and evaluate stocks and bonds traded in the capital markets using alternative methodologies, (usage of Excel).
- Understand covenants associated with bank loans to business firms as well as bond issues by business firms.
- Compute optimal capital structure for different firms in different industries and assess whether a firm is over or under leveraged, (usage of Excel).
- To understand the important parameters of the financing and pay-out decisions.
- To interpret information emanating from firms’ investment, financing, and payout decisions.
- To evaluate IPO and SEO decisions and pricing
General Competences
- Search for, analysis and synthesis of data and information by the use of appropriate technologies.
- Analysis of capital market conditions and adaption to new information situations.
- Decision-making.
- Individual/Independent work.
- Group/Teamwork.
- Project planning and management
- Analyst and consultant abilities.
- Critical thinking.
Course Content
The following sections will be presented:
- Introduction to corporate finance: The role of financial managers, their main objective and key decisions. Types of business firms. The importance of firm cash flows
- Firms strategies and objectives in an asymmetric information environment: Maximizing the value of the firm, Conflicts of interest, The agency problem, The role of the capital markets, of the institutional setting and the government
- Time value of money: The calculation of the present and future values of cash flows
- Investment valuation: The Net present value and internal rate of returns approaches as other alternative evaluation criteria. Investment risk analysis such as sensitivity, scenario and Monte Carlo analysis
- Bond and Stock valuation: Bond Yield to maturity and realized return. The relationship of bond price and yield. Valuing stocks with the dividend discount model the free cash flow discounting method and pricing with the use of multiples
- Capital Structure: Theories of optimal capital structure. The cost of financial distress. Finding the optimal capital structure. The weighted average cost of capital.
- Dividend policy: Theories of optimal pay-out policy. The decision to repurchase stock or pay cash dividends.
- Raising capital: IPOs SEOs and rights issues
Student Performance Evaluation
I. Written exam (50%) that includes:
- Questions on theory.
- Problem solving.
II. Individual students’ work in the form of: a) a Project (30%) that includes the estimation of the optimal capital structure with market data via the use of Excel or another case study related with one of the sections taught in the course and b) Coursework (20%) that includes problem solving subject to the material taught in class.
This is a 3-hour written exam. The individual evaluation grades are explicitly written next to each question.
Bibliography
Suggested Bibliography
- Ross, S., Westerfield, R., Jaffe, J., Χρηματοοικονομική των Επιχειρήσεων, Broken Hill 2016 [RWJ]
- Brealey, R., Myers, S., Allen, F., Αρχές Χρηματοοικονομικής των Επιχειρήσεων, Utopia 2013 [BMA]
- Damodaran, A., Εφαρμοσμένη Χρηματοοικονομική για Επιχειρήσεις, Broken Hill 2013 [D]
Related Academic Journals
- Journal of Economic Perspectives
- Journal of Corporate Finance
Master of Science (M.Sc.) in
«Banking and Finance»
Specialization in
«Banking and Financial Management»