Principles of Finance 350

Syllabus

SHELDON B. LUBAR SCHOOL OF BUSINESS

Lecture 404 is Tues/Thurs at 9:00-9:50 AM (29525) in Lubar Hall S151

Lecture 405 is Tues/Thurs 1:00-1:50 PM (29156) in Lubar Hall N140
Spring Semester 2012, 3 credits

INSTRUCTOR: Richard D. Marcus, Ph.D.is an Associate Professor of Finance & Chair of the Lubar Executive Committee

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

OFFICE HOURS: Tuesdays and Thursdays from 10:00AM - 11:00AM and by appointment.

TELEPHONE: 414-229-4103 (office) or 414-228-7731 (home)

E-mail: marcus@uwm.edu

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

PRINCIPLES OF FINANCE 350: Examines the fundamentals of financial management, asset/liability valuations, risk and return, investment analysis, sources and uses of funds, cost of capital, and cash management. Prerequistes are soph st; Econ 103(P) & 104(P); Bus Adm 201(P) or 207(P); Bus Adm 210(P) or 211(P).

THREE REQUIRED MATERIALS FOR COURSE: The following are required components to complete this course: (1) Ross, Westerfield, and Jordan: Essentials of Corporate Finance 7th 2011 McGraw-Hill; (2) McGraw-Hill's Connect Finance; and (3) a financial calculator. McGraw-Hill's Connect Finance has 15 on-line homework assignements, ten for grades and 5 as practice for exams. As outlined later in this syllabus, assignments will make up 25% of your overall course grade.

There are at least three ways to get access to the book and Connect.

  1. The UWM Bookstore has a looseleaf version of the book with Connect-Plus. This gives you access to Connect for graded homework assignments and access to an electronic version of the book (this is the "plus" in Connect-Plus, and the book in looseleaf version. This costs $148, whereas purchasing a book alone would cost $179 and Connect for another $49.99.
  2. Alternatively, Connect-Plus is available for $84.75. This gives you both the homework assignments in Connect Finance and the book on-line, which is Plus in Connect-Plus. This tends to be the least cost option. Conect-Plus is avaiable to you through June 26, 2012.
  3. If you purchase a new or used book somewhere or share a book with someone, the alternative is to just get Connect alone. The cost of this is $49.99. (See Registration for Connect directly below on how to purchase either Connect-Plus or Connect)

REGISTRATION FOR CONNECT: To register for Connect, please visit the appropriate hyper-link for 350-404-spring2012 or 405-spring2012 given below in which you are registered. Go the the appropriate link, click REGISTER NOW. There are 3 choices. (1) You can SUBMIT your registration code given in your purchased looseleaf book from the UWM bookstore. Or (2), you can click BUY NOW, where you have the choice of the blue "Buy Connect" to register for CONNECT-only for $49.99 or "Buy Connect-Plus" to purchase an electronic version of the textbook for $84.75. Or (3), you can click the Free Trial for 3 weeks. Select the link for which you are registered. Lecture 404 is at 9AM on Tuesdays and Thursdays. Lecture 405 is at 1PM on Tuesdays and Thursdays.

  1. http://connect.mcgraw-hill.com/class/r_marcus_350-404-spring2012 is the web address for the 9AM Lecture 404. Or go to:
  2. http://connect.mcgraw-hill.com/class/r_marcus_350-405-spring2012 is web address for the 1PM Lecture 405. When you purchase Connect online, you will have the option of purchasing Connect or Connect Plus. Connect Plus gives you access to the full textbook, which is both searchable and printable. NOTE: You can register in Connect and have access without a code for three weeks.

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.

FINANCIAL CALCULATOR: You will need a financial calculator of your own choosing. My recommendation is Texas Instruments BAII Plus or the professional version. The textbook is designed for use of either HP-10B or TI BA II Plus Financial Calculators. Either the TI or HP are fine with me. Some of the apps on smart phones are getting pretty good, but none do everything that financial calculators do. For example, some apps do Bond Valuation, but they cannot determine the number of periods.

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 midterms for 350 are combined exams for both Lectures 404 and 405. The first midterm is on Friday, February 17 from 2-4PM and covers Chapters 1-5 for 60 points. An alternative time on February 16 is listed in the syllabus. The second midterm is on Friday, March 16 at 2-4PM, with an alternative on March 15. These cover Chapters 6-9 for 60 points. The final covers Chapters 10-15. Professor Marcus provides a list of key financial formulas attached to the midterms and finals. Students will bring their own financial calculator to the exams.

FINANCE CONNECT ASSIGNMENTS: There are 15 assignments (10 graded and 5 are ungraded). Each of the ten graded assignments is worth 6 points for a total of 60 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.

FINAL EXAM: Lecture 404 and 405 have a Combined Final on Saturday, May 12 at 7:30-9:30 AM. The final covers Chapters 10-15 and lecture material for 60 points. An alternative date of May 17 is listed in the syllabus.

GRADES: Grades will be based on the total points earned on midterm 1, midterm 2, the final, and the scores received on the graded assignmnets in Connect Finance. The maximum possible points for the semester is 240 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 ASSISTANTS: We have two outstanding, experienced Teaching Assistants. They are Dave Mateljan (E-mail: mateljan@uwm.edu) and Dave Wenzel (E-mail: dawenzel@uwm.edu). Dave Mateljan is TA for Discusssions 601, 602, 608, 609, and 610. Dave Wenzel is TA for Discusions 603, 604, 605, 606, and 607.

TA OFFICE, PHONE NUMBER, and OFFICE HOURS: Dave Mateljan and Dave Wenzel's office is S445 in Lubar Hall. Their office phone number is 414-229-6337. Dave Mateljan's office hours each week are on Tuesdays from 2-4 PM; Dave Wenzel's office hours each week are on Thursdays from 9:30-11:30 AM.

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 in class and provide a basis for corporate finance test questions. These can appear on Facebook walls or as text messages using Twitter. Students are invited to like the Facebook fan page, which is called UWMFinance350 and the same name in Twitter. Since the same information is sent on Twitter and Facebook, choose the one you prefer. 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 without joining Facebook or Twitter. Or you may 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 24: Chapter 1- Introduction to Financial Management

Discussion 1: Wednesday, January 25: Demo of Connect Finance and D2L links to Facebook and Twitter for UWMFinance350.

Lecture #2 is on Thursday, January 26 Chapter 2 - Financial Statements, Taxes, and Cash Flows.

Monday, January 30: Due date for the first Finance Connect assignment. This assignment is ungraded from Chapter 1 .


WEEK 2: Lecture #3 on Tuesday, January 31: Chapter 2 (continued) - CFFA or Cash Flow From Assets

Discussion 2: Wednesday, February 1: OCF and CFFA problems (problems 19-21, pages 46-47).

Lecture #4 on Thursday, February 2, Ground Hog's Day Chapter 3 - Working with Financial Statements (with an emphasis on ratio analysis).

Monday, 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 7: Chapter 3 (continued) - The Du Pont Identity

Discussion 3: Wednesday, February 8: TAT (Total Asset Turnover from pages 59-60 and problem 22 on page 87) and Du Pont Identity questions.

Lecture #6 on Thursday, February 9: Chapter 4 Introduction to Valuation (BYC = Bring Your Calculator!)

Monday, February 13: Due date for the third Finance Connect assignment from Chapter 3 and Chapter 4. This assignment is graded.


WEEK 4: Lecture #7 on Tuesday, February 14: Chapter 5 - Discounted Cash Flow Valuation (BYC)

Discussion 4: Wednesday, February 15: 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 16: Chapter 5 (continued) - Effective Annual Rates (EARs), Perpetuities, Midterm 1 Overview.

Friday, February 17 by 2PM is also the due date for the fourth Finance Connect ungraded assignment based on Chapter 5 as a great practice for Midterm 1.

Friday, February 17 is our COMBINED MIDTERM #1, Room TBA at 2-4 PM and BYC! Midterm 1 covers Chapters 1-5 for both lectures 404 and 405. An alternative time and date will be on Thursday, February 16 from 3-5PM by sign up in class on Week 4.

WEEK 5: Lecture #9 on Tuesday, February 21: Chapter 6 - Interest Rates and Bond Valuation

Discussion 5: Wednesday, February 22: Return of Midterm #1, Answers to Midterm #1, and "The five keys to bond valuation"

Lecture #10 on Thursday, February 23: Chapter 6 (continued) More Bond Features and Types

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


WEEK 6: Lecture #11 on Tuesday, February 28: Chapter 7 - Equity Markets and Stock Valuation

Discussion 6: Wednesday, February 29: DGM -The Dividend Growth Model and selected problems from Questions and Problems pages 225-227.

Lecture #12 on Thursday, March 1: Chapter 7 (continued) Preferred Stocks, Primary Markets, and Secondary Markets for Equities

Monday, March 5: Due date for sixth Finance Connect assignment from Chapter 7. This assignment is graded.


WEEK 7: Lecture #13 on Tuesday, March 6: Chapter 8 - NPV is Net Present Value and IRR is Internal Rate of Return

Discussion 7: Wednesday, March 7: NVP and IRR using Excel and on calculators, and selected problems form page 259

Lecture #14 on Thursday, March 8 Chapter 8 (continued)- Capital Budgeting and Capital Rationing Issues

Monday, March 12: Due date for seventh assignment from Finance Connect from Chapter 8. This assignment is graded.


WEEK 8: Lecture #15 on Tuesday, March 13 Chapter 9 - Making Investment Decisions

Discussion 8: Wednesday, March 14: Calculating project Operating Cash Flows (OCF) examples from Page 296.

Lecture #16 on Thursday, March 15 Chapter 9 (continued) - Sensitivity Analysis of Capital Projects and Managerial Options and review for Midterm #2

Friday, March 16: Due date for eighth Finance Connect assignment based on Chapter 9. This assignment is ungraded, and is great practice for Midterm 2.

Friday, March 16 at 2-4PM COMBINED MIDTERM #2, Room TBA and BYC! Midterm 2 covers Chapters 6-9. An alternative time and date will be on Thursday, March 15 from 3-5PM by sign up in class in week 8.

SPRING BREAK: March 18-25

WEEK 9: Lecture #17 on Tuesday, March 27: Chapter 10 - Lessons from Capital Market History

Discussion 9: Wednesday, March 28: Arithmetic versus Geometric Returns and selected problems from pages 334-335

Lecture #18 on Thursday, March 29: Chapter 10 (continued) Capital Market Efficiency

Monday, April 2: Due date for the ninth assignment from Finance Connect based on Chapter 10. This assignment is graded.


WEEK 10: Lecture #19 on Tuesday, April 3: Chapter 11 - Risk and Return

Discussion 10: Wednesday, April 4: How a beta is estimated, and selected problems from pages 371-373.

Lecture #20 on Thursday, April 5: Chapter 11 (continued) - The Security Market Line and CAPM (The Capital Asset Pricing Model)

Monay, April 9: Due date for the tenth Finance Connect assignment from Chapter 11. This assignment is graded.


WEEK 11: Lecture #21 on Tuesday, April 10: Chapter 12 - The Cost of Capital

Discussion 11: Wednesday, April 11: Review of the WACC (Table 12.1 on page 389) and selected problems

Lecture #22 on Thursday, April 12: Chapter 12 (continued) - Some methods for finding the cost of capital for projects not similar to the whole firm

Monday, April 16: Due date for the eleventh Finance Connect assignment from Chapter 12. This assignment is graded.


WEEK 12: Lecture #23 on Tuesday, April 17: Chapter 13 - Leverage and Capital Structure

Discussion 12: Wednesday, April 18, Value of a levered and unlevered firm and the difference between a Workout and a Bankruptcy; and selected problems from pages 433-435.

Lecture #24 on Thursday, April 19: Chapter 13 (continued) - Is there an Optimal Capital Structure?

Monday, April 23: Due date for Twelth Finance Connect assignment from Chapter 13. This assignment is ungraded.


WEEK 13: Lecture #25 on Tuesday, April 24: Chapter 14 - Dividends and Dividend Policy

Discussion 13: Wednesday, April 25: Stock Splits and Reverse Stock Splits and a few questions from pages 463-465.

Lecture #26 on Thursday, April 26: Chapter 14 (continued) - Stock Dividends and Stock Repurchases

Monday, April 30: Due date for Thirteenth Finance Connect assignment from Chapter 13 and Chapter 14. This assignment is graded.


WEEK 14: Lecture #27 on Tuesday, May 1: Chapter 15 - Raising Capital

Discussion 14: Wednesday, May 2: Dutch Auction underwriting of an IPO

Lecture #28 on Thursday, May 3: Chapter 15(continuted) - Costs of Issuing Securities

Monday, May 7: Due date for our fourteenth Finance Conncect assignment from Chapters 14 and 15. This assignment is graded.


WEEK 15: Lecture #29 on Tuesday, May 8:Intro to financial event studies

Discussion 15: Wednesday, May 2: What is "abnormal returns" and two ways to find them and review for the final

Lecture #30 on Thursday, May 10: Review for the final and question and Answer session preparing for the final

Friday, May 11: This is the University Study Day. No classes.

Saturday, May 12: Due date for fifteenth Finance Connect assignment from Chapter 15. This assignment is ungraded, and is practice for the final with a question on financial event studies.

COMBINED Final Exam - both lecture 404 and 405 is on Saturday, May 12 at 7:30 AM - 9:30 AM. The rooms are TBA. By sign up in Week 15 with Professor Marcus, there will be an alternative final available on Thursday, May 17 from 10-noon.

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.