Universitat Internacional de Catalunya
Corporate Finance
Other languages of instruction: English, Spanish,
Teaching staff
Introduction
Corporate finance is a course that has a clear objective: learning how companies finance their long term activity. The student has to finish the course with a complete knowledge of finance concepts, tools and metrics to calculate return and profitability and which kind of different sources of funds the market offers for corporates to rise capital.
As such, the course deals with investment decisions, third-party financing, structuring a company's capital with the aim of maximizing shareholder’s value, which means maximization of profitability and minimization of capital cost.
Corporate finance tries to assess the best investment alternatives, to obtain the economic resources for the organization and allocate them in the best possible way; this is, capital efficiency. The aim is to reduce the risk implicit in certain decisions and to achieve optimal development of the company by acquiring more and more value.
This includes topics such as time value of money, company valuation, structural financing, Project Finance, etc.
The course aims to introduce students to the study and understanding of the liability structure of companies. The goal is to create value for shareholders. In order to do so, Financial managers need to have different tools to rank different investment alternatives and choose (valuation methodology) which project or alternative better fits with the strategic plan of the company.
Pre-course requirements
Corporate Finance is and advanced finance course.
It is mandatory to totally know understand:
- how accounting works
- accounting regulation
- what are the financial statements and how these financial statements are done
- how to analyse financial statements
Objectives
The objective of corporate finance is to provide students with a solid foundation in the principles and tools required to make effective financial decisions within a firm.
The course aims to develop an understanding of the role of corporate finance in creating value for shareholders, emphasising key concepts such as capital structure, cost of capital, capital budgeting, and valuation. By the end of the course, students should be able to analyse financial statements, assess investment opportunities, and apply quantitative methods to evaluate business projects under conditions of risks and uncertainty.
Another important role is to help students link theory with practise by applying corporate finance concepts to real-world business scenarios. The course seeks to strengthen problem-solving and critical thinking skills in areas such as working capital management, mergers and acquisitions, cash flow management, and financial planning.
Last but certainly not the least, students will gain insights into how financial managers balance profitability, liquidity, and risk in order to ensure the sustainable growth and competitiveness of a firm in a globalized market
Competences/Learning outcomes of the degree programme
- 01 - To be familiar with, understand and apply the methods, techniques and instruments specific to accounting.
- 02 - To be familiar with and know how to interpret and apply current accounting standards.
- 03 - To select and adequately apply applicable accounting alternatives.
- 04 - To understand and know how to use financial terms within a business framework.
- 05 - To understand the functions of corporate finance departments.
- 06 - To know how to apply the main policies for capital structure and asset management.
- 30 - To be familiar with information systems models: relational databases and mis, dss, eis, crm, scm, bi, km, erp, bpms models.
- 31 - To develop the ability to identify and interpret numerical data.
- 32 - To acquire problem solving skills based on quantitative and qualitative information.
- 50 - To acquire the ability to relate concepts, analyse and synthesise.
- 51 - To develop decision making skills.
- 52 - To develop interpersonal skills and the ability to work as part of a team.
- 53 - To acquire the skills necessary to learn autonomously.
- 54 - To be able to express one’s ideas and formulate arguments in a logical and coherent way, both verbally and in writing.
- 59 - To skilfully use software and ICTs.
Learning outcomes of the subject
The student must have sufficient knowledge to:
1. Understand a company's financial situation and propose solutions.
2. Calculate the cost or profitability of any financial product.
3. Analyze any investment project from the perspective of a consultant or a company member.
4. Value a company using the various existing methods.
5. Understand alternative financing methods such as Project Finance.
6. Determine whether or not to distribute dividends.
Syllabus
UNIT 1 – Capital markets
How the general worldwide financial structure works.
General knowledge to deeply understand agents, type of markets, contracts and all other characteristics of what we refer to capital market.
UNIT 2 – Time value of money
How does time effect to the value of money? Concept and calculations of:
- Compounding (simple, compounded, continuous)
- Interest rates (effective, nominal, Equivalent Annual Rate –EAR–)
- Holding Period Return (HPR), Arithmetic Mean (AM), Geometric Mean (GM)
- Present value (PV), Future Value (FV), Annuities
UNIT 3 – Investment analysis and decision making
How can we evaluate, rank and choose investment opportunities? Concept and calculations of:
- NPV, IRR, IRR flaws, CF patterns, time-weighted vs money-weighted returns
- Payback (PB), discounted PB, Profitability Index, accounting rate of return
- Ranking investment projects and projects with unequal lives
- Project sequencing and real options
UNIT 4 – Capital budgeting
How does an investment process work? Concept of:
- Accounting profits vs CF. CF definitions: Equity CF and FCF
- The capital budgeting process. Capital rationing
- The Project Finance structuring
- Investments and depreciation: stated vs effective tax rate
- Investments and inflation
UNIT 5 – Cost of capital and company valuation
What is the real cost of the capital used by ca company? Concept and calculation of:
- The cost of equity and the cost of debt. The WACC
- Financial leverage and the optimal capital structure. Modigliani – Miller. Theory vs Market
- Company valuation: CF discount, the value of the unlevered company plus the value of tax shields, valuation by multiples, stepwise evaluation (CF discount plus multiples)
UNIT 6 – Going public. M&A and PE
Theoretic and conceptual description of:
- The rationale and the process of going public
- The rationale of merging: types of M&A
- Structuring and M&A: asset acquisition, stock purchase, pure merger, MBO, LBO
- EPS: accretion and dilution. Deceptive merger
- Introduction to Private Equity (structuring, the PE firm, the target and
Teaching and learning activities
In person
Lectures
Practical classes
Case analysis
Self-learning activities
Supervised work
Evaluation systems and criteria
In person
The evaluation system is easy:
- 10% of the grade will come from the mid term exam
- 20% of the grade will come from the continuous evaluation
- 70% of the grade will come from the final exam
To pass the course the student needs a minum grade of 5 (out of 10 points).
Passing the exam is a must
Final Mark: the resulting mark will be weighted by the 3 inputs herein mentioned.
Inappropriate behaviour in class will count against the final mark.
Second-sitting: the maximum score that the stundent can obtain is 7 (out of 10). No average with other activities (evaluation activities during the course and final project) will be calculated.
Bibliography and resources
- Fundamentals of Financial Management – 11th Edition (Eugene F. Brigham, Joel F. Houston)
- Principles of Corporate Finance – 13th Edition (Brealey, Myers and Allen)
- Financial Management: Principles and applications – 10th Edition (A. J. Keown, J. D. Martin, J. W. Petty, David F. Scott Jr.)
- Press release information