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IB810 - Corporate Finance

  • Module code: IB810
  • Module name: Corporate Finance
  • Department: Warwick Business School
  • Credit: 10

Content and teaching | Assessment | Availability

Module content and teaching

Principal aims

Corporate Finance is the study of financial decision-making processes for corporations. Unlike privately owned firms, corporations are structured on the basis of separation of ownership and control: while a corporation is owned by its shareholders, these do not run the day-to-day business of the firm. Instead, the shareholders appoint financial managers who are responsible for the firm’s investment and financing decisions. In other words, Corporate Finance deals with questions such as the following: What are the decisions that financial managers are required to make?; What are the objectives that (should) govern these decisions?; What are the constraints imposed by the economic and regulatory environment?; How can the different available choices be evaluated and ranked?; Can conflicts of interest deriving from separation of ownership and control distort the manager’s incentives to pursue their goals? This module aims to provide students with the skills and tools of modern Finance theory that are necessary to critically evaluate decisions of the following types from different angles, ultimately enabling them to reach their own conclusion based on all information available: Capital Budgeting/Investment Decisions, What real assets (or projects) should the firm invest in? Should the firm launch a specific product? How does the firm determine the fair value of a division or company that it wishes to acquire/sell/float on the stock market?; Financing Decisions, How should the firm raise the funds to finance its investment activity? Should the firm sell shares or borrow issuing debt? ; Payout Policy Decision, How does the dividend policy affect the value of the firm? What fraction of its profits should the firm pay out to its shareholders? Risk Management Decisions, What risks should a firm keep and what risks should it pass on? How could a firm use insurance, derivative contracts, and other options to change its risk exposure? Depending on the angle from which it is studied, the very same problem may allow for many quite different solutions.

Principal learning outcomes

"Subject knowledge and understanding: Define the objectives of the firm, and explain the role that the financial managers play in achieving these objectives; Define different sources of corporate financing (e.g. retained earnings, debt, equity …), and explain their respective advantages/disadvantages. Identify the factors (e.g. risk, cost of capital …) that affect investment appraisal, and explain how each affects project value; Estimate a firm’s cost of capital, and understand how this changes as a function of leverage, taxation, and other factors; Define the factors that influence the firm’s capital structure and payout policy and risk management policy, and explain how each affects the optimal decisions.Cognitive Skills: Identify the testable implications of a theoretical concept, and assess its validity using empirical analysis; Evaluate and rank in real-word cases the (seemingly conflicting) factors influencing corporate decision-making.Key Skills: Use spreadsheets (e.g. Excel …) to compute the values of projects or securities, and perform risk and sensitivity analyses; Analyze and critically evaluate real-world cases, and communicate the findings either in writing or in a verbal presentation. Use various data sources (e.g. web, publications, databases …) to obtain and analyze financial data. Subject-Specific/Professional Skills: Perform tasks that are involved in corporate financial management."

Timetabled teaching activities

"Total contact hours: 12 (plus 6 optional); Module duration (weeks, if applicable): 10 months Other (please describe):e.g. distancelearning, intensive weekend teaching: Distance Learning, full day at compulsory seminar(including evening session)."

Departmental link

https://my.wbs.ac.uk

Module assessment

Assessment group Assessment name Percentage
10 CATS (Module code: IB810-10)
A1 (Assessed work only) Assessment 100%
A3 (Assessed work only) 3500 word essay (DLMBA) 100%
A4 (Assessed work only) Online test 1 20%
  Online test 2 20%
  Individual Assignment (2500 words) 60%

Module availability

This module is available on the following courses:

Core

N/A

Optional Core

N/A

Optional
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  • Postgraduate Taught Business Administration (Distance Learning) (N1PW) - Year 5
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