FINANCIAL POLICIES & INVESTMENT STRATEGIES - 1

The goal of the course is to apply fundamental principles of corporate finance to real companies and demonstrate how investors evaluate and value firms. The perspective is the firm value maximization: the focus is on principles that guide corporate manager decisions on financing and investing. In detail, business decisions are classified into three groups: investment, financing, and dividend decisions. At the end of the course, students will be able to fully understand and apply the process of valuation that represents the standard activity of a security analyst in a broker house.

The goal of the course is to apply fundamental principles of corporate finance to real companies and demonstrate how investors evaluate and value firms. The perspective is the firm value maximization: the focus is on principles that guide corporate manager decisions on financing and investing. In detail, business decisions are classified into three groups: investment, financing, and dividend decisions. At the end of the course, students will be able to fully understand and apply the process of valuation that represents the standard activity of a security analyst in a broker house.
Attending and actively participating to classes, studying the textbook and the other suggested materials, including the real cases used during the course, will allow students to:
1. Knowledge and comprehension
• acquire advanced knowledge of fundamental models of corporate finance and know how to apply them in practice, to comprehend how in reality the investment, financing and dividend decisions work.

2. Ability to apply knowledge and comprehension
• master the techniques to determine firm expected cash flows and to calculate the cost of capital to discount cash flows
• identify the company optimal financial structure
• comprehend the consequences of the choices of dividend policies
• apply methods and tools acquired during the course to interpret the dynamics of corporate finance

3. Judgment ability
• critically evaluate company valuations like a financial analyst
• evaluate the sustainability of the firm financial structure and its equilibrium
• evaluate the effects of different dividend policies that the firm may choose

The main prerequisite is knowledge of Financial and management accounting.

Module 1 - 1 period of classes
Topics Dates Readings
PPT 1- Managing Firms to Create Value
I. Overview
II. Resolving conflicts of interest
a. Stockholders vs. Managers
b. Stockholders vs. Bondholders
c. Firms and Markets
d. Firms and Society
e. Governance
PPT 2- Managing for Value: How Investors Think
I. Fundamentals of Investing
II. The Portfolio Decision and Diversification
III. The Capital Asset Pricing Model
IV. Information and Valuing the Firm (Market Efficiency) 17, 18 September (week 1)

Project: form teams, identify company to analyze.

Turn in the name of the company on 18 September along with a 1-page explanation of why you chose this company. Chapters 1, 2
PowerPoint slides


Chapters 3, 4 PowerPoint slides
PPT 3 - Analyzing the Firm’s Past Performance
I. Financial Statements
II. Ratio Analysis
III. The ROE (DuPont) Model
PPT 4- Analyzing the Firm’s Current Situation
I. Stock Analysis and Valuation – The Basics
II. Macroeconomic Factors
III. Industry Specific Factors
IV. Firm Specific Factors 24, 25 September
(week 2)

Project: Basic financial data due. Overview of company due. PowerPoint slides
PPT 4- Analyzing the Firm’s Current Situation
V. Stock Analysis and Valuation – The Basics
VI. Macroeconomic Factors
VII. Industry Specific Factors
VIII. Firm Specific Factors
PPT 5- Evaluating the Impact of Management Decisions and Corporate Strategies
I. Operating strategies; investment/divestment decisions; WACC
II. Capital/financial structure
III. Dividend policy
IV. Restructuring 1, 2 October
(week 3)
Project: Financial analysis due. Initial discussion of management strategies due. Initial estimates of cost of capital due.
Chapters 5, 7, 10
PowerPoint slides
PPT 6- Equity Valuation Part 1—Modeling the Firm
I. Basics
II. Discounted Cash Flow Valuation (with examples)
III. Relative Valuation Models (with examples)
PPT 7- Equity Valuation Part 2 – A Closer Look at How Investors/Markets Estimate:
I. Cash Flows
II. Discount Rates (Risk)
III. Growth
IV. Value 8, 9 October
(week 4)
Project: Report on expectations and valuation due.
Chapter 12
PowerPoint slides

PPT 8 – Conclusions and Propositions
15, 16 October
(week 5)
Project: Final Report due. Oral presentations will be held. PowerPoint slides

Information on Module 2 - 2 period of classes - see: https://www.unive.it/data/insegnamento/257652 .

Aswath Damodaran, Applied Corporate Finance: A User's Manual – 4th Edition,
ISBN-13: 978-1-118-80893-1

Supplementary study material - such as slides, papers, and exercises - will be available on Moodle.

The course grade will be based on the course project and by a written exam, that lasts 60 minutes, composed by three essay questions.

The course in mainly organized in frontal classes. All the material discussed in class will be available to students in Moodle. Classes combine fundamental principles of the subject with their practical application through exercises and real cases.
Students are required to solve case studies on topics covered in class: case studies are not mandatory but provide additional points (3pts max) to sum to the final exam mark to get the final grade.

English

Class attendance is not mandatory but strongly recommended. Similarly, class participation is at least encouraged.
Class attendance and class participation do not directly affect the grade (e.g. the exam is the same for attending & non-attending students).

written