UNIVERSITY OF MANITOBA

I. H. ASPER SCHOOL OF BUSINESS

DEPARTMENT OF ACCOUNTING AND FINANCE

FIN 4400 – FINANCIAL MANAGEMENT PRACTICES

2014/15 Term 1, Section A01

Instructor: Dr. S. Abeysekera

Room: 444 Drake Centre for Management

Phone: 474-8427

Office Hours: Tuesday and Thursday 10:00 a.m. - 11:00 a.m. or by appointment.

E-mail: Sarath_Abeysekera@Umanitoba.ca

Web site: http://umanitoba.ca/faculties/management/faculty/sarath.abeysekera/

COURSE OBJECTIVE AND DESCRIPTION:

To deepen and consolidate the understanding of the basic concepts of finance acquired at the introductory and

intermediate level courses, and to apply this knowledge via case simulations and actual business situations.

Broader issues discussed will include ethics, corporate social responsibility, corporate governance, and

leadership. Critical thinking and teamwork will play important roles in case analyses.

COURSE MATERIALS:

Text: Custom ordered Case Book available in the UofM Book Store.

Recommended:

Benninga, Simon, Financial Modeling, 3e, MIT Press, 2008.

Berk, J., P. DeMarzo, and D. Stangeland, Corporate Finance (Canadian Edition), Pearson Canada,

2010. [BDS]

Brealey, R., S. Myers, Principles of Corporate Finance, 7th Edition, McGraw-Hill Ryerson, 2003.

Chew, Jr. Donald H. (Ed.), The New Corporate Finance: Where Theory Meets Practice, Third Edition,

McGraw-Hill 2001.

Copeland, T., T. Koller and J. Murrin, Valuation: Measuring and Managing the Value of Companies,

John Wiley & Sons, 1990.

Lusztig, P., W. S. Cleary and B. H. Schwab, Finance in a Canadian Setting, 6th Edition, John

Wiley & Son, 2001.

Damodaran, Aswath, http://pages.stern.nyu.edu/~adamodar/

Ross, S. A, R. W. Westerfield, J. F. Jaffe and G. S. Roberts, Corporate Finance, Third Canadian

Edition, McGraw-Hill Ryerson, 2003. [RWJR]

Santomero, A. M., and D. F. Babbel, Financial Markets, Instruments, and Institutions , McGraw-Hill

Irwin, 2001.

Note: Additional reading and reference materials will be handed out in class.

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PREREQUISITE:

Financial Theory and Practice – FIN 3480.

COURSE REQUIREMENTS:

Class Participation:

Each class will consist of discussion of a case study with the entire class participating. The students, therefore,

are expected to have thoroughly analysed a given case before arriving in class. In this regard, questions

provided in advance could be used as minimal guidance in the analytic framework adopted.

Regular attendance is expected of all students. Department procedures may be initiated and a failing

grade may be assigned to those who miss 10 or more classes.

Recommended Reading:

It is expected that everyone is familiar with literature related to the topic/s of discussion on a given day.

Students are encouraged to broaden their understanding of these topics through Recommended Readings and

other relevant sources.

Reports on Case Analyses:

Three written case analyses are due in class, on the dates indicated in the Course Schedule below. No reports

will be accepted after the given deadline.

Reports must be “word processed” and you are required to submit a hard copy in class, and e-mail a soft copy

to the instructor. Please have the subject line of the e-mail as FIN 4400 Report. All graded reports will be

retained in our Department.

Author of each report is solely responsible for the content and analysis presented, and therefore

no group effort is assumed in writing a given report. All suspected cases of violations of academic

integrity are subject to disciplinary action. (See page 5)

Seating and Identification:

It is suggested that the students find a permanent seat by the second day of classes. Every student is required to

display his/her nameplate on the desk during all classes.

Examination Liability:

Final examination will be a case analysis.

GRADING: Report 1: Spreadsheet 05%

Report 2: Case Analysis 15%

Report 3: Case Analysis 20%

Class Participation 25%

Final Examination (Case Analysis) 35%

Total 100%

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TENTATIVE COURSE SCHEDULE:

Date Case / Topic Suggested Reading

Sep. 4 Introduction

Sep. 9 “Sophisticated Petites” /

Comprehensive size-up of a firm

and Assessment of financing

needs

Tips for case analysis,

http://archive.tlt.psu.edu/suggestions/cases/studenttips/index.htm

Ross et al., Corporate Finance, Third Canadian Edition, Chapter

2, “Accounting Statements and Cash Flow”

http://www.smallbusiness.wa.gov.au/profit-margin-ratio-s-and-

break-even-analysis/

Sep. 11 “Palmer Limited” / Lending

decision http://sbinfocanada.about.com/od/cashflowmgt/

Cash_Flow_Management.htm / Cash_Flow_Management.htm

Sep. 16 “Kitchen Helper” / Assessment

of cash needs RWJR - Chapter 27, “Short-term Finance and Planning”

BDS – Chapter 26 “Working Capital Management”

BDS – Chapter 27 “Short-Term Financial Planning.”

Sep. 18

Report #1 due

Sep. 23 “Northstar Aerospace” /

Lending decision RWJR - Chapter 29, “Credit Management”

BDS - Chapter 26 “Working Capital Management”

Sep. 25 “SRI Office Products” / Credit

management Sartoris and Hill, “Generalized Cash Flow Approach to Short-

Term Financial Decisions,” Journal of Finance, May 1983.

Sep. 30 “EnCana Corporation: the Cost

of Capital” Gitman and Vandenberg, “Cost of Capital Used by Major U.S.

Firms”

Kerins et al., “Opportunity cost of capital for Venture capital

investors and entrepreneurs”

Oct. 2 Cost of capital Bruner et al., “Best Practices in Estimating the Cost of Capital:

Survey and Synthesis”

Oct. 7 “Telus: Capital Structure

Management Miller, “The Modigliani-Miller Propositions After Thirty Years”

Mittoo and Bancel, “The Determinants of Capital Structure

Choice: A Survey of European Firms”

Oct. 9 Capital Structure Management

Drobetz and Fix, “What are the Determinants of the Capital

Structure? Some Evidence for Switzerland”

Oct. 14 “Champion Road Machinery” /

Dividend decision Dividend Irrelevant Theory

http://pages.stern.nyu.edu/~adamodar/New_Home_Page

/invfables/dividirrelevance.htm

Baker and Powell, “Determinants of Corporate Dividend Policy:

A Survey of NYSE Firms”

Baker, Powell and Veit, “Revisiting Managerial Perspectives on

Dividend Policy”

Oct. 16

Report #2 Due

Oct. 21 Capital Budgeting / Valuation

Chapter 15 of Damodaran “Valuation”

Damodaran, “The Dark Side of Valuation: Firms with no

Earnings, no History and no Comparables Can Amazon.com be

valued?

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Oct. 23 “Healthcare Manufacturing” /

Valuation “

Graham and Harvey: “The theory and practice of corporate

finance: Evidence from the field”

Date Case or Topic Suggested Reading

Oct. 28 Real options Damaodaran, “The Promise and Peril of Real Options”

Amran, M. and N. Kulatillake, Real Options: Managing

Strategic Investment in an Uncertain World, Harvard Business

School Press, 1999.

Oct. 30 “CNS Company” / Real options See above for Real Options.

Nov. 4 Management of foreign

exchange risk Belk, “The Organization of Foreign Exchange Risk

Management: A Three Country Study

Duangoploy, “The Management of Foreign Exchange Risk in

U.S. Multinational Enterprises: An Empirical Investigation

Nov. 6 “Advance Technologies” / Risk

management Wallace, “Best Practices in Foreign Exchange Risk

Management”

Nov. 11 No class – Remembrance Day

Nov. 13 Valuation II

Nov. 18

Report #3 Due

Nov. 20 “The Antamina Copper-Zinc

Project: Political Risk

Insurance”

Lessard, Donald R., 1996, “Incorporating Country Risk in

the Valuation of Offshore Projects,” Journal of Applied

Corporate Finance, 9 (Fall), pp. 52-63.

Godfrey, Stephen and Ramon Espinosa, 1996, “A Practical

Approach to Calculating Costs of Equity for Investments in

Emerging Markets,” Journal of Applied Corporate

Finance, 9 (Fall), pp. 80-89.

Nov. 25 “Primus Automation Division,

2002”

Schallheim, J. S., Lease or Buy? Principles of Sound Corporation

Decision Making, Harvard Business School Press, 1994.

Pretorius, Frederik;Ho, Pretorius, F. and MaryReal Estate and

Capital Structure Decisions – Lease versus Buy Analysis

Nov. 27 “Amtelcom Group Inc.” /

Valuation The Value of Synergy, Aswath Damodaran

The Value of Control: Implications for Control Premia,

Minority Discounts and Voting Share Differentials Aswath

Damodaran

The Value of Control, Aswath Damodaran

Dec. 2 Review

* TBA – To be announced

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Academic Integrity

It is critical to the reputation of the Asper School of Business and of our degrees, that everyone associated with our faculty

behave with the highest academic integrity. As the faculty that helps create business and government leaders, we have a special

obligation to ensure that our ethical standards are beyond reproach. Any dishonesty in our academic transactions violates this

trust. The University of Manitoba General Calendar addresses the issue of academic dishonesty under the heading "Plagiarism

and Cheating". Specifically, acts of academic dishonesty include, but are not limited to:

- using the exact words of a published or unpublished author without quotation marks and without referencing the source of

these words

- duplicating a table, graph or diagram, in whole or in part, without referencing the source

- paraphrasing the conceptual framework, research design, interpretation, or any other ideas of another person, whether

written or verbal (e.g., personal communications, ideas from a verbal presentation) without referencing the source

- copying the answers of another student in any test, examination, or take-home assignment

- providing answers to another student in any test, examination, or take-home assignment

- taking any unauthorised materials into an examination or term test (crib notes)

- impersonating another student or allowing another person to impersonate oneself for the purpose of submitting academic

work or writing any test or examination

- stealing or mutilating library materials

- accessing tests prior to the time and date of the sitting

- changing name or answer(s) on a test after that test has been graded and returned

- submitting the same paper or portions thereof for more than one assignment, without discussions with the instructors

involved.

Group Projects and Group Work

Many courses in the Asper School of Business require group projects. Students should be aware that group projects are subject

to the same rules regarding academic dishonesty. Because of the unique nature of group projects, all group members should

exercise special care to insure that the group project does not violate the policy on Academic Integrity. Should a violation occur,

group members are jointly accountable unless the violation can be attributed to a specific individual(s).

Some courses, while not requiring group projects, encourage students to work together in groups (or at least do not prohibit it)

before submitting individual assignments. Students are encouraged to discuss this issue as it relates to academic integrity with

their instructor to avoid violating this policy.

In the Asper School of Business all suspected cases of academic dishonesty are passed to the Dean's office in order to ensure

consistency of treatment.

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UNIVERSITY OF MANITOBA

I. H. Asper School of Business

Medical Absenteeism Form

Student Identification: (please print clearly)

______________________________ ___________________ ___________ ______________________________ Last Name First Name Middle Initial U of M Student Identification Number

I hereby authorize ________________________________ to verify with the attending physician or his/her (Name of Instructor/Administrator)

staff or colleagues that the contents of this form are true.

________________________________________ _______________________________________ Student’s Signature Date

To be completed by the attending physician: (after the above section is completed) ________________________________________ ______________________________ ________________ Physician’s Last Name (please print clearly) Physician’s First Name Middle Initial ________________________________________ ______________________________ ________________ Street Address City, Province Postal Code ________________________________________ _________________________________ Telephone Number Fax Number

To the attention of the physician: Your evaluation of the student’s condition is being used for the purpose of determining whether or not the student has a valid reason to miss an important exam or assignment. Your professional evaluation is necessary to ensure that only valid cases are excused. I certify that the nature of the student’s condition is severe enough to prevent the student from taking an exam or completing an

assignment. If requested, my associates or I will verify for the above-named instructor/administrator that this information is

accurate.

The student’s condition will likely span the following dates: ____________________________ (indicate start date) until ____________________________ (indicate end date) ___________________________________ ____________________________ Physician’s Signature Date

Notes to physician:

Please make a note in the student/patient’s file indicating that the student has given the above-named instructor/administrator permission to verify with you, your staff, or your colleagues, that the information contained on this form is correct. Thank you for your professional evaluation of this student’s condition.

PLEASE ATTACH THIS FORM TO YOUR REGULAR OFFICE STATIONERY THAT INDICATES THE STUDENT

VISITED YOUR OFFICE.

Note to student:

The use of this form is at the option of the student. However, in order to obtain an excused absence for an

assignment or exam, the student must obtain a doctor’s certification that the student’s condition is severe

enough to prevent the student from taking the exam or completing the assignment.

It is NOT SUFFICIENT to provide a note that only indicates the student visited the doctor’s office.