Corporate Finance

Module

Contents

Sessions

Marks

I

Overview of Financial Management:

• Meaning, Objectives, Scope, Role and Functions of Financial Management (Financial Decisions).
• Financial Goal - Profit Maximization versus Shareholders’ Wealth Maximization.

Time value of Money: (theory and numerical)

• Concepts, Compounding, Discounting, Annuities.

Sources of Long-Term Finance:

• Introduction to Equity Shares, Preference Shares and Debentures, Term loan.

Valuation of Bonds, Preference shares and Equity.

(numerical)

10

17

II

Understanding Investment Decisions (Capital Budgeting Decisions):

• Meaning, Features
• Types and Importance of Investment Decisions
  • Discounted Cash Flow (DCF)
    • NPV, IRR, MIRR, PI, Discounted Payback
    • Non-Discounted Cash Flow Techniques
      • ARR, Payback period

Capital Rationing (theory and numerical)

Understanding Dividend Decision:

• Dividend and dividend policy
• Factors affecting dividend payout
• Dividend payment models: (theory and numerical)
  • Dividend relevance model
    • Walter model
    • Gordon model
    • Dividend irrelevance model
      • MM model

Basics of Decision Tree Analysis (1-level and 2-level) (theory only)

10

18

III

Cost of Capital: (theory and numerical)

• Significance, Concept of the Opportunity Cost of Capital
• Component Costs of Capital - Cost of Debt, Preference Capital and Equity Capital
• Weighted Average Cost of Capital (WACC)

Leverage: (theory and numerical)

• Types of Leverage - Operating, Financial and Combined Leverage.
• Point of indifference

Understanding Financing Decisions (Capital Structure Decisions): (theory and numerical)

• NI Approach
• NOI Approach
• MM Theory with and without Taxes

10

18

IV

Working Capital Management:

• Concepts of Working Capital.
• Operating Cycle.
• Determinants of Working Capital.
• Estimating Working Capital Needs. (theory and numerical)
• Working Capital Finance Policies.
  • Matching approach, conservative approach, aggressive approach.

Receivables Management:

• Nature and Goals of Credit Policy
• Credit Policy Variables(theory and numerical)

10

17

V

Application:

• Select suitable organization and study:
• The role and functions of Finance department;
• Select Scrip or bonds and do the valuation of its Securities;
• Study the investment decisions, working capital policy and cash budgeting etc.

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(30 marks)