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Financial Management

Objectives

This finance course is concerned with understanding what financial managers do. It starts by discussing valuation. In particular, it will be discussed the valuation of stocks, bonds and options.

The course then introduces risk and return and develops tools for measuring risk and determining appropriate discount rates. It also considers issues relevant to corporate managers in determining optimal investment and financing policies. It examines the impact of taxes, agency costs, and asymmetric information on debt and payout policy.

We will seek a balance between the theoretical paradigms, the empirical findings, and their applicability to the real world. Emphasis will be on principles and problem solving. Lectures and exams will concentrate on both quantitative and conceptual foundations.

General characterization

Code

2414

Credits

7

Responsible teacher

Filipa Castro

Hours

Weekly - Available soon

Total - Available soon

Teaching language

English

Prerequisites

N/A

Bibliography

The main textbook: Corporate Finance by Jonathan Berk and Peter DeMarzo, Pearson 3rd edition, Global Edition.

Complementary Reading: Hillier, Ross, Westerfield, Jaffe, and Jordan, Corporate Finance, 2nd European Edition, McGraw-Hill, 2014

Resources

All the material will be available on Moodle.

Teaching method

Classes are weekly and last for 3 hours. Classes are devoted to the presentation of the material by the instructor and to the application of the material in the form of exercises.

Practice exercises will be made available and discussed in a workshop.


Evaluation method

In terms of the evaluation, there will be a mid-term, which will cover the material discussed until one week before. The mid-term will be MANDATORY. The final exam will cover all the material and is also mandatory. In accordance with the school’s norms, there is no procedure for grade improvement after passing a course (no re-sit or second-course enrolment). There will be two group assignments in the form of case study.

Total score in the course will consider:

  • Case Study I (in groups of 2-4): 15%

  • Mid-term exam (individual): 35%

  • Case Study II (in groups of 2-4): 15%

  • Final Exam (individual): 35%

Grade Review

For each of the three components of the grade there will be a review session. In this session the student has access to the solutions and grading criteria as well as their own work. The TA will answer questions students might have on resolutions. If the student thinks his work was not graded correctly, for any reason, he or she can put in a request for grade revision with the professor by filling up a form. As a disclaimer, beware that a request for revision implies that the professor will have a look at your whole work, not just the question you are suggesting us to revise. Hence, your grade might also go down after the revision.

Subject matter

  • 1. Introduction to Financial Management and Mathematical Finance;

  • 2. Bonds and Stock Valuation;

  • 3. Portfolio Theory and Capital Asset Pricing Model;

  • 4. Introduction to Options;

  • 5. Capital Budgeting;

  • 6. Capital Structure.