lecture1 351

Introduction to Financial Management: 

Introduction to Financial Management Administrative Issues and Course Overview

Today’s plan: 

Today’s plan administrative issues syllabus prerequisite add, drop and withdraw Quizzes In-class work final grade course overview

The instructor: 

The instructor My name is George Li Call me George, not professor Office: BUS 315, DTC 585 Website:http://online.sfsu.edu/~li123456 Email: li123456@sfsu.edu Office hours: Tuesday (Main campus) and Wednesday (DTC) 12:30 -2:30 Research interest: Corporate finance: real options, technological innovations, and valuations Asset pricing: information and stock prices

Textbook: 

Textbook fundamentals of corporate finance, by Brealey, Myers and Marcas (5th edition) sorry about the cost this is a standard textbook used in many major schools for the first course in corporate finance

Prerequisite: 

Prerequisite You are required to take FIN 350 with a grade of at least C-. It is the school’s policy that all the students in this course must satisfy this requirement and there is no exception

Add, drop and withdrawal policy: 

Add, drop and withdrawal policy The business school has the policy for add, drop and withdrawal In the first four weeks, you have to get enrolled in the class, if you want. Students can withdraw once Please read the bulletin for detail information

Homework: 

Homework To help you understand the concepts taught in class, and prepare for the quizzes and the final exam, there is a weekly homework set, which is not graded, but its solution will be posted in my website. The best way to learn is to do a lot of problems.

Quizzes: 

Quizzes There are four quizzes, which are in the form of multiple choice questions and take place at the beginning of a lecture There are no makeup or in-advance exams. Three highest quizzes count for the final grade ( each 15 pts). If you miss one, that is the quiz you will drop. You are supposed to allocate your time to take all the quizzes

In-class works: 

In-class works There are four in-class works. In-class work can take place in any time of any lecture without in-advance notice. In-class work is close to some problems in the final. It is highly recommended that you come to every lecture for in-class work It is very important that you bring in a calculator and a pen at every lecture

The final exam: 

The final exam The final exam will be in class (closed book), with a form of multiple choice questions. There are no makeup or in-advance exams. The final exam is cumulative, based on the quizzes, homework and in-class works.

Final grade : 

Final grade Your overall course grade will be based on your performance in the class, the quizzes, homework problem sets, the team project, and the final exam. Class attendance: 5 pts Qizzes (3 of 4 total) 45 pts Final exam: 50 pts Total 100 pts

Grading policy: 

Grading policy Your grades are based on the distribution of the scores of the class. Specifically, your final grade is based on the following table. Ranking Grade 0%-10% A range 10%-50% B range 50%-85% C range 85%-95% D range 95%-100% F

Why do you want to take this course : 

Why do you want to take this course Why are you taking Fin 351? nothing better to do today ? become a millionaire overnight? the instructor is a nice guy for a good grade? get a “stamp of approval” to get a job ? learn finance for fun ? simply a required course ? learn finance to be more successful?

My objective in this course: 

My objective in this course I want everyone in the room to learn finance very well this semester i want you to understand the concepts / issues i want you to feel comfortable talking about finance and answering finance questions. i want you to gain a set of tools that will help you look at the world in a slightly different way. What is standing in the way of those objectives? Over-confidence Under-confidence

Two ways of learning: 

Two ways of learning Positive Can be a fun, since it is an opportunity to improve your future career, open your mind and broaden your vision Look at each difficulty as an opportunity to learn new things Good performance Negative Can be boring, since it is regarded as a burden, a task Look at each difficulty as a “torture” or pain Bad performance

Corporate finance: what is it?: 

Corporate finance: what is it? A set of concepts, theories and approaches that help the firm make financial decisions

Financial decisions: 

Financial decisions Capital budgeting (use of the capital) Real investments Mergers; acquisitions Financing (capital structure decision) Equity Debt

FIN 351: course organization : 

FIN 351: course organization FIN 351 Module 1 Fundamentals of valuation Module 2 Valuing risky investments Risk and return Module 3 Corporate financial decisions Module 4 Market efficiency and options Fundamentals of PV Financial decision Interest rates Perpetuities and annuities calculation Valuing stocks and bonds NPV and other criteria Portfolio theory Diversification and covariance Modigliani-Miller theorem 1 Pizza size is independent of how sliced Tangency portfolio, CAPM risk and return Effect of leverage WACC and discount rate Binomial model, replication Risk-neutral probabilities Options and Black-Scholes Weak, semi-strong and strong form efficiency Information and stock prices Types of securities Stocks, bonds and other Modigliani-Miller theorem 2 WACC

Course organization (2): 

Course organization (2) This course is broken-down into four modules Module 1: time value of money Module 2: risk and return Module 3: capital structure Module 4: financial markets

Time value of money: 

Time value of money This module is a “skill building” block in this course We will soon have the necessary skills needed to value stocks and bonds In this module, we don’t consider risk It is assumed that future cash flows are riskless It is assumed that the discount rate is riskless

Risk and return: 

Risk and return This part teaches us about uncertainty How do we measure risk? How much is a risky cash flow in the future worth (today)? There are both: skill building sections conceptually more difficult sections

Financing decisions: 

Financing decisions If you are the CEO of an industrial company you can make your company more valuable by choosing “better” projects we want to know if you (and the CFO) can make your company more valuable by changing the mixture of your financing (i.e. the ratio of debt to equity)

The efficiency of financial markets: 

The efficiency of financial markets We will look at how information gets into security prices We will learn three forms market efficiency We will examine the implication of market efficiency on financing