Finance 357 Syllabus
Fall 1999
Unique Number 02590
T TH 3:30-5:00
UTC 4.124

Professor: Dr. Richard MacMinn

• Office: CBA 3.210
  Phone: 471-5758
• Email: macminn@mail.utexas.edu
• Office Hours: Thursday 12:00-2:00 or by appointment
• Finance Department: CBA 6.222 Phone: 471-4368

Teaching Assistant: Alex Lukin

• Office: CBA 5.324
  Phone: 471-1674
• Email: alex.lukin@bus.utexas.edu
• Office Hours: CBA 3.210 T TH 2:00-3:00 or by appointment

Prerequisites:

Basic accounting and statistics are essential to understanding the principles developed in this course. If you have not had these courses as required by the college then you should consider withdrawing now. Finance 357 is one of the most quantitatively oriented core courses you will take and you need to be adequately prepared.

Some computer skills are also required for this section of Finance 357. You need to be familiar with the basic operation of either a PC or a Mac. You must also be willing to learn how to use software including applications like Outlook and Internet Explorer that will allow you to send and receive email and navigate the world wide web, respectively. Using an email system is a generic communication skill that most companies will expect you to have; in this course, you will be able to contact me this way and I will expect you to submit assignments this way. Using the web is also becoming a generic communication skill; we will use the web to get current corporate information such as stock price histories, quarterly and annual reports, proxy statements, etc. that might not otherwise be available to us on a timely basis. Further, you will be provided with all the course information via the web server for this course.

Textbook:  

Keown, Petty, Scott and Martin, Foundations of Finance: The Logic and Practice of Financial Management 

Burton Malkiel, A Random Walk Down Wall Street  

Other Material:
We will be using the following two formula sheets.  In addition, you may want to go to LiveMath and download the free LiveMath plugin.  I will be using the LiveMath software to demonstrate the solutions to some problems and I will make those solution available on the web.  You will need the plugin to view the solutions.

Financial Ratios Formula Sheet

Formula Sheet

Course Description:

Business Finance is concerned with the concepts and analytical techniques necessary to identify and analyze financial performance and problems. The present and future value notions are critical in finance; these notions will be developed early, and then applied repeatedly in a variety of settings. The risk and return notions are also critical and will be introduced early, and then applied in the remaining development of the subject. Using the risk and return notions requires some sophistication in probability and statistics since mean, variance, and covariance all play a role in their development. You will be expected to demonstrate an understanding and proficiency in using these notions by solving increasingly complex problems.

This semester I will continue developing an integrated set of lecture notes. The lecture notes will provide links between the formulas that we develop, a formula sheet, and problems that demonstrate the use of the formulas. The lecture notes will also provide links to excel spreadsheets and theorist notebooks as appropriate; theorist is a math software program that allows you to perform simple algebraic operations in a very intuitive way. I will also provide links to other parts of the internet that provide financial information that is relevant to this course, such as EDGAR and Security APL. Follow the links here for more information on the topics, for links to the lecture notes, and for the assignments.

The outline of the course below contains links to lectures given in the Fall of 1996. Links to the new lectures will be provided on the assignment sheets. The following major topics will be covered:

• Financial Management
• Organizational Goals
• Organizational Forms
• Taxes
• Principles
• Financial Markets
• Why do financial markets exist?
• The cast of characters, menu of financial instruments, and trading process
• Interest rates
• Financial Performance
• Financial Statements
• Leverage
• Financial Ratios
• The Time Value of Money
• Bond Value
• Stock Value
• Risk and Return
• The Nature of Risk and Return
• A Market Value Model
• Capital Budgeting in an Uncertain Environment
• Capital Budgeting
• Cost of Capital
• Financial Mix
• Dividend Policy

Schedule:

Class Day	Topic	Suggested Problems	Assignment
Thursday August 26	Course Introduction		Take the pre-screen quiz at MedWeb. Due September 22
Tuesday 31	Keown 1, 17 Financial Management	Chapter 1: 2, 5, 6 Study Guide
Thursday September 2	Keown 2, 17 Malkiel 1, 2 Financial Markets	Chapter 2: 1-3, 5 Study Guide Spreadsheet	Locate the  February 1994 Economic Report of the President on the internet. Submit the URL in an email message to alex.lukin@bus.utexas.edu as the economic report assignment Due September 16
Tuesday 7	Keown 3 Financial Performance	Chapter 3: 1-5 Study Guide Spreadsheet
Thursday 9	Keown 3	Study Guide Spreadsheet	Search EDGAR for a company that interests you. Get the latest 10-K for that corporation and calculate the following financial ratios: total asset turnover, net profit margin, leverage ratio, return on assets, and return on equity. Submit the URL of the 10-K and the financial ratios in an e-mail message to alex.lukin@bus.utexas.edu as financial ratios assignment Due September 18
Tuesday 14	Keown 5 Time Value	Chapter 5: 1-6, 11, 13, 15-22, 25, 26, 30 Study Guide Spreadsheet
Thursday 16	Keown 5		Take the Time Value of Money quiz at MedWeb Due September 27
Tuesday 21	Keown 6 Malkiel 13 Bond Value	Chapter 6: 1-6 Study Guide Spreadsheet
Thursday 23	Keown 6 Malkiel 13
Tuesday 28	Review		Provide some feedback on how the course is going and how it might be improved. Send it to macminn@mail.utexas.edu as the comment assignment Due October 5
Thursday 30	Exam One
Tuesday October 5	Keown 7 Malkiel 3, 13 Stock Value	Chapter 7: Study Guide Spreadsheet
Thursday 7	Keown 7 Malkiel 3, 13	Chapter 7: Study Guide Spreadsheet
Tuesday 12	Keown 8 Malkiel 5-8, 9-10 Risk and Return	Chapter 8: 1-8, 10, 11 Study Guide Spreadsheet	Select a publicly held company of interest to you. Go to Quote.Com,  PCQuote or MarketGuide, to get a quote and the company's beta. Submit  the company quote and the company beta in an e-mail message to alex.lukin@bus.utexas.edu as the beta assignment Due October 19
Thursday 14	Keown 8 Malkiel 5-8, 9-10	Chapter 8: Study Guide Spreadsheet	Take the Risk & Return quiz at MedWeb Due October 25
Tuesday 19	Keown 9 Capital Budgeting	Chapter 9: 1-2, 4-8, 11-15 Study Guide Spreadsheet	Take the Topics in Capital Budgeting quiz at MedWeb Due October 28
Thursday 21	Keown 10 Topics in Capital Budgeting	Chapter 10: 1-4 Study Guide Spreadsheet	Take the Capital Budgeting quiz at MedWeb Due October 28
Tuesday 26	Review
Thursday 28	Exam Two
Tuesday November 2	Keown 11 Cost of Capital	Chapter 11: 1-5 Study Guide Spreadsheet
Thursday 4	Keown 11	Chapter 11: 1-5	Take the Cost of Capital quiz at MedWeb Due November 15
Tuesday 9	Keown 12 Financial Structure	Chapter 12: 1-4, 9-12 Study Guide Spreadsheet	Search the database at Edgar for the 10-K of a company of interest to you. Submit the URL of the 10-K  in an email to the TA, alex.lukin@bus.utexas.edu as 10K assignment Due November 16
Thursday 11	Keown 12 Capital Structure	Chapter 12: 1-4, 9-12 Study Guide Spreadsheet	Using the company 10-K that you submitted in the last assignment, calculate the breakeven sales, degree of operating leverage, degree of financial leverage, and degree of combined leverage. Submit these numbers along with the URL for 10-K in an email to the TA, alex.lukin@bus.utexas.edu as breakeven assignment Due November 18 Take the Leverage quiz at MedWeb Due November 26 Take the Capital Structure quiz at MedWeb Due November 26
Tuesday 16	Keown 13 Dividends	Chapter 13: 1-8 Study Guide Spreadsheet	Take the Dividend quiz at MedWeb Due November 26
Thursday 18	Review
Tuesday 23	Exam Three
Thursday 25	Thanksgiving holiday
Tuesday 30	Keown 16
Thursday December 2	Keown 17 Review	Chapters 1-13

Electronic Mail:

You will be expected to become proficient in using electronic mail. It is important that you check for email messages on at least a daily basis since this will be one of the primary methods we have for communication outside of class. It is also important for you to learn how to attach documents to email messages so that we can strive to make this course as paperless as possible. Assignments must be submitted via email unless otherwise specified.

The computation center has established the University Mailbox System (UMBS). If you are a registered student then you already have an account for email. To activate your UMBS mailbox, use the Telnet program to connect to the UMBS host called mail.utexas.edu. You will be asked to identify yourself by supplying your UTID, name, and date of birth. If the values you supply match official University records, you will be requested to choose a password and a mailbox name. Guidelines for composing these are displayed on-screen. Your mailbox is created immediately and so you can start sending and receiving email immediately. Your email address takes the form mailboxname@mail.utexas.edu. All the lab assistants in the business school labs should be able to assist you if you encounter problems. If you click on the following anchor you will begin a telnet session to activate your email account. From there just follow the instructions on screen.

For those of you who want extra help activating your email account, here is the course description and a link to the schedule for email orientation sessions. In these classes, you will activate your UMBS mailbox, configure Eudora and send a message. You will leave with a Eudora settings file on a floppy diskette so you must take a floppy disk to the session. You can use a number of client programs for email.

The computation center runs a number of short courses that may interest you. The computation center short course schedule is here. Also check out the training services homepage.

The Web:

You will be given a short introduction to web during the first week of class. Netscape and Internet Explorer are client applications that give you access to the web. Lecture notes and other materials will be provided through my Corporate Finance web pages.

Course Evaluation:

    Your course scores and averages will be available online.  You will be given the access information in class.

• Examinations.
  There will be three exams and a final. The exams will include multiple choice and essay questions.
• Exam I:  September 30, Keown 1-3, 5, 6, 17, Malkiel 1, 2, 13
• Exam II:  October 28, Keown 7-10, Malkiel 3, 5-10, 13
• Exam III:  November 23, Keown 11-13
• Final:  December 11, 7:00-10:00 PM, GSB 2.126, Keown 1-13
• Grading.
  Course scores will be based on the following formula:

.1A + .9 max{.33 I + .33 II + .34 III, F, .2 I + .2 II + .2III + .4 F},

where I, II, III, and F indicate the scores on exams one, two, three and the final, respectively. A represents an average of the assignment scores. The assignment score will be an average score for assignments given to you during the semester. All assignments will be pass or fail.  The pass and fail scores are one and zero, respectively.  In the case of quizzes a passing score is 85% or better and you may take the quiz as many times as necessary.  Finally, at my discretion, the assignment score may also be based on class attendance. The course scores will determine your grade in the class as follows:

90-100	A
80-89	B
70-79	C
60-69	D
0-59	F

• Reviews
• Some class time will be allocated to review for the exams.
• You may request the re-grade of an exam in writing within a week after it is returned. Your score may be increased or decreased as indicated by any existing grading error.

Course Policies:

• If you choose not to take the final then you must notify me via email at macminn@mail.utexas.edu before Tuesday, December 7, 1999. Put final choice on the subject line of the email. The course score will revert to .1A + .9 (.2 I + .2 II + .2III + .4 F) for those who fail to comply.
• If you attend class but must leave before the end of class then let me know before class begins! You may do this via email if you prefer. Class attendance will be taken periodically and you are subject to losing assignment points if you leave class early without letting me know.
• Most assignments will be turned in via email. The subject line of the email message must correspond to the instructions on the assignment sheet for you to be given credit for the assignments. Send a copy of the assignment to yourself as proof that you submitted the assignment.
• Students missing an assignment, quiz, or exam without my prior permission will receive zero for it. Requests for an excused exam absence must be made in writing prior to the exam; email is preferred.
• Make-up or extra work to improve your grade is not possible. Your final letter grade is determined solely by your exam and assignment scores. In addition, no special considerations concerning your general academic situation can be offered. The final grade in the course, once assigned will not be changed except in the event of a grading error.
• All tables, formulas and scratch paper will be provided with your exam. You need only bring a couple of No 2 pencils and a hand calculator. Students taking each exam must bring a picture ID to the exam session.
• Any individual caught cheating will be disciplined to the maximum extent possible.
• Exams will not be returned. They will be available for review during the week after the grades for that exam are posted. After that time, they will be stored.
• Your exam score will be posted as soon as possible. Allow at least five working days for grading. If you feel that the posted grade is incorrect, you have one week from the date the grades are posted to bring the matter to my attention.
• If you do not attend a class it is entirely your responsibility to determine what you have missed, including any administrative announcements I may have made. Remember, not all announcements will be made electronically!
• Grades for each exam are posted on the roster. You can check them at any time during the semester. Do not contact me about missing scores until I've indicated, in class, that the roster has been updated! If you do not want your grades posted, please give me a note to that effect.
• It is possible that a conflict may arise with the final in this course and a final in one of your other courses. I am willing to work with you in resolving this conflict. It is imperative that the conflict be brought to my attention at least two weeks before the scheduled final. After that time, no adjustments will be made and I will expect you to attend the final as scheduled.

Study Guidelines:

• You need to understand what you are studying, whether it be conceptual or analytical. When you study, ask yourself questions such as:
• What is the purpose of this concept or formula?
• Why is it important?
• How does the author demonstrate its importance?
• How does it fit with what you have studied so far, either in this class or in an earlier class?
• I suggest that you skim each chapter once right before it is discussed in class and then read it thoroughly after the topic is covered in class. If you are having trouble with a concept or problem then see me or the TA as soon as possible. I also encourage you to use the class email list to get help from other students.
• The lecture notes contain the important points in this course. Use them as a guide for your studying efforts.
• The problems associated with each chapter are not to be handed in but I encourage you to work them. Working these problems is a necessary step in preparing for the exams. The quizzes will be graded and will become part of your assignment score. The exam problems will appear simpler for those who work the problem sets and complete the quizzes. No amount of reading will help you consolidate the material if you do not work the problems. I will give more specific guidance concerning each problem set as the semester progresses.
• Most students find the course material to be very rigorous. Memorization of facts, definitions, etc., will not suffice. Relying on your calculator as a means to simply plug in numbers for an answer will get you in trouble since problems do not always fit neatly into one formula.
• Cramming right before an exam usually results in confusion, anxiety and a loss of the big picture!