Finance 620

By Janice Duncan,2014-08-07 07:24
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Finance 620

    Finance 790 - Seminar in Finance

    Fall 2006-2007

    Michael Gombola Office: 55-207

     Phone: 895-1743

    Office Hours: Dept. phone: 895-1741

    1:00 4:00 PM Thursday Email:


    Required: Richard F. Bruner, Case Studies in Finance: Managing for Corporate Value Creation, Fifth Edition, McGraw-Hill 2006.

Suggested foundation: Brealey and Myers, Principles of Corporate Finance any ed., McGraw-Hill.

Course Objectives:

    1. To summarize and integrate theories and concepts presented in prerequisite courses,

    particularly FIN 601 and FIN 602 (628).

    2. To develop fundamental research skills useful in managerial problem solving and mandatory in

    understanding Finance problems

    3. To develop skills in oral and written communication of ideas and decisions

Course Policies:

1. No incompletes will be given or even considered.

    2. Attendance is mandatory at all class sessions. Case summaries are not accepted after the

    beginning of the respective class discussion regardless of reason.

    3. Groups who fail to submit a case report or project when due, or present a case when scheduled

    will have a one letter grade reduction in the course grade.

4. Seminar participants must have knowledge of the material presented in FIN 601 Corporate

    Financial Management, and FIN 628 Capital Budgeting or FIN 602 Intermediate Corporate

    Finance. Knowledge of material in Investments/Risk Management (FIN 626/624) and

    Derivatives (FIN 650) would be helpful.


    Grading will be based upon the following system:

    2 Group Case-Study Presentations 40%

    2 Group Case Study Discussions 40%

    Individual Class Participation 20%

Some Thoughts on the Case Solutions and Presentations:

    The objective of assigning a case in this course is to develop decision-making skills that are based on sound financial principles as well as to aid the student in development of oral and written communication skills. The student is admonished to search first through the principles and theory of Finance prior to attempting a solution to the case. The first guess at a solution is often wrong and, rather than trying to arrive at a solution after studying the problem, students often try to justify their intuition by twisting financial principles.

    The most important consideration in arriving at your solution to the case is to apply financial theory. Students have a tendency to throw all their Finance texts out the window then try to arrive at a solution out of thin air. Instead, try to apply as much financial theory as possible. In particular, make sure that your financial measures are calculated and interpreted correctly. Make sure you go back to Brealey and Myers or Ross, Westerfield and Jaffe first.

    The written report should be in the same form as a report made to a supervisor in a business. As such it is not necessary (and may be harmful) to “pad” the report with excess verbiage, since that approach may dilute the power of your solution. The instructor will not be particularly impressed by multi-colored charts or dancing dollar signs in the report, but will be impressed by solid application of financial principles. Grading is based primarily on the instructor’s perceptions of the group’s understanding and application of the theory. To that effect, the ultimate solution is less

    important than the thought process in arriving at the decision. It is not necessary to cite previous theory in a formal manner but reference to it may be helpful in your exposition. Make sure that you go back to Brealey and Myers. The length of the report should depend upon the type of case, but ten to fifteen pages should suffice.

    The rules of case study allow only the actual material presented in the case as well as any material that would be available prior to the time of the decision represented in the case. It is prohibited to find out what the firm in the case actually did and how it fared as a result. On the other hand, economic and market conditions at the time of the case may be consulted by the student, although such information may not be particularly germane to the solution. It is OK to consult with the instructor on fitting financial theory to the case problem. Make sure that you go back to Brealey and Myers.

    The oral presentation should not exceed twenty-five minutes. For each presentation, another group is assigned the task of discussing or critiquing the report by the presenting group. They expect to receive the written version of the report one week prior to the date of the presentation. Please send a preliminary copy of the report to the discussing group and the instructor one week prior to presentation. The purpose of presentation and discussion is to engage in an active dialogue about the case with contributions to the dialogue from two groups and from the general audience.

    Participants who are not in a presenting group or discussing group are expected to prepare a one-page summary of the facts surrounding the case decision and should be prepared to discuss the case as it is presented. Participation is a major component of grading. It is virtually impossible to obtain an A grade without active participation in case discussion.

    A break from the presentation/discussion format will occur for the last case with Group IV representing Chrysler in negotiations with Daimler and Group III representing Daimler in negotiations with Chrysler. Each group should come in to the negotiations with an opening offer as well as a last, best, walk-away offer.

    The author of the text, Robert Bruner, has prepared an excellent note to students on how to study and discuss cases. This note is presented on pp. xxv-xxx in the preface of the case book. Study of this note to students is highly recommended.

A Note on Grading

    As indicated on the first page of the syllabus, 80 percent of the grade stems from group presentations and 20% stems from class discussions. Students not in the presenting group or the discussing group should be prepared to challenge, question, or ratify the recommendations prepared by the presenting group and to comment on the discussant group’s review. To this effect each

    student not in the presenting or discussing group is asked to prepare a one-page summary to indicate that the student has read and thought about the case. If the student is oriented towards a distinguished performance in class (i.e. an “A” grade) then the student should go towards preparing a solution to the case and should be prepared to volunteer their solution in the class.

In each case presentation the instructor will “call” on two students with a specific question. The

    student’s response will be included in the “class participation” portion of the grade. The order of identifying students has already been determined. If you would like to see an example of this process you could view “The Paper Chase” starring John Houseman and Timothy Bottoms, which is a movie demonstrating the case analysis process in Harvard Law School. The case analysis process in Harvard Business School is largely based on the Law School process. In this grading style, class contribution and a final exam are the only determinants of the course grade. The final exam at Harvard is typically a comprehensive case whose solution is to be provided in written form by each student. Our grading mechanics are somewhat different with an opportunity to focus on two cases but to participate in all of the cases to be discussed in class.

    In FIN 790, the portion of the grade for case analysis is not required to be identical for all group members. On the last day of class, a request for a ranking of group participation will be requested by the instructor. Students with superior contribution to the group could earn “A” grades even if the group as a whole does not earn an equivalent grade. Similarly, students with inferior contribution to the group might not share uniformly an “A” grade. In general, perhaps only the students in the very best group will all earn an “A” grade. The next groups might share “A” and “B” grade depending on the contribution to the group and class participation. A group that does not fare well in its assigned cases might have only one or none of its members receiving an A grade.


    Fall 2005-2006

    Date Title Presenting Group Discussant Group

Sept. 28 Introduction

    Oct. 5 Warren Buffet, 1995 Instructor

     Lecture on EVA (not in text)

     Lecture on Sustainable Growth

    Oct. 19 Krispy Kreme Group I Group IV

    Oct. 26 Deutsche Braueri Group II Group III

     Lecture on WACC (B&M)

    Nov. 2 Teletech Group III Group II

    Nov. 9 Diamond Chemicals (A) Group IV Group I

     Lecture on Real Options (B&M)

     A link to the Real Options lecture can be found at

    Nov. 16 Diamond Chemicals (B) Group I Group II

     Lecture on Dividend Policy (B&M)

     Lecture on Capital Structure (B&M

    Nov. 30 Gainesboro Machine Tools Group III Group IV

    Wrigley Group II Group I

    Lecture on mergers

    Dec. 7 Chrysler Corporation Group IV Group III

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