Dr Amil Dasgupta OLD 3.45, Prof Christopher Polk OLD 4.23 and Prof Daniel Ferreira OLD M2.17

This course is compulsory on the MSc in Finance (full-time), MSc in Finance (part-time) and MSc in Finance and Private Equity. This course is not available as an outside option.

Aimed at people with a good undergraduate degree and good quantitative skills, with some knowledge of economics.

The aim of the course is to provide a comprehensive overview of firms' financial decision making. Corporate finance questions can be divided into two broad sets. Decisions regarding how to spend funds on investment projects constitute one part, usually referred to as capital budgeting. This part of the course will describe the various techniques commonly employed to assess investment opportunities. Particular attention will be given to the need to properly evaluate the risk associated with each investment project. Methods like the Adjusted Present Value or the weighted average cost of capital will be presented. The other main set of questions regards how to raise funds necessary to finance those investments. There, firms' decisions over debt/equity ratios will be analysed. Attention will be paid to differential tax treatments of debt and equity incomes. The implications of the possibility of bankruptcy will also be taken into account. The analysis will then broaden to allow for the possibility that debt/equity choices may affect how firms are run. Incentives to adopt riskier strategies as a function of overall leverage will be considered, as will the debt overhang problem. The course will also cover a number of specific topics. Firms' decisions to pay dividends will be studied. The factors behind the decision to go public, i.e. to trade securities in a public market, will then be presented. The market for takeovers and mergers will be examined, as will the topical issue of corporate

40 hours of lectures and 20 hours of classes. MSc Finance (part-time) taught MT and LT (evenings). MSc Finance (full-time) taught MT (daytime).

Regular classworks will be completed, handed in and marked as part of formative assessment for this course.

The recommended textbooks for this course are Berk and DeMarzo, Corporate Finance 2008 and Higgins, Analysis for Financial Management, 9th Edition. Other recommended readings from relevant journal articles will be included in a study pack.

Exam (80%, duration: 3 hours) in the main exam period.
In class assessment (20%) in the MT and LT.