Readings

The textbooks for this class are:

Brealey, R., and S. C. Myers. Principles of Corporate Finance. New York, NY: McGraw-Hill/Irwin. ISBN: 0073368695.

Higgins, R. C. Analysis for Financial Management. New York, NY: McGraw-Hill/Irwin. ISBN: 0077297652.

Part I: Financing

LEC # TOPICS READINGS
1 Lecture: Introduction

Background Reading:

  • Higgins. Interpreting Financial Statements. Chapter 1.
  • Higgins. Evaluating Financial Performance. Chapter 2.
  • Brealey and Myers. An Overview of Corporate Financing. Chapter 14.
2 Case: Wilson Lumber 1

Piper, Thomas R. Wilson Lumber Co. Boston, MA: Harvard Business School Publishing, 1991. Case No. 9-286-122.

Brealey and Myers. Financial Analysis and Planning. Chapter 29.

Higgins. Evaluating Financial Performance. Chapter 2.

Background Reading:

  • Higgins. Financial Forecasting. Chapter 3.
3 Case: Wilson Lumber 2

Piper, Thomas R. Wilson Lumber Co. Boston, MA: Harvard Business School Publishing, 1991. Case No. 9-286-122.

Higgins. Financial Forecasting. Chapter 3.

Higgins. Managing Growth. Chapter 4.
4 Lecture: Capital Structure 1

Brealey and Myers. Does Debt Policy Matter? Chapter 17.

Myers, S. C. Still Searching for Optimal Capital Structure. Continental Bank, Journal of Applied Corporate Finance, pp. 4-14.

Background Reading:

  • Higgins. Financial Instruments and Markets. Chapter 5.
5 Lecture: Capital Structure 2

Brealey and Myers. How Much Should a Firm Borrow? Chapter 18.

Higgins. The Financing Decision. Chapter 6.

Background Reading:

  • Brealey and Myers. How Corporations Issue Securities. Chapter 15.
6 Case: Debt Policy at UST Inc.

Mitchell, Mark. Debt Policy at UST, Inc. Boston, MA: Harvard Business School Publishing, 2001. Case No. 9-200-069.
7 Case: Massey Ferguson, 1980

Baldwin, Carliss Y., Scott P. Mason, and Jennifer H. Hughes. Massey-Ferguson Ltd. -- 1980. Boston, MA: Harvard Business School Publishing, 1990. Case No. 9-282-043.
8 Lecture: Capital Structure: Informational and Dynamic Considerations

Barclay, Smith, and Watts. The Determinants of Corporate Leverage and Dividend Policies. Journal of Applied Corporate Finance 7, 4, 1995, pp. 4-14.
9 Case: MCI Communications Corp., 1983

Greenwald, Bruce C., and Wilda L. White. MCI Communications Corp. -- 1983. Boston, MA: Harvard Business School Publishing, 1998. Case No. 9-284-057.

Brealey and Myers. Warrants and Convertibles. Chapter 23.

Background Reading:

  • Jen, Choi, and Lee. Some New Evidence On Why Companies Use Convertible Bonds.
10 Review of Financing and Capital Structure
11 Case: Intel Corporation, 1992

Froot, Kenneth A. Intel Corp. -- 1992. Boston, MA: Harvard Business School Publishing, 1993. Case No. 9-292-106.

Brealey and Myers. The Dividend Controversy. Chapter 16.

Brealey and Myers. Leasing. Chapter 26.

Background Reading:

  • Opler, Pinkowitz, Stulz, and Williamson. Corporate Cash Holdings.
Midterm Exam

Part II: Valuation

LEC # TOPICS READINGS
12 Lecture: Valuation of Free Cash Flows

Brealey and Myers. Why NPV Leads to Better Investment Decisions… Chapter 5.

Brealey and Myers. Making Investment Decisions with the Net Present Value Rule. Chapter 6.
13 Case: Cost of Capital at Ameritrade

Mitchell, Mark, and Erik Stafford. Cost of Capital at Ameritrade. Boston, MA: Harvard Business School Publishing, 2001. Case No. 9-201-046.
14 Lecture: WACC and APV 1

Brealey and Myers. Capital Budgeting and Risk. Chapter 9.

Brealey and Myers. Financing and Valuation. Chapter 19.

Background Reading:

  • Brealey and Myers. Where Positive Net Present Values Come From. Chapter 11.
  • Higgins. Discounted Cash Flow Techniques. Chapter 7.
15 Lecture: WACC and APV 2 Same as above.
16 Case: Dixon Corporation 1

Kester, W. Carl. Dixon Corp.: The Collinsville Plant. Boston, MA: Harvard Business School Publishing, 1999. Case No. 9-298-165.
17 Case: Dixon Corporation 2

Kester, W. Carl. Dixon Corp.: The Collinsville Plant. Boston, MA: Harvard Business School Publishing, 1999. Case No. 9-298-165.
18 Case: Diamond Chemicals (A)

Bruner, Robert F. Diamond Chemicals (A). Charlottesville, VA: Darden Business School Publishing, 2001. Case No. UVA-F-1351.
19 Lecture: Real Options

Luehrman. Investment Opportunities as Real Options. Boston, MA: Harvard Business Review, 1998.

Brealey and Myers. Real Options. Chapter 22.
20 Case: MW Petroleum Corporation (A)

Luehrman, Timothy A., Peter Tufano, and Barbara D. Wall. MW Petroleum Corp. (A). Boston, MA: Harvard Business School Publishing, 1994. Case No. 9-295-029.
21 Lecture: Valuing a Company

Higgins. Business Valuation and Corporate Restructuring. Chapter 9.

Brealey and Myers. Mergers. Chapter 33.
22 Case: Cooper Industries, Inc.

Piper, Thomas R. Cooper Industries, Inc. Boston, MA: Harvard Business School Publishing, 1993. Case No. 9-274-116.
23 Case: The Southland Corporation (A)

Ruback, Richard S., and Elizabeth H. McNair. Southland Corp. (A). Boston, MA: Harvard Business School Publishing, 1997. Case No. 9-291-038.

Brealey and Myers. Leverage Buyouts, Spinoffs, and Restructurings. Chapter 34.1.

Jensen, Michael C. Eclipse of the Public Corporation. Boston, MA: Harvard Business Review, September 1989.
24 Wrap-Up of Valuation
Final Exam