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FM-EMBA-BA-19

MBA(Exe.)-BA-2019-20: Term-II

Financial Management
Credits 3.00
Faculty Name Banikanta Mishra
Program EMBA-BA
Academic Year and Term 2019-2020, Term-II



1. Course Description
The objective of the financial-manager of a firm is to create wealth for the firm’s stakeholders. S/he does so by identifying and investing in projects where the current worth of cash-flows exceeds the current cost of the required investments. This worth is measured by value.

This course revolves around the central theme of finance: valuation. It will start by introducing you to concepts of valuation and their measurements. You will then use this knowledge to value the two most basic securities: stock and bond. You would learn that value depends upon two variables: cash-flows and discount-rate.

Discount-rate is typically the more difficult variable to tackle. When valuing stocks and bonds, you would have initially taken the discount-rate as given. But, later in the course, you will analyze how these discount-rates are determined. The first thing that you will learn in this regard is that risk of an instrument influences its discount-rate. Then, you will ferret out the different sources of risk for a bondholder. In this context, you will learn about the term-structure-of-interest-rates, which explains why riskless - and even similarly risky - bonds of different maturities command different yields.

Determination of discount-rate for stocks is perforce a more complicated task. This will necessitate your understanding the risk-return framework in which individuals make their portfolio-selection choices. You will learn how risk is defined and measured for a stock. That will introduce you to the concept of “beta”, which measures a stock’s risk.

Using all the above building-blocks, it would finally teach you how to evaluate – or value - a capital-investment opportunity using various rules, especially NPV (Net Present Value) and IRR (Internal rate of Return). It would thus familiarize you with the nuances of determination of cash-flows for a project, in particular the effect of tax-shields, opportunity costs, externalities, and unequal lives. It would also tell you how to determine cost-of-capital and what effect debt-equity ratio and other factors have on the cost-of-capital. You may also get a glimpse of "real options", options that arise in capital-budgeting problems.

After having gone through the course, you should be able to evaluate an investment opportunity or, by extension, even value a firm.

2. Student Learning Outcomes
ü Be able to derive present-value and future-value of single cash flows and cash flow streams
ü Be able to value simple (straight) bonds and stocks
ü Be able to understand how risk affects discount-rate or cost-of-capital used in valuation
ü Be able to decide whether a project is worth investing in and how it compares with other projects
ü Be able to carry out sensitivity, scenario, breakeven, unequal-lives analyses
3. Achievement of Program Learning Objectives

Ø 1.3 Students will demonstrate understanding of elements of finance
Ø 2.1 Students will use analytical techniques to identify a business problem and suggest a solution

4. Required Text Book

Fundamentals of Corporate Finance by Ross et al, TMH (Tata McGraw-Hill: Latest Edition)

5. Tentative Session Plan

Session
Topics Covered
1-4
Time Value of Money: PV and FV
5-7
Security Valuation: Debt and Equity
8-10
Risk and Return; CAPM
11-12
Capital Budgeting: NPV, IRR, and Other Criteria
13
Determination of Cash Flows
14-15
Determination of Cost of Capital
16-18
Evaluation and Comparison of Projects
19
Financial Forecasting (Case)
20
Cash Budgeting; Working Capital Management (Case)

6. Evaluation

Your grade would depend on your performance in two examinations – or a quiz and a final exam – carrying a total weight of 60%, two group case reports (10% each), group-report on the COC Project (10%), and class participation (10%); a group should have maximum six students. Our grading policy would be followed.

7. Code of Ethics

You must abide yourself by the (unwritten) Code of Ethics for Students. For individual (group) assignments/examinations/projects, it is unethical to seek any direct help from others (other groups), whether or not you make use of the help. Besides, other forms of dishonesty (like plagiarism) would also invite severe punishment.
Moreover, for a group assignment, all members of the group should contribute to the preparation of the report (no free-riders), and no direct help should be sought or taken from persons outside the group. Discussion among individual students and groups (except in the examination hall or class-room) is, of course, always encouraged. But, the final report or solution should be totally in your (your group’s) own style and language; any form of copying from another student (or group) or from any outside source is a serious offense. Moreover, you (or, wherever relevant, each member of your group) must fully and clearly understand every word and every step written in your (your group’s) report. Your basic purpose should be to learn, without resorting to any unfair means for getting a higher score/grade. If you resort to any unfair means, including, but not limited to, the ones mentioned above, you would receive an F in the course; I may also recommend to the Institute for your expulsion.

8. An Additional Code of Ethics

All group members are jointly and severally responsible for ensuring that the group report and activities adhere to the code of ethics. If a group violates code of ethics, all group members would be punished equally; one or more group members cannot claim waiver from punishment on the ground that “I was not aware of the unethical act of my other group-member(s)”.

Please realize that you would not be promoted or allowed to graduate if the total number of Ds and Fs you have exceeds a benchmark set by the institute/university. So, please do not come to me at the end of the term and request me to change any F/D received by you. I will NOT change the QPI or grade. So, work hard to ensure that you do not get a poor grade. More important, avoid violation of code of ethics to ensure that you do not get a penalty F.

9. Academic Integrity (taken verbatim from the University of Texas, Dallas, format)

The faculty expects from its students a high level of responsibility and academic honesty. Because the value of an academic degree depends upon the absolute integrity of the work done by the student for that degree, it is imperative that a student demonstrate a high standard of individual honor in his or her scholastic work.

Scholastic dishonesty includes, but is not limited to, statements, acts or omissions related to applications for enrollment or the award of a degree, and/or the submission as one’s own work or material that is not one’s own. As a general rule, scholastic dishonesty involves one of the following acts: cheating, plagiarism, collusion and/or falsifying academic records. Students suspected of academic dishonesty are subject to disciplinary proceedings.

Plagiarism, especially from the web, from portions of papers for other classes, and from any other source is unacceptable and will be dealt with under the university’s policy on plagiarism (see general catalog for details). This course will use the resources of turnitin.com, which searches the web for possible plagiarism and is over 90% effective.



10. Some Examination Instructions

Online Exams: Unless otherwise specified, things like rate (RRR, ERR, etc.), interest rate, ratio, and relative change should be expressed in percent form (two places after decimal) and things like value (FV, NPV, etc.), price, and absolute change in decimal form (two places after decimal), subject to caveats about format stated below. In Long questions, multiple questions are based on the same set of data; so save your work when you work on it for the first time.

In answering a multiple-choice question, just enter the number (without any prefix or suffix) corresponding to the correct option. Only if an explanation is asked for, show that in the space provided (where you can enter text and all that); for such a question, both your answer and the explanation must be correct to receive the points.

In answering a numerical problem, do NOT enter any sign, symbol, or text (&, %, $, Answer:, ","); just enter the number with a decimal sign if required. So, if the correct answer is 13.46, then enter 13.46 (if asked for two places after decimal), 13.5 (one place), 13 (nearest integer), or 14 (next nearest integer or rounded up to the next integer).

Similarly, if the correct answer is 5.46% or 0.0546, then, if asked to answer in [a] %, then enter 5.46 (two places after decimal), 5.5 (one place after decimal), 5 (nearest integer) / [b] decimal, then enter 0.0546 (four places after decimal), 0.055 (three places), 0.05 (two places), 0.1 (one place).

Moreover, carefully note the unit in which you have to enter the answer. For example, if 7,50,000 shares are bought back and you are asked "How many lakh shares are bought back?", then you should enter 7.50. If asked how many thousand, then 750.00. Only if you are asked “How many shares are bought back?” should you enter 750000.00 (remember, no commas and two decimal-places default?).

Wrong-Answer-Penalty per question depends on your wrong-answer-percent (total wrong answers/ number of questions in the test) and is as follows: 1/2 (>80% wrong answers), 1/3 (<80%), 1/4 (<60%), 1/5 (<40%), and 0 (<20%).

Offline Exams: You would be given either a question-cum-answer paper or a question paper with an attached answer-paper. In the former case, you would be given a specific amount of space following each question for writing your answer. In the latter, you would be given a specific total number of pages to write your answers in; you should use both sides of each sheet and show your answers in ascending order (answer to Q.1 first, followed by answer to Q2, and so on), leaving half-inch gap between your answers.

In all cases, leave half-inch margin on both left and right sides. Read instructions, if any, on the question/question-cum-answer book; if an instruction therein conflicts with one given here, then it overrides the one given here. If not specifically asked to use a pen, you may use either pen or pencil. Write legibly; if I cannot read what you have written, I will not give you any points for the relevant portion.

Unless merely asked to tick the right answer, explain clearly all your derivations and answers; if no explanation is given, no credit will be given for merely ticking or jotting down the correct answer. Be precise; clumsy writing and imprecise or unnecessarily lengthy answers will be penalized.

You are not allowed to seek any clarifications from anyone (not even your instructor) during examinations; if a question is wrong or unclear, just state why the question is wrong/unclear and, if possible, make an assumption and answer the question. If you are found to be justified doing what you did, you will get full points; or else, you would receive less (even zero).



Bhubaneswar 4 June 2019
Signature Place Date
Created By: Alora Kar on 11/25/2019 at 12:08 PM
Category: MBA(Exe.)BA-2019-20 T-II Doctype: Document

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