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CID-P09
PGDM 2009-11:Term-III
Capital Investment Decisions (1.5 credit)
Prof. Banikanta Mishra
Course Content
: 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 Finance-I: IVR (Introduction to Risk and Valuation). This course would build on that.
This course will 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. 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 value a firm.
Course Materials
: I do not refer to any specific book. The Indicative Schedule at the end refers to the pages of
Fundamentals of Corporate Finance
by Ross, Westerfield, and Jordan, TMH (Tata McGraw-Hill), 2007 Edition. But, books by Bodie & Merton, Grinblatt & Titman, and Brealey & Myers are also good ones (possibly in that order). You may scan
The Wall Street Journal Guide to Understanding Money and Investing
by Kenneth Morrris and Allen Siegel (Lightbulb Press); Wall Street is the Dalal Street of USA and the
Wall Street Journal
its
Economic Times.
Five not-to-be-graded assignments are also enclosed in the course-pack.
Examinations
: There will be only one examination, the final (accounting for 85% of the course-grade). This closed-book examination (you will be allowed to carry only the Formula Sheet and PV-FV tables provided by me) will typically have conceptual questions and numerical problems (short, medium, long). There will be no make-up examination except in exceptional circumstances pre-approved by me
.
Some Basic Examination Rules
: You would be given either a question-cum-answer paper or a question paper with the answer-paper attached. 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; 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 side. 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).
Assignments
: The course-pack contains some assignments. You should not submit their solutions to me. I would hand you over the answers to the questions in an assignment only after all the topics relating to that assignment have been covered and you have had a few days to work the problems. Answers to cases, if any, would not be handed over, though they would be discussed in class. The COC (Group) Project is somewhat different and requires your group to determine and analyze the cost-of-capital of a company. Your group may be provided with the name of a company or asked to choose one for itself.
Grade
: Your grade would depend on your performance in the final examination (85%), your class-participation (10%), and your group-report (maximum 6 in a group) on the COC Project (5%). 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).
Class Participation
: All students are expected to take an active part in class discussions. It is not enough for a student to do well in the above-cited examinations and assignments. Class participation is an integral component of the learning process and carries 10% weight too. Therefore, I would urge you to come well-prepared to the class, to answer questions when called upon to do so, and to raise interesting issues for discussion. Besides, you must attend every class. You are allowed to miss up to two classes only if you or someone in your family is seriously ill or there is a death in your family (God forbid!). If you miss any class in violation of this rule, 0.2 would be deducted from your QPI
for every class thus missed
.
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.
‘Hide Thy Name’ Policy
: In all your solutions / reports / examinations, please mention only your Roll Number(s) on the last page. Never mention your name(s) anywhere, not even in the examination-answer-sheets. This ensures that the person grading your assignment/examination does not know your identity. If you mention your name, up to 40% of the total points would be deducted from your assignment (examination / report / case solutions).
If you are anywhere directed to write your name, it shall be deemed to be a mistake and to be overwritten by the ‘Hide Thy Name’ Policy mentioned here.
Contact Details
: Though I am usually always available in my office (Room 227 Admin Block) between 11:00 a.m. and 6:00 p.m. (except lunch break) on weekdays (and at random hours on weekends), I may not always be free to talk to you. So, if you want a meeting, please get an appointment in advance. You can reach me in my office at extension 827 or at home (only between 10:00-1:00 and 5:00-9:00, please) at 864; in case my home extension does not work, you may call me in my direct number at 230-2727 during the same hours. My secretary, Mr. Bijay Raut, can be reached at extension 842. You can, of course, always reach me by e-mail at
banikant@ximb.ac.in
OR
banikanta@hotmail.com
(the former is preferred).
Feedback
: Feedback is always useful, even for the most seasoned veteran. In that spirit (but, of course, without claiming to be either seasoned or a veteran), I would request you to give me continuous “informal” feedback. Toward this, the class may like to form a “focus group” that continuously interacts with the students and informs me about their problems, if any, with the course. I would also request you to submit the final evaluation-form, which is different from the "official" one you would receive from the Dean's Office, on the day of the final examination (just after the exam); it asks some specific questions regarding topics and cases (which are not touched upon by the official form).
Complaints
: If you have problems with the course, please report to me first. You can push in printed slips under my office-door or talk to me face to face. If for some reason, you do not feel like talking to me or are not satisfied after talking to me, you can report to the Area Coordinator, Accounting & Finance (currently Professor Soumya Guha Deb, Office Extension: 802).
Formula Sheet and PV-FV Tables
: I would have provided a 4-page Formula Sheet and 4-page PV-FV Tables. You must bring these to every class. You should bring these to all examinations also. No other sheet would be allowed or provided by me for the examinations.
Indicative Schedule
: The Indicative Schedule below gives you an idea about the chronological sequence of topics I plan to cover and the amount of time I plan to spend on each topic. It is by no means binding. I would try my best to ensure that you understand a topic well before moving on to the next topic. Based on my past experience, I, of course, believe that we shall be able to cover most, if not all, the topics mentioned in the Indicative Schedule.
I hope that I live up to your expectation (of teaching quality) and you up to mine (of sincerity).
I also hope that you enjoy the course and get the value of your time and money spent on it.
Indicative Schedule
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
Created By:
Debasis Mohanty
on
12/15/2009
at
08:52 AM
Category
:
PGP-I
Doctype
:
Document
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