Students

ACST603 – Principles of Finance

2014 – MQC S2 Day

General Information

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Unit convenor and teaching staff Unit convenor and teaching staff Unit Convenor
Damian Bridge
By mutual agreement. Send an email to the Unit Convenor to arrange a time.
Credit points Credit points
4
Prerequisites Prerequisites
Admission to MActPrac or MCom or MEc or MIntBus or MAcc(Prof)MCom or MBioTechMCom or MIntBusMIntComm or MIntBusMIntRel
Corequisites Corequisites
Co-badged status Co-badged status
Unit description Unit description
This unit aims to provide students with a knowledge and understanding of the principles and techniques underlying theory and practice in corporate finance. Topics include: - basic financial mathematics: interest rates, present values, future values, annuities, perpetuities; - valuation and analysis of debt and equity securities; - methods for investment evaluation and capital budgeting: NPV, IRR, PP; - financial markets and raising finance by issuing new securities; - risk and return, and the cost of capital; - capital structure and dividend policy; - derivative securities: forward, futures and option contracts, and applications to corporate finance; - corporate liabilities and international finance; and - introduction to risk management.

Important Academic Dates

Information about important academic dates including deadlines for withdrawing from units are available at https://www.mq.edu.au/study/calendar-of-dates

Learning Outcomes

On successful completion of this unit, you will be able to:

  • to be able to demonstrate knowledge and understanding of the principles and techniques underlying theory and practice in Corporate Finance and Capital Markets
  • develop expertise in using excel spreadsheet software to build the financial models and perform the calculations for security valuation and corporate decision making
  • demonstrate awareness of different financial instruments and their valuation and usefulness in a Corporate Finance context
  • be able to explain the concepts covered in the course in a clear and concise manner and be able to communicate it to others effectively

Assessment Tasks

Name Weighting Due
Assignments 30% Week 7 & 11
Assessed coursework 20% fridays of weeks 3,5,7,9,11
Class test 10% Week 7
Final exam 40% University Examination Period

Assignments

Due: Week 7 & 11
Weighting: 30%

Assignment 1: Available Week 4; Due Week 7

Assignment 2: Available week 8; Due week 11

The release dates and due dates may change from the above. If so we will advise students of the changes. 

These are individual assignments, not group work. 

Submission:

essay type responses to be submjtted online via iLearn / turnitin. Excel spreadsheet solutions to be submitted electronically (method to be advised)

Extension

No extensions will be granted. Late tasks will be accepted up to 72 hours after the submission deadline.  There will be a deduction of 20% of the total available marks made from the total awarded mark for each 24 hour period or part thereof that the submission is late (for example, 25 hours late in submission – 40% penalty). This penalty does not apply for cases in which an application for special consideration is made and approved.


On successful completion you will be able to:
  • to be able to demonstrate knowledge and understanding of the principles and techniques underlying theory and practice in Corporate Finance and Capital Markets
  • develop expertise in using excel spreadsheet software to build the financial models and perform the calculations for security valuation and corporate decision making
  • demonstrate awareness of different financial instruments and their valuation and usefulness in a Corporate Finance context
  • be able to explain the concepts covered in the course in a clear and concise manner and be able to communicate it to others effectively

Assessed coursework

Due: fridays of weeks 3,5,7,9,11
Weighting: 20%

Submission

Due on fridays, submit electronically (method to be advised). Submissions should be typed into word and converted to pdf, or an excel spreadsheet file created, or both. These can be uploaded and submitted electronically. There are 5 tasks, worth 4% each. These are individual, not group assignments. The due dates may change. We will advise students of any such changes to the due dates. 

Extension

No extensions will be granted. Late tasks will be accepted up to 72 hours after the submission deadline.  There will be a deduction of 20% of the total available marks made from the total awarded mark for each 24 hour period or part thereof that the submission is late (for example, 25 hours late in submission – 40% penalty). This penalty does not apply for cases in which an application for special consideration is made and approved.


On successful completion you will be able to:
  • to be able to demonstrate knowledge and understanding of the principles and techniques underlying theory and practice in Corporate Finance and Capital Markets
  • develop expertise in using excel spreadsheet software to build the financial models and perform the calculations for security valuation and corporate decision making

Class test

Due: Week 7
Weighting: 10%

 

Extension 

No extensions will be granted.  Students who have not sat the exam / test will be awarded a mark of 0 for the task, except for cases in which an application for special consideration is made and approved


On successful completion you will be able to:
  • to be able to demonstrate knowledge and understanding of the principles and techniques underlying theory and practice in Corporate Finance and Capital Markets
  • demonstrate awareness of different financial instruments and their valuation and usefulness in a Corporate Finance context
  • be able to explain the concepts covered in the course in a clear and concise manner and be able to communicate it to others effectively

Final exam

Due: University Examination Period
Weighting: 40%

Extension 

No extensions will be granted.  Students who have not sat the exam / test will be awarded a mark of 0 for the task, except for cases in which an application for special consideration is made and approved.


On successful completion you will be able to:
  • to be able to demonstrate knowledge and understanding of the principles and techniques underlying theory and practice in Corporate Finance and Capital Markets
  • demonstrate awareness of different financial instruments and their valuation and usefulness in a Corporate Finance context
  • be able to explain the concepts covered in the course in a clear and concise manner and be able to communicate it to others effectively

Delivery and Resources

Classes

For campus students:

 A 3-hour combined lecture / tutorial / computer lab session will be held each week. Normally the lecture part takes up the first 1.5 - 2.0 hours and the tutorial / lab session the last 1.0 - 1.5 hours. The location is E4B214

 All lecture content and tutorial exercises and solutions will be available on iLearn. 

Changes since last offering:

Nil

 

Textbooks: 

The textbook for this unit is "Fundamentals of Corporate Finance" by Parrino et al (isbn 9781118378076). An electronic version of the book is available and may be cheaper than the paper version. This book covers most but not all of the topics in the unit. The lecture notes will also cover what you need to know. Additional readings may be assigned for the various topics each week. This will either be journal articles, or other materials available on the web or available electronically e.g. via the Macquarie University Library

Reference Books:

 

Berk, J. and Demarzo,  P. Corporate Finance, Pearson (ISBN 9780273756033)

 

Beninga Principles of Finance with Excel, Oxford (ISBN 978 0 19 975547 9)

 

This book may be used to by students to learn about using excel for the various financial calculations involved in the course, during the tutorial / computer lab sessions.

 

Copeland, Weston and Shastri, Financial Theory and Corporate Policy 4th Edition, Pearson (ISBN 0-321-22353-5)

Grinblatt and Titman, Financial Markets and Corporate Strategy 2nd Edition, McGraw-Hill (ISBN 0-07-229433-7)

Hull, Options, Futures and Other Derivatives 8th  Edition, Prentice Hall

 

Technology Used and Required

Students will require access to the internet to download lecture slides and tutorial solutions.

 The assignment and most tutorial exercises will require the use of word processing and/or spreadsheet programs.

 In most weeks we will be using excel spreadsheets for the various financial calculations needed. Our classes are held in a computer laboratory and all students will have access to a computer with the required software installed on it.

 Students will be instructed in how to use excel for the purposes of the unit

 Students may wish to bring a headset to class so they can view and listen to the mp4 video files of lectures / tutorials / excel demonstrations 

Unit Web Page

 Course material is available on the learning management system (iLearn)

 The web page for this unit can be found at: http://ilearn.mq.edu.au/course/view.php?id=17756

Learning and Teaching Activities

 The unit is taught via lectures, tutorial exercises and the use of spreadsheet software for implementing models and calculations for the purpose of financial decision making

 Each lecture is self-contained and structured according to the summary provided in the “weekly curriculum” section below. Students are expected to read the relevant chapters prior to the lecture, so that they are familiar with the material to be covered. This will greatly enhance your learning experience.

 Dealing with advanced material in our subject area requires a range of generic skills. This unit aims at developing such skills. The lectures and in particular the assignments and tutorial exercises are tailored to enhance critical analysis, problem-solving and creative thinking, comprehension, computing and writing skills.

 You should take the time to work on the problem sets, since they will tend to be similar in nature to the problems you see on the test and exam. Solutions will be provided for the assigned selected questions.

 We cover many examples of financial valuation and decision making problems and how to solve these using spreadsheets. Our approach is one of learning by example and by practicing using excel to solve financial decision making problems.

 

Unit Schedule

Date

Topic

Readings

Week 1

Introduction to Finance,

Different forms of business organisation

Measurement of Financial Condition and Profit - Financial Statements and Analysis.

Taxation

Depreciation

Introduction to using spreadsheets

lecture notes

& text Ch 1 (1.1, 1.2); Ch 3, Ch4

Week 2

 

The time value of money and interest rates.

Introduction to financial mathematics.

Simple and compound interest

Various types of interest rate

Valuation of single payment cashflows

Spreadsheet implementation of financial calculations. 

lecture notes

& text  Ch 5

 

Week 3

 

Valuation of multi-payment cashflows

annuities & perpetuities

Present value and future value

Sinking funds

Loans, leases, amortizing loans

Nominal and effective interest rates

Spreadsheet implementation of financial calculations

lecture notes,  

& text Ch 6 

Week 4

 

Valuation of shares and fixed income bonds

Bond terminology, Yield to maturity

RBA bond valuation formula

Solving for the bonds price, coupon rate, or  yield

Dividend discount model for share valuation

Gordon growth model

Share valuation using multiples

Net Asset Valuation

Spreadsheet implementation of financial calculations

lecture notes

& text ch 8, 9

Week 5

 

Capital Budgeting – project evaluation methods

Weighted Average Cost of Capital

Internal rate of return,

net present value,

payback period

Definition and measurement of cashflow

Sensitivity analysis and breakeven analysis

Excel implementation of calculations

 

 

lecture notes

text ch 10, 11, 13

Week 6

 

The term structure of interest rates and corporate bond valuation

Zero Coupon Bonds

The relationship between zero coupon bonds and normnal coupon bearing bonds & the law of one price

The bootstrap method

Spot and forward yield curves

Applications of zero coupon bond pricing

Corporate Debt Finance

Valuing corporate bonds

lecture notes

text ch 8

Week 7

Raising new capital – Debt & Equity

IPO

SEO

Placement

Rights Issue

Dividend Reinvestment Plan

Issuance Costs

Mid semester test

lecture notes,

text ch 15

 

Mid-Semester Break: 22 September – 3 October

 

Week 8

 

Randomness, probability and statistical concepts:

What is randomness

The structure of randomness - probability distributions:

Bernoulli, binomial, uniform and normal distributions

Expected value, variance, standard deviation,

Correlation, covariance, linear regression and forecasting

Measurement of risk

Results for portfolios

spreadsheet implementation 

lecture notes

Week 9

 

Tradeoff between risk and return

Random walks, market efficiency

law of one price,

implications for investment and finance

measurement of risk and return,

estimation of risk and return.

Risk and return for portfolios

the capital asset pricing model and the security market line

Spreadsheet implementation of methods used.

lecture notes

text ch 7

Week 10

 

Capital Structure & Payout Policy

Debt vs equity vs hybrid securities

Features of debt and equity

Impact on stakeholders

Modigliani and Miller theory

Optimal capital structure

Different forms of payout

Interaction between payout policy and capital structure

Pecking order hypothesis

 

lecture notes

text ch 16, 17

Week 11

 

Financial Derivative securities

Futures & forward contracts & Option Contracts

Black Scholes Valuation formulae

Applications to Corporate Finance.

spreadsheet implementation.

lecture notes

text ch 20

Week 12

 

Risk Management & International Corporate Finance,

Applications of options and derivative securities

hybrid securities.

Spreadsheet implementation

lecture notes

text ch 21

Week 13

 

Revision

lecture notes

 

Policies and Procedures

Macquarie University policies and procedures are accessible from Policy Central. Students should be aware of the following policies in particular with regard to Learning and Teaching:

Academic Honesty Policy http://mq.edu.au/policy/docs/academic_honesty/policy.html

Assessment Policy  http://mq.edu.au/policy/docs/assessment/policy.html

Grading Policy http://mq.edu.au/policy/docs/grading/policy.html

Grade Appeal Policy http://mq.edu.au/policy/docs/gradeappeal/policy.html

Grievance Management Policy http://mq.edu.au/policy/docs/grievance_management/policy.html

Disruption to Studies Policy http://www.mq.edu.au/policy/docs/disruption_studies/policy.html The Disruption to Studies Policy is effective from March 3 2014 and replaces the Special Consideration Policy.

In addition, a number of other policies can be found in the Learning and Teaching Category of Policy Central.

Student Code of Conduct

Macquarie University students have a responsibility to be familiar with the Student Code of Conduct: https://students.mq.edu.au/support/student_conduct/

Grades

Macquarie University uses the following grades in coursework units of study:

 

·         HD - High Distinction

·         D - Distinction

·         CR - Credit

·         P - Pass

·         F – Fail

 

Grade descriptors and other information concerning grading are contained in the Macquarie

University Grading Policy which is available at:http://www.mq.edu.au/policy/docs/grading/policy.html

 

Grade Appeals and Final Examination Script Viewing

 

If, at the conclusion of the unit, you have performed below expectations, and are considering lodging an appeal of grade and/or viewing your final exam script please refer to the following website which provides information about these processes and the cut off dates in the first instance. Please read the instructions provided concerning what constitutes a valid grounds for appeal before appealing your grade.

 

Special Consideration Policy

 

Supplementary Exams

Further information regarding supplementary exams, including dates, is available here http://www.businessandeconomics.mq.edu.au/current_students/undergraduate/how_do_i/special_consideration

 

Student Support

Macquarie University provides a range of support services for students. For details, visit http://students.mq.edu.au/support/

Learning Skills

Learning Skills (mq.edu.au/learningskills) provides academic writing resources and study strategies to improve your marks and take control of your study.

Student Support

Macquarie University provides a range of Academic Student Support Services. Details of these services can be accessed at http://students.mq.edu.au/support/

Student Services and Support

Students with a disability are encouraged to contact the Disability Service who can provide appropriate help with any issues that arise during their studies.

Student Enquiries

For all student enquiries, visit Student Connect at ask.mq.edu.au

IT Help

For help with University computer systems and technology, visit http://informatics.mq.edu.au/help/

When using the University's IT, you must adhere to the Acceptable Use Policy. The policy applies to all who connect to the MQ network including students.

IT Help

 

If you wish to receive IT help, we would be glad to assist you at http://informatics.mq.edu.au/help/ or call 02 9850-4357.

 

When using the university's IT, you must adhere to the Acceptable Use Policy. The policy applies to all who connect to the MQ network including students and it outlines what can be done.

 

Students must use their Macquarie University email addresses to communicate with staff as it is University policy that the University issued email account is used for official University communication.

 

 

·         Accessing inappropriate web sites or downloading inappropriate material is not permitted.

·         Material that is not related to coursework for approved unit is deemed inappropriate.

·         Downloading copyright material without permission from the copyright owner is illegal, and strictly prohibited. Students detected undertaking such activities will face disciplinary action, which may result in criminal proceedings.

 

Non-compliance with these conditions may result in disciplinary action without further notice.

 

 

Graduate Capabilities

PG - Discipline Knowledge and Skills

Our postgraduates will be able to demonstrate a significantly enhanced depth and breadth of knowledge, scholarly understanding, and specific subject content knowledge in their chosen fields.

This graduate capability is supported by:

Learning outcomes

  • to be able to demonstrate knowledge and understanding of the principles and techniques underlying theory and practice in Corporate Finance and Capital Markets
  • develop expertise in using excel spreadsheet software to build the financial models and perform the calculations for security valuation and corporate decision making
  • demonstrate awareness of different financial instruments and their valuation and usefulness in a Corporate Finance context
  • be able to explain the concepts covered in the course in a clear and concise manner and be able to communicate it to others effectively

Assessment tasks

  • Assignments
  • Assessed coursework
  • Class test
  • Final exam

PG - Critical, Analytical and Integrative Thinking

Our postgraduates will be capable of utilising and reflecting on prior knowledge and experience, of applying higher level critical thinking skills, and of integrating and synthesising learning and knowledge from a range of sources and environments. A characteristic of this form of thinking is the generation of new, professionally oriented knowledge through personal or group-based critique of practice and theory.

This graduate capability is supported by:

Learning outcomes

  • develop expertise in using excel spreadsheet software to build the financial models and perform the calculations for security valuation and corporate decision making
  • be able to explain the concepts covered in the course in a clear and concise manner and be able to communicate it to others effectively

Assessment tasks

  • Assignments
  • Assessed coursework
  • Class test
  • Final exam

PG - Research and Problem Solving Capability

Our postgraduates will be capable of systematic enquiry; able to use research skills to create new knowledge that can be applied to real world issues, or contribute to a field of study or practice to enhance society. They will be capable of creative questioning, problem finding and problem solving.

This graduate capability is supported by:

Learning outcomes

  • to be able to demonstrate knowledge and understanding of the principles and techniques underlying theory and practice in Corporate Finance and Capital Markets
  • develop expertise in using excel spreadsheet software to build the financial models and perform the calculations for security valuation and corporate decision making

Assessment tasks

  • Assignments
  • Assessed coursework
  • Class test
  • Final exam

PG - Effective Communication

Our postgraduates will be able to communicate effectively and convey their views to different social, cultural, and professional audiences. They will be able to use a variety of technologically supported media to communicate with empathy using a range of written, spoken or visual formats.

This graduate capability is supported by:

Learning outcomes

  • to be able to demonstrate knowledge and understanding of the principles and techniques underlying theory and practice in Corporate Finance and Capital Markets
  • demonstrate awareness of different financial instruments and their valuation and usefulness in a Corporate Finance context
  • be able to explain the concepts covered in the course in a clear and concise manner and be able to communicate it to others effectively

Assessment tasks

  • Assignments
  • Final exam

Research and Practice

 This unit gives you practice in applying research findings in your assignments

 This unit gives you opportunities to conduct your own research

Changes since First Published

Date Description
11/02/2014 The Prerequisites was updated.