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CID-R10
(PGDM-RM 2010-12:Term-III)
Capital Investment Decisions
Rural Management
(1.5 Credits)
Dr. Shridhar Dash
I. Course Objective
Capital is a scare resource and financial managers optimize the uses of the same. This course would develop the understanding of the concepts and tools that would help in capital investment decisions, which would maximize the value of the firm. In addition the course would attempt to discuss how the capital is raised and what should be composition of capital in terms of debt and equity.
II. Course Contents
This course would discuss the various types of capital budgeting methods, and critically evaluate them to understand the implication of using them for allocation of capital to various competing projects. Capital budgeting process is associated with risk and the course would discuss tools of risk analysis like; scenario analysis, sensitivity analysis, and break-even analysis.
In addition to capital budgeting decisions the course would cover how finance managers decide to finance the project; what should be composition of debt and equity, and the sources of fund for corporations. Besides the course would discuss the basic concepts of dividend policy, and introduce the concept of working capital management.
Reference Books
1. Financial Management
by Prasanna Chandra, TMH
2. Fundamentals of Corporate Finance
by Ross, Westerfield, and Jordan; 8th Edition (Alternate); ISBN: 978-0-07-328211-4; 2008
3. Principles of Corporate Finance
by Richard A Brealey, Stewart C. Mayers, Franklin Allen, and Pitabas Mohanty, Tata McGraw-Hill (TMH), 2007
III. Detailed Session Plan
Session 1-3: Capital Budgeting: The investing decisions
In this session we will discuss the various types of capital budgeting methods, and critically evaluated them to understand the implication of using them for capital allocation to various competing projects. Besides we would study various scenario analysis and sensitivity analysis to understand the risk associated with the investment decisions.
Session 4-5: Capital Structure: The long-term financing decisions
In these sessions, we will study the importance of structure of firm with respect to how the firm finances their investment. We would study the Modigliani & Miler (MM) Theorem and its implications for capital structure. How the imperfections in the market needs to be understood in the context of MM theorem so that we can explain the differences in capital structure across industries.
Session 6: Dividend policy: The sharing of surplus decision
In these sessions, we will study the firm’s decision about how much cash from the profit to distribute to the shareholders of the firm. Does pay-out policy makes a difference to the valuation of firm? We would study the Modigliani & Miler (MM) theorem and try to understand the implications for the pay-out decisions for a firm. How pay-out different form stock purchase and what is would be appropriate thing to do under what conditions would be studied.
Session 7-8: Working capital management: The Short-term financing decisions
In these sessions, we will study the importance of working capital, and how one can estimate the requirement of working capital. Given that more working capital is drag on the profitability, how can a finance manger reduce the working capital requirement.
Session 9-10: Source of funds: Knowing the facts for decisions
In these sessions, we will study the role of financial institutions to meet the financial need of the firm. What are source of long-term and short-term fund? The source of the fund would be discussed in the context of the Indian financial system. Besides we would discuss the positive and negative aspect of various sources and under what condition which source would be most appropriate for the firms.
IV. Evaluation
The following table describes the per cent of weights given for the purpose of the evaluation.
Components
Weights (%)
Class Participation
10
Class Assignments
30
Surprise Quizzes (2)
20
End Term
40
The class participation would be based on the regularity of attendance (Students attending all classes would be rewarded), and the students participation level on the over all learning process.
Class assignment would be given to groups (each group would consists of 6 students). One can choose the group only from his/her own sections. It is expected that each students should understand the assignment. Marks on the assignment would be given on the basis of report and class discussion. Each group would get 5 minutes to discuss the assignment (faculty will decide who would discuss in the class). If any individual fails to do so then the entire group would get zero in that component. No negotiations on this respect would be encouraged.
Quizzes would be of MCQ types with negative marks. There will of two quizzes with 15% of the mark. Both the quizzes would cover the portion discussed till the time the quizzes are conducted.
End term examination would cover the entire syllabus and would test students understanding of the subject.
Created By:
Hemanta Ranjan Deo
on
12/21/2010
at
10:56 AM
Category
:
PGPRM - I
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