Search our site :

COMMON CORE COMPONENT: FTX5042W CORPORATE FINANCE & VALUATIONS

1.  AIMS AND OBJECTIVES

The broad aim of FTX5042W is the preparation of participants for executive positions in corporate finance.  The approach is interdisciplinary with the emphasis on the development of conceptual knowledge and problem solving ability in issues regarding corporate finance within the context of strategic management planning.

The objectives of the course are to:

  • focus on the underlying concepts in corporate finance within the context of strategic management, through the study of appropriate case studies, textbooks and research articles;
  • create the structure which affords the participants an opportunity to develop a decision focused approach to financial management
  • provide opportunities for participants to explore and to discuss corporate finance and capital markets;
  • develop the ability, given a particular financial situation within a business environment to:

·         identify key issues,

·         focus on relevant information,

·         rank issues in order of importance,

·         process required computations and undertake financial modelling,

·         suggest and debate alternative courses of action,

·         select the most appropriate course of action,

·         develop the ability to present a motivated solution to a complex financial issue, given the possibility of alternative solutions, to small and large groups of participants,

·         develop the participant's oral and written communication skills.

2. COURSE DURATION

The course extends over the period from March to November and comprises weekly class meetings, which are held on Monday to Thursday evenings (please consult your program as venue availability is driving the choice of evening) from 18.00 to about 20.30 in room 4J, Leslie Social Sciences Building. Saturday mornings are often used for additional lectures and tests and examinations.

The proposed programme for FTX5042W is set out in the ANNEXURE but may be subject to change:

Class, or individual sessions may be held to consider proposals for and/or discussions on Research Proposals. Staff is available to assist with Research Proposals already during this course.

Attendance at all sessions is an essential requirement for continued permission to remain on the course and for registration.  We do understand that your work commitments are important.  However, attendance at lectures must be a priority.  If you are going to miss a class, please email us with an explanation and go the extra mile for your group.  Non-attendance will not be accepted without a detailed reason for such absence. 

3. COURSE CONTENT

The course has a decision making focus within a strategic context.  Value creation and the principles of valuations are stressed throughout the programme.  

The content is organised in key areas:

3.1 Accounting Information, Financial Analysis and Financial Modelling

Accounting data reflects the firm’s relationship between capital markets and investment opportunities, and the results of operations.  The course focuses on interpreting this information for decision making. Forecasting financial statements and funding requirements are also covered as well as financial analysis and credit ratings.

3.2 Risk & Return, Cost of Capital and EVA

These are key underlying concepts in the creation of value.  It is not enough for firms to earn a profit, in order to add value the profit must exceed the firm’s cost of capital.  The use of Economic Value Added as a measure of performance is evaluated Joel Stern – the founder of EVA normally lectures on this topic.

3.3 Capital Budgeting & Risk Analysis

The analysis of long-term investments is crucial in maximising value, especially in situations of capital rationing and inflation.  The evaluation of capital projects emphasises the tax implications, real options and the estimation of project cash flows.  Risk analysis includes sensitivity analysis, tornado graphs, scenario manager, goal seek, and financial modelling in Excel. We also apply Monte Carlo Simulation using Crystal Ball.

3.4 Source of Finance and Capital Structure

Excessive use of debt can expose a firm to unacceptable levels of risk.  Conversely, conservative debt policies may limit the opportunity for the leverage effect to increase wealth.  How do firms select their debt/equity ratios?  Which sources of finance should firms use?  The course evaluates MM and other capital structure theories

3.5 Valuation of Companies and Fixed Income securities

The valuation techniques required to value equity and fixed income securities are fundamental to decision making in corporate finance and portfolio management.  Topics include Yield to Maturity, Free Cash Flow, EVA, Growth models, net asset values and price earnings multipliers.  Financial Modelling is a key component of this section and this topic also refers to the IPEV and IVSC guidelines. Forecasting methods are analysed and you will be referred to readings on the topic.  The valuation of financial institutions will be included.

3.6 Specialised topics in Finance

Specialised topics covered in the course include real options, share buybacks, BEE financing structures, securitisation and behavioural finance.

 

4. KEY ELEMENTS

The course provides an integrated package built around a number of key elements, each of these supports and is supported by the other elements.  No part of the programme stands alone and students are expected to participate fully in each.

4.1 Participants

The course is designed to assist participants in achieving the course objectives, while allowing sufficient scope for individuals to achieve personal objectives.  Those invited to join the programme will be selected because it is believed that they have something to offer to, as well as gain from the course. 

4.2 Working Groups

The class will be divided into groups of between 4 and 5 students.  The objective of the working group is to simulate organisational behaviour.  Various people in an organisation will observe clues to problems and will propose action: in the working group the participant should develop reasoning and persuasive abilities and also the ability to draw on the knowledge, experience and perceptions of others in the group.  Groups prepare material for each session of the full class and will also be allocated group assignments.  Working groups normally meet once a week at a time convenient to the group members.  Many corporate finance assignments in practice revolve around teams.  The course reflects the new corporate reality.

4.3 Case Studies

The Programme follows the Harvard Business School approach of making extensive use of case studies.  The objective of a case study is to simulate real financial management situations.  Good case studies will therefore have a certain level of "noise", which is irrelevant, distracting or misleading information, and also clues to various problems.  These relevant problems then compete for priority.  The task of the group is:

  • to eliminate the "noise",
  • identify the relevant problems,
  • rank them in order of priority,
  • research the finance theory and literature relevant to these problems,
  • identify alternative courses of action,
  • propose and motivate the preferred alternative.

Case study work forms the core of FTX5042W. The typical procedure for case study preparation will be as follows: the individuals in the group will analyse the case and research material where appropriate.  They will then formulate a written solution.  They will then meet in the working groups to exchange, propose and debate their views.  A group member will document its conclusions and supporting arguments.  This document is typed, including a reference list and is submitted by 12.00 p.m. of the day of the class meeting where the case is to be discussed.   Each Group can email their submission but need to set out the worksheets in such a way that it is easy to print.  Always identify your Group in file names.

In addition, each group will appoint a chairperson on a rotating basis to co-ordinate and manage each group’s submission on a weekly basis.  It is mandatory that the functions of chairperson be rotated through the working group. However, I will retain the right to call on anyone to open a case. No other mandatory rules apply to working groups.  It is essential that all students prepare for and participate in each case study.  Abdication in favour of the chairperson will devalue the quality of solutions and defeat the function of the case.  It is critical that all members are fully prepared as I will call on any student within a group to answer a question.

At the full class meeting a group will be selected and the spokesperson for that group will present their views.  Other groups will also be given an opportunity to present their case.  General discussion and questions will proceed.  Circumstances may however require this procedure to be altered on occasions.

4.4 Class Meetings

Besides the presentation of assignments and discussion papers, weekly class meetings serve to create learning experiences for the class as a whole.  They are conducted in various modes of which the following are the most frequent.

  • Case Study.  The session is used for presentation of case study findings and discussion of the issues which arise.
  • Unstructured Seminar.  This results from students being given a topic to research. On arrival at the class meeting, a chairperson is appointed, a framework for discussion is agreed and the topic is discussed, drawing on the reading and research of the whole group.
  • Structured Seminar.  This combines the features of a lecture conducted by a staff member with specific preparation based on prescribed readings.
  • Guest Speakers.  On occasions, visiting speakers with specialist expertise are invited to address the class.

4.5 Assignments:

The objective of assignments is to develop the participant's ability to:

  • perform limited research on a specific issue;
  • to present varied opinions thus obtained into a succinct summary; and,
  • to select and justify conclusions.

The group assignments have the added objective (as with case studies) of developing the participant's reasoning and human relations skills.

A major valuation research project is also required to be undertaken during the programme.  We make extensive use of Adobe and your submissions should be in PDF format, if possible – otherwise use Word. All references should be properly acknowledged and a reference list should be provided. In general, marks will be awarded for content (adequacy of coverage, analysis and research) and structure (clarity, logic, strength of conclusions).  Marks may be lost for poor presentation (typographical errors, defective bibliography, poor layout).

4.6 Tests and examinations

A series of examinations will be held during the year and usually after each section.  Participants will be permitted to bring reference material into examinations.  However, in some modules, students will not be able to bring in any materials. The examinations will primarily take the form of short case studies or problems and may include questions on cases covered in the programme.  The scheduled dates for the tests and examinations are set out in the programme.

4.7 Reference Material

The reference material is drawn mainly from three sources.  Firstly, prescribed texts, which provide a basic reference document on selected issues.  Secondly, the libraries have the resources of books and journals (access is available to the Jagger Linear Library and UCT’s electronic database resources).  Thirdly, it is expected of students to remain current with reporting in the local financial press.  It is included in the objective of the course that participants should develop the ability to find relevant reference material from the library and other sources.

The prescribed texts are:

  • Brigham, Eugene F, & Davies Phillip R, Intermediate Financial Management,  Eighth  or later Edition.  Otherwise, order any Intermediate Financial Management or Corporate Finance Textbook.  Damodaran’s Corporate Finance – Theory & Practice is recommended.
  • Correia, Flynn, Uliana & Wormald, Financial Management, 7th ed., Juta & Co., 2011
  • Bruner, Robert F, Eades, Kenneth M. and Schill, Michael J. Case Studies in Finance - Managing for Corporate Value Creation, Irwin McGraw-Hill, 6th  Edition, 2010 (Note: the 5th edition should also be fine for this course)

5. COURSE CONVENOR

The programme director is Prof Francois Toerien and the course convenor for FTX5042W is Dr Phillip de Jager.

Download PDF copy

Example Programme Outline

_

Last updated : 07 Feb 2017



Staff Members on this course :

Dr. Francois Toerien Associate Professor

+27 (0)21 650 2470
Francois.Toerien@uct.ac.za
4.64, Robert Leslie Social Science

Research Area / Interest :
Head of Finance Postgraduate Studies







There are no downloads available.