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FM-II-Q12
PGDM-HRM 2012-14: Term-III

FM: Part-II [Capital Investment Decisions (CID)]

Credits 1.5
Faculty Name Banikanta Mishra
Program PGPHRM
Academic Year and Term 2013-2014



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.

You would have learnt the basics of valuation and risk in IVR (Introduction to Risk and Valuation). This course would build on that. It will 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 ho 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 (typically 3-5 bullet points):

ü Be able to decide whether a project is worth investing in and how it compares with others
ü Be able to derive cash flows for planned projects towards comparing them
ü Be able to carry out sensitivity, scenario, breakeven, unequal-lives analyses
ü Be able to understand the effect of capital structure on value of the firm and cost of capital

3. Required Text Books and Reading Material

Fundamentals of Financial Management by Prasanna Chandra, TMH (Tata McGraw-Hill)

4. Tentative Session Plan

Session
Topics Covered
1
Recap: Deriving Cash Flows
2
Cost of Capital
3-4
Capital Budgeting: Competing Criteria
5-7
Capital Budgeting Under Certainty
8-9
Capital Structure and Project Value
10
Special Topics in Capital Budgeting
5. Evaluation: Your grade would depend on your performance in the final examination (80%), class participation (10%), and your group-report on the COC Project (10%); a group should have maximum six students. Unless there is an official grade distribution of the Institute, your QPI would be calculated as equal to (P-N)/10, where P is your overall percentage-score and N is between 0 and 10 (usually 10).

6. 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.

7. 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 soft-ware that searches the web for possible plagiarism and is over 90% effective.

Created By: Debasis Mohanty on 12/17/2012 at 09:20 AM
Category: PGDM(HRM)-I Doctype: Document

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