ADVANCED CORPORATE FINANCE
Saverio Massi Benedetti, Joao Miguel Da Costa Monteiro
Saverio Massi Benedetti
smassi@luiss.it
Instructional goals
The course will present and discuss corporate finance topics including advanced capital budgeting techniques, capital structure design, dividend policy and firm valuation. The aim of the course is to combine standard academic teaching with case studies and personal work experience presentations from the lecturers in order to provide students with a framework to analyze even complex investment and financing decisions and understand how financial theory can be used to address practical issues.
Prerequisites
Corporate finance, financial mathematics, accounting, statistics
Intended learning outcomes
Students are expected to acquire deep understanding of the theory related to the course topics and to be able to apply the theoretical knowledge to practice
Course Contents
The course will cover the following topics:
Risk and return models, CAPM, APM, Multifactor models;
Cost of Equity, Cost of Capital, WACC;
Return on investments, Capital budgeting;
Capital structure design;
Dividend policy;
Firm valuation, DCF Models, Relative valuation and multiples;
Valuation in IPO, M&A;
LBOs;
Reference Books
Damodaran, A. (2015) Applied Corporate Finance, 4th Edition;
Berk/DeMarzo (2014) Corporate Finance;
Teaching Methods
The course will combine standard academic teaching (covering theoretical background and formal models) with lectures oriented towards practical issues, case studies and excel-based tutorial sessions.
Selected problem sets or projects may be assigned as individual or team work over the semester in order to stimulate active participation by students.
Assessment Method
Written (compulsory) exam
Thesis assignment criteria
Personal judgment and full marks for the exam session.
Week 1 Contenuto sessioni on line e on campus
Topics:
Introduction to the course;
The objective in decision making;
Analyzing Risk;
Reading material: Damodaran (2015), chapters 2 and 3
Week 2 Contenuto sessioni on line e on campus
Topics:
The Investment decision;
Risk and return models; Estimating discount rates;
Reading material: Damodaran (2015), chapter 4
Week 3 Contenuto sessioni on line e on campus
Topics:
Investment Apprisal/Capital budgeting;
Return on Investments;
Project Interactions, side costs and benefits.
Reading material: Damodaran (2015), chapters 5 and 6
Week 4 Contenuto sessioni on line e on campus
Topics:
Capital Structure/Financing decision;
The optimal financial mix;
Financing details.
Reading material: Damodaran (2015), chapters 7,8 and 9
Week 5 Contenuto sessioni on line e on campus
Topics:
Dividend policy;
Analyzing cash returned to stockholders.
Reading material: Damodaran (2015), chapters 10 and 11
Week 6 Contenuto sessioni on line e on campus
Topics:
Valuation: introduction and objectives. Financial Statements Review
Free Cash Flow computation; APV and WACC methods
Week 7 Contenuto sessioni on line e on campus
Valuation I: Valuing Stocks. Dividend Discount Model, Total Payout Model, Discounted Free-Cash Flow Model, Multiple-based valuation. Reading material: Berk/DeMarzo (2014), Chapter 9.
Week 8 Contenuto sessioni on line e on campus
Valuation II: Estimating the cost of capital. Beta estimation, the debt cost of capital, project’s cost of capital. Reading material: Berk/DeMarzo (2014), Chapter 12.
Week 9 Contenuto sessioni on line e on campus
Valuation III: Capital budgeting and valuation with leverage. Weighted average cost of capital, project-based cost of capital. Reading material: Berk/DeMarzo (2014), Chapter 18.
Week 10 Contenuto sessioni on line e on campus
Real Options. Real versus financial options, the option to delay an investment opportunity, multiple projects. Reading material: Berk/DeMarzo (2014), Chapter 22.
Week 11 Contenuto sessioni on line e on campus
Raising Equity Capital. Equity financing for private companies, Initial Public Offering, Seasoned Equity Offering. Reading material: Berk/DeMarzo (2014), Chapter 23
Week 12 Contenuto sessioni on line e on campus
Mergers and acquisitions. Market reaction to a takeover, reasons to acquire, the takeover process, value added in takeovers. Reading material: Berk/DeMarzo (2014), Chapter 28.