University of Scranton

The Arthur J. Kania School of Management

Economics/Finance Department

 

 

 

 

Course Number: FIN 470                                              Semester: Fall 2001

Course Title: Capital Investment and Structure           Office: Brennan Hall 310

Instructor:  Dr. John N. Kallianiotis                              Office Hours:Hours:  Monday: 5:00 - 6:30 P.M.

Tuesday: 11:00 A.M. - 2:30 P.M.

                       and 3:45 P.M. - 4:30 P.M.

            Thursday: 10:00 A.M. - 2:30 P.M.

                       and by appointment

Telephone:   941-7577

e-mail: jnk353@uofs.edu

 

Required Text:             Capital Budgeting and Long-Term Financing Decisions, Third Edition, by Neil Seitz and Mitch Ellison, The Dryden Press, 1999.

 

The Wall Street Journal  (subscription is suggested)

 

Description of Course: 

 

 

This course is an advanced study in the “permanent” financial aspects of the firm including Capital Budgeting Models, Optimal Replacement Processes, Abandonments Leasing, Risk Analysis, Cost of Capital, Capital Structure, Mergers and Acquisitions, Bankruptcy, and other special topics in Capital Budgeting.

 

 

Objectives:       The major objectives of the course are:

 

1.   To familiarize students with advanced studies in Capital Budgeting, taxes, inflation, cash flow identification, risk analysis, financing capital investment, multi-criteria capital budgeting and Linear Programming, Cost of Capital, lease analysis, mergers and acquisitions, and Bankruptcy.

 

2.   To master topics in the “permanent” financial aspects of the firm.

 

3.   To learn empirical research techniques (statistics, econometrics, and forecasting) by using data, mathematics, economic theory, and computers.

TOPICS COVERED:

 

Topics                                                                          Classroom Hours

 

Strategy and Value                                                                                            1

(Small Review)

 

Capital Investment Choice                                                                                   8

 

5.    Measuring Investment Value: You Can Trust NPV                             

6.   Alternate Measures of Capital Investment Desirability

7.   Ranking Mutually Exclusive Investments

9    Taxes and Capital Investments

8    Measuring Incremental Cash Flows

10.  Inflation and Capital Investment Analysis

 

Risk Analysis                                                                                                    8

 

11.  Introduction to Risk Analysis

12.  Single Investment Risk Analysis

13.  Risk from the Company Perspective:  Capital Budgeting

Consideration of Firm Risk Reduction Effects

14.  Risk from Shareholders’ Perspective:  Using CAPM in

Capital Budgeting

15.  Arbitrage Pricing Theory, Option Pricing Theory, and

Capital Budgeting

 

Financing Decisions and Required Return                                                            10

 

16.  Cost of Capital

17.  Capital Structure and Value

18.  Capital Structure Decisions

19.  Dividend Policy and Investment Decisions

20.  Interactions Between Investment and Financing Decisions

21.  Lease Analysis

22.  Capital Rationing

 

Special Topics  

                                                                                                                        5

23.  Capital Budgeting in Nonprofit Organizations                         

24.  Multi-criteria Capital Budgeting and Linear Programming                    

25.  Mergers and Acquisitions

26.  Bankruptcy and Reorganization

 

Class Meeting:

 

The class will meet for 26 sessions of 1 hour and 15 minutes duration, plus three examinations.

Teaching Methods and Assigned Readings:

 

This course is designed to give the students an advanced knowledge in capital “fixed” investment and structure.  A small reading assignment and a project will be given to students, too. There will be three exams (25% each) and your assignments together with your attendance, class participation and performance will count for another 25% of the course.  (The first exam will be on September 27^th  , the second exam on November 6^th, project due date is Thursday, December 6th and the final exam’s date will be announced later).

 

The Grading Scale is the following:

 

 0 –  59             F                                  80 – 83             B-

60 – 63             D                                  84 – 87             B

64 – 67             D+                                88 – 91             B+

68 – 71             C-                                 92 – 95             A-

72 – 75             C                                  96 – 100            A

76 – 79                         C+

 

 

This course will also give students the opportunity to work with computers and do some empirical research^[1] with different software packages (Lotus 1-2-3, TSP, Excel, Eviews, A-Pack).  A few homework assignments will be given to the students during the term and an individual project on estimating the cost of capital for a specific firm and a few other statistics.   We plan to cover one chapter per lecture.  Class sessions will be devoted to lecture, problems, and discussions.  The students will be exposed to a wide range of issues, concepts, mathematical, statistical, and econometric techniques, statistical and computer programs, and other information sources related to Capital Investment and Structures.  Attendance and class participation are necessary and count for the course grade. A student cannot miss more than four class sessions during the semester.