Course code: MGT4005
Course credits: 30
Taught: Semesters 1 and 2
Course co-ordinator: Mr M. Keeley
Entry requirements: Normally admission to an honours programme in Business & Management
Available to visiting students: Yes
Contact for more information: Cherisse McLaren
Financial Management aims to provide students with a thorough understanding of the theory and practice governing corporate financial management.
Financial Management aims to provide students with a thorough understanding of the theory and practice governing corporate financial management. The course introduces students to an analysis of security valuation (of bonds, equity and derivative instruments), and the financing decision; should the cash needed for the investment be raised by issuing equity or debt, or by retaining profits in the firm? To make sure these decisions, managers need the guidance of finance theory as well as empirical evidence on issues such as: how will borrowing affect the value of the firm and its share capital? How will the payment of dividends affect the value of the shares and shareholder wealth? This course addresses these and other core questions of financial management, and in doing so, introduces some of the key concepts of modern finance, including portfolio theory and the capital asset pricing model, option pricing theory, market efficiency, and agency theory.
Intended Learning Outcomes
By the end of the course, students should be able to
- Demonstrate an understanding of the present value principle, and apply various investment appraisal techniques for investment decision making;
- Discuss various theories regarding the term structure of interest rates;
- Calculate the value of bonds, including the interest rate sensitivity (duration);
- Apply and discuss the Gordon's growth model of share valuation;
- Discuss the relationship between risk and return;
- Discuss the concepts of portfolio theory and the capital asset pricing model (CAPM) in non-technical terms;
- Understand how the CAOM can be used to ascertain the cost of capital in capital budgeting;
- Discuss the various forms of the efficient market hypothesis (EMH) together with some of the key evidence as to whether the EMH is valid or not;
- Discuss why companies attach such significance to dividends, and why dividend policy is influenced by taxation, information asymmetry and other market imperfections;
- Evaluate the capital structure decision in light of the Modigliani and Miller propositions and subsequent developments;
- Demonstrate an understanding of the controversy surrounding the use of derivative instruments, and the Black-Scholes option pricing model;
- Evaluate the various motives for mergers and acquisitions and the role of agency theory in corporate governance.
Learning and teaching methods
Lectures: 2hrs x 20 weeks
Please refer to MyCampus for timetable.
"Corporate Finance" by Hillier et al., 3rd European edition, McGraw Hill
An in-course exam (20%)
An assignment (20%)
A 3-hour degree exam (April/May) (60%)