Principles of Finance 350

Syllabus

SHELDON B. LUBAR SCHOOL OF BUSINESS

Lecture 404 is Tues/Thurs at 1-1:50 PM (25313) in Lubar Hall N140

Spring Semester 2011, 3 credits

INSTRUCTOR: Richard D. Marcus, Ph.D.is an Associate Professor of Business and the Chair of the LSB Executive Committee

OFFICE: S430F in Lubar Hall. My mailbox is also on the fourth floor of Lubar Hall

OFFICE HOURS: Tuesday 11:00 AM - noon and Thursday noon-1:00 PM in Lubar Hall S430F and also by appointment.

TELEPHONE: 229-4103 (office) or 228-7731 (home)

E-mail: marcus@uwm.edu

Homepage: https://pantherfile.uwm.edu/marcus/www/

TEXTBOOK and CONNECT FINANCE: The following are required components to complete this course: Ross, Westerfield, and Jordan: Essentials of Corporate Finance 7th © 2011 McGraw-Hill, as well as McGraw-Hill’s Connect Technology. McGraw-Hill’s Connect is a web-based assignment and assessment solution required for this course. Connect is designed to assist you with your coursework based on your needs. As outlined in this syllabus, assignments will make up 25% of your overall course grade. The textbook with an Access Card for Connect is shrink wrapped with it is in the bookstore for $149.45. Alternatively, an electronic textbook and CONNECT is available on-line for $69, and is available for $91.45 in the bookstore on a card. However, if you have a book, and only need to have Connect, CONNECT can be purchased for $40 (See: Registration for Connect without an Access Card, below).

ACCESS WITH ACCESS CODES: Connect access codes are packaged with a new textbook at no additional cost. Connect can also be purchased online at our section’s Connect web address. Go to the lecture in which you are enrolled: http://connect.mcgraw-hill.com/class/r_marcus_2011_spring_finance_350 is the webaddress for Lecture 404.

If you purchase Connect online, you will have the option of purchasing Connect or Connect Plus, which includes an interactive eBook to supplement the required textbook for this course. NOTE: You can register in Connect and have access without a code for a limited time period (three weeks).

REGESITRATION FOR CONNECT WITHOUT AN ACCESS CODE: To register in Connect, please visit http://connect.mcgraw-hill.com/class/r_marcus_2011_spring_finance_350 and click “Register Now” to register for CONNECT only or CONNECT Plus (with an eBook).

SUPPORT AND TIPS FOR CONNECT: If you have any issues while registering or using Connect, please contact McGraw-Hill’s CARE TEAM through http://www.mhhe.com/support . Our course examines Chapters 1-15. To avoid problems related to unexpected technical issues, you are advised not to wait until the last moment to complete assignments. Please review your “Student Quick Tips” for further support.

EXAMINATION AND HOMEWORK WEIGHTS: There will be two midterm examinations and one final. Each exam is worth 25% of the class. We will also have homework assignments that will constitute 25% of the points that are completed on Connect Finance from McGraw-Hill.

MIDTERM EXAM DATES: The first midterm is on Tuesday, February 22 in class and covers Chapters 1-5 for 50 points. The second midterm is on Thursday, April 7 in class and covers Chapters 6-10 for 50 points.

FINANCE CONNECT ASSIGNMENTS: There are 14 assignments (10 graded and 4 ungraded). Each of the ten graded assignments is worth 5 points for a total of 50 points. The questions are "algorithmic" so that each student gets different numbers for problems. The assignments have unlimited number of attempts to retake up to the due dates listed in the "Daily Schedule of Lectures, Discussion Sections, and Connect Assignments" appearing below. There is no penalty for retaking the assignment. I permit that you can print of the assignment, but you must enter your answers on the website. When you retake an assignment, only those that you got wrong will have to be reworked to improve your score on the assignment. Click "submit" after completing an assignment. We put your CONNECT homework scores on GRADES in D2L several days after the due date for assignments.

FINAL EXAM: Saturday, May 14, 2011 in N140 from 10-noon. The final covers primarily Chapters 11-15 for 50 points.

GRADES: Grades will be based on the total points earned on Midterm 1, Midterm 2, the Final, and the scores received on the graded assignments in CONNECT FINANCE. The maximum possible points for the semester is 200 points. There are no "extra credit" points available. Typically, students who amass points at (or above) the median score will be considered for earning a B or better. Those who are in the lower half will be considered for scores of B- or lower. Scores will be posted on Desire2Learn at: http://d2l.uwm.edu/.

TEACHING ASSISTANT: We are fortunate to have the assistance of an outstanding, experienced Teaching Assistant, Mr. Syed Raza (E-mail: syedraza@uwm.edu).

SYED RAZA'S OFFICE, PHONE, OFFICE HOURS, and DISCUSSION SECTIONS: Syed Raza's office is S445 in Lubar Hall. His office phone number is 414-229-6337. Syed's office hours each week are on Wednesdays from 2:30-4:30 PM in his office. His discussions are:

DIS 601 31871 8:00 AM-8:50 AM on Wednesdays in LUB S191
DIS 602 31873 9:00 AM-9:50 AM on Wednesdays in LUB S191
DIS 603 31875 10:00 AM-10:50 AM on Wednesdays in LUB S191
DIS 604 31877 11:00 AM-11:50 AM on Wednesdays in LUB S191
DIS 605 31879 1:00 PM-1:50 PM on Wednesdays in LUB S191

CLASSROOM POLICIES: UWM has long-standing policies on academic misconduct, sexual harassment, discrimination, adding, dropping, withdrawal, repeating classes, and changes of grade. These policies are available at: https://pantherfile.uwm.edu/marcus/www/policies.html.

SPECIAL NEEDS: If anyone has a need for note-taking or testing assistance, please feel free to discuss this with me early in the semester. Slide presentations are available weekly in class and will be available on D2L.

SOCIAL CONNECTIVITY: Financial announcements of stock splits, leverage buyouts, and dividend changes occur daily. Some will be highlighted for special attention. These will appear on your Facebook walls or as text messages using Twitter. Students will be invited to like a fan page our 350 class. It is called UWMFinance350 and the same name in Twitter. Links to these locations are on the NAVIGATION line on D2L site for our class. You can view the messages sent by clicking either Facebook or Twitter. You can click the like "thumps up" icon in Facebook or click "follow" in Twitter to have it sent to your own page or phone.

OBJECTIVE: To understand the everyday financial activities of collecting from customers and paying suppliers, finding long-term financing to pay for investments, and deciding which investments offer the greatest promise. These are issues sometimes called Financial Management, but they are duties of a financial manager. Financial managers who do these tasks well reduce the risk of financial distress and increase the opportunities for growth and profits.


Daily Schedule of Lectures, Discussion Sections, and Connect Assignments

WEEK 1: Lecture #1 on Tuesday, January 25: Chapter 1- Introduction to Financial Management

Discussion 1: Wednesday, January 26: Demo and Intro to Connect Finance, D2L links to Facebook and Twitter for UWMFinance350.

Lecture #2 is on Thursday, January 27: Chapter 2 - Financial Statements, Taxes, and Cash Flows.

Sunday, January 30: Due date for the first Finance Connect assignment. This assignment is ungraded from Chapter 1 and part of chapter 2.


WEEK 2: Lecture #3 on Tuesday, February 1: Chapter 2 (continued) - CFFA or Cash Flow From Assets

Discussion 2: GROUND HOG'S DAY Wednesday, February 2: OCF and CFFA problems (problems 19-21, pages 46-47).

Lecture #4 on Thursday, February 3 Chapter 3 - Working with Financial Statements (with an emphasis on ratio analysis).

Sunday, February 6: Due date for the second assignment Finance Connect assignment from Chapters 2 & part of chapter 3. This assignment is graded, but you have multiple times to take it before the deadline.


WEEK 3: Lecture #5 on Tuesday, February 8: Chapter 3 (continued) - The Du Pont Identity

Discussion 3: Wednesday, February 9: TAT (Total Asset Turnover from pages 59-60 and problem 22 on page 87) and Du Pont Identity questions.

Lecture #6 on Thursday, February 10: Chapter 4 Introduction to Valuation (BYC = Bring Your Calculator!)

Sunday, February 13: Due date for the third Finance Connect assignment from Chapter 4. This assignment is graded.


WEEK 4: Lecture #7 on Tuesday February 15: Chapter 5 - Discounted Cash Flow Valuation (BYC)

Discussion 4: Wednesday, February 16: TVM (Time Value of Money) from end of Chapter 4 and some from Chapter 5 on uneven Cash Flows using your financial calculator: selected Questions and Problem from page 153-157 - BYC (bring your calculator!) HINT: Do all the worked problems on page 604-606 (textbook Appendix D) for TI BA II Calculators and HP-10B Calculators.

Lecture #8 on Thursday, February 17: Chapter 5 (continued) - Effective Annual Rates (EARs), Perpetuities, Midterm 1 Overview.

Sunday, February 20: Due date for the fourth Finance Connect ungraded assignment based on Chapter 5 as a great review also for Midterm 1.


WEEK 5 and Midterm 1:

Tuesday, February 22 is our MIDTERM #1, Room N140 at 1-1:50 PM and BYC! Midterm 1 covers Chapters 1-5.

Discussion 5: Wednesday, February 23: Return of Midterm #1 if ready and answers to Midterm #1, and "The five keys to bond valuation."

Lecture #9 on Thursday, February 24: Chapter 6 - Interest Rates and Bond Valuation

Sunday, February 27: Due date for fifth Finance Connect assignment from parts of Chapter 6. This assignment is graded.


WEEK 6: Lecture #10 on Tuesday, March 1: Chapter 6 (continued) More Bond Features, Types, and the Yield Curve

Discussion 6: Wednesday, March 2: Selected problems from Chapter 6.

Lecture #11 on Thursday, March 3: Chapter 7 - Equity Markets and Stock Valuation

Sunday, March 6: Due date for sixth Finance Connect assignment from Chapter 7. This assignment is graded.


WEEK 7: Lecture #12 on Tuesday, March 8: Chapter 7 (continued) Preferred Stocks, Primary Markets, and Secondary Markets for Equities

Discussion 7: Wednesday, March 9: DGM -The Dividend Growth Model and selected problems from Questions and Problems pages 225-227.

Lecture #13 on Thursday, March 10: Chapter 8 - NPV is Net Present Value and IRR is Internal Rate of Return. Guess who was born in 1953 on this very day?

Sunday, March 13: Due date for the seventh assignment from Finance Connect from Chapter 8. This assignment is graded.


WEEK 8: Lecture #14 Beware the Ides of March on March 15: Chapter 8 (continued)- Capital Budgeting and Capital Rationing Issues

Discussion 8: Wednesday, March 16: NPV and IRR using Excel and using calculators, also selected problems from page 259.

Lecture #15 on Thursday, March 17: Chapter 9 - Making Capital Investment Decisions

Monday, March 28: Due date for eighth Finance Connect assignment based on Chapter 9. This assignment is graded.


Let's have Spring Break from March 20-27!

WEEK 9: Lecture #16 on Tuesday, March 29 Chapter 9 (continued) - Sensitivity Analysis of Capital Projects and Managerial Options

Discussion 9: Wednesday, March 30: Calculating project Operating Cash Flows (OCF) examples from Page 296.

Lecture #17 on Thursday, March 31 Chapter 10 - Lessons from Capital Market History

Tuesday, April 5: Due date for the ninth assignment from Finance Connect based on Chapter 10, but this assignment is ungraded.


WEEK 10 and Midterm 2:

Lecture #18 on Tuesday, April 5: Chapter 10 (continued) Capital Market Efficiency and review for Midterm #2.

Discussion 10: Wednesday, April 6: Arithmetic versus Geometric Returns and selected problems from pages 334-335

Thursday, April 7 is our MIDTERM #2 in Room N140 at 1-1:50 PM and BYC! Midterm 2 covers Chapters 6-10.

No assignment due for Sunday, April 10.


WEEK 11: Lecture #19 on Tuesday, April 12: Chapter 11 - Risk and Return

Discussion 11: Wednesday, April 13: Return Midterm 2, how a beta is estimated, and work on selected problems from pages 371-373.

Lecture #20 on Thursday, April 14: Chapter 11 (continued) - The Security Market Line and CAPM (The Capital Asset Pricing Model)

Sunday, April 17: Due date for the tenth Finance Connect assignment from Chapter 11. This assignment is graded.


WEEK 12: Lecture #21 on Tuesday, April 19: Chapter 12 - The Cost of Capital

Discussion 12: Wednesday, April 20: Review of the WACC (Table 12.1 on page 389) and selected problems.

Lecture #22 on Thursday, April 21: Chapter 12 (continued) - Divisional and Project Cost of Capital

Sunday, April 24: Due date for eleventh Finance Connect assignment from Chapter 12. This assignment is graded.


WEEK 13: Lecture #23 on Tuesday, April 26: Chapter 13 - Leverage and Capital Structure

Discussion 13: Wednesday, April 27: The difference between a Workout and a Bankruptcy; and selected problems from pages 433-435.

Lecture #24 on Thursday, April 28: Chapter 13 - Capital Structure with Taxes and with Bankruptcy Costs

Sunday, May 1: Due date for twelfth Finance Connect assignment from Chapter 13. This assignment is graded.


Week 14: Lecture #25 on Tuesday, May 3: Chapter 14 - Dividends and Dividend Policy

Discussion 14: Wednesday, May 4: Stock Splits and Reverse Stock Splits and a few questions from pages 463-465

Lecture #26 on Thursday, May 5: Stock Dividends,and Stock Repurchases

Sunday, May 8: Due date for Thirteenth graded Finance Connect assignment from Chapter 14. This assignment is graded.


WEEK 15 and Final:

Lecture #27 on Tuesday, May 10: Chapter 15 - Raising Capital

Discussion 15: Wednesday, May 11: Dutch auction underwriting of an IPO and review questions for the final

Lecture #28 on Thursday, May 12: Chapter 15 - Costs of Issuing Securities and Debt, and Overview of Final

Friday, May 13: This is the University Study Day.

Saturday May 14 or earlier, try doing the ungraded assignment fourteen on CONNECT from Chapter 15 as practice before the final at 10AM.

Saturday, May 14 in N140 at 10 AM to noon is our Final Exam. The Final covers Chapters 11-15.

Scores and grades will be posted on D2L at http://d2l.uwm.edu/ and an email notice will be sent when grades have been reported on PAWS.