Undergraduate 

Finance & Mathematics BSc

Finance 2 ACCFIN2002

  • Academic Session: 2021-22
  • School: Adam Smith Business School
  • Credits: 20
  • Level: Level 2 (SCQF level 8)
  • Typically Offered: Semester 2
  • Available to Visiting Students: Yes
  • Available to Erasmus Students: Yes

Short Description

Finance 2 builds on Finance 1. The course covers many issues of relevance to the financial manager, such as portfolio theory, asset valuation, market efficiency, risk management, capital structure, cost of capital, dividend policy, working capital management, and corporate takeovers.

Timetable

Lectures: 3 hours of lectures x 10 weeks.

Tutorials: 1 hour of tutorials x 6 weeks.

Tutorial slots can be selected on MyCampus.

Excluded Courses

None

Assessment

Intended Learning Outcomes

Assessment

Weighting

Word Length/ Duration

1-5

Class Test

25%

1 Hour

1-10

Degree Exam

75%

2 Hours

Main Assessment In: April/May

Course Aims

Finance 2 aims to consolidate and extend ideas introduced in Finance 1. By means of the concepts and analytical tools learned in Finance 1, the course introduces theories of valuation and capital structure, with an emphasis on their practical implementation and resulting implications. We extend the ideas of asset valuation and the EMH into the area of portfolio theory and investments with a first look at an asset pricing model (CAPM) and its real world implications. The course also brings about various special topics such as risk management, working capital management as well as mergers and acquisitions. After finishing this course, students are expected to have insights on crucial elements influencing the investment and financing decisions of a typical firm.

Intended Learning Outcomes of Course

By the end of this course, students should be able to:

1. Understand the concept of portfolio theory and the role it plays in modern finance.

2. Apply the concepts of investment portfolio and diversification in performing computations involving the Capital Asset Pricing Model (CAPM). Employ the CAPM to devise and evaluate various types of investment portfolios.

3. Describe the nature and type of exposure associated with risk management. Students will be able to discuss the impact of interest rate risk and currency risk on a company finances and describe the different exposures associated with this type of risk: including transaction, translation and operating risks.

4. Discuss the 5 parity relationships of international finance and ways in which exchange rate differences and interest rate fluctuations can be explained. They will be able to discuss theories of interest rate fluctuations.

5. Understand derivative use and apply simple hedging techniques for protection against foreign currency and interest rate risk

6. Apply the concepts of arbitrage and transactions costs to formulate the optimal capital structure theory with reference to the work of Modigliani and Miller. Analyse the optimal capital structure under a range of market imperfections. Examine and explain various capital structure theories and their practical implications.

7. Understand the drivers of the firm's overall cost of capital. Apply the weighted average cost of capital (WACC) to value projects.

8. Evaluate contemporary dividend policy theories.

9. Understand the nature, elements and importance of working capital. Apply and evaluate the use of a number of techniques in managing these elements.

10. Analyse the motives and tactics of mergers and acquisitions proposals as the market for corporate control in light of empirical evidence of successful mergers and acquisitions.

Minimum Requirement for Award of Credits

The minimum requirement for the award of credits is the submission of at least 100% by weight of the course's summative assessment Further requirements may include monitored attendance at classes and examinations and completion of formative assessment. All such requirements shall be specified by the subject concerned; details will be available via Moodle. Normally no grade or credits shall be awarded to a candidate who has not met these requirements.