BUS315 Corporate Finance and Valuation

The course is organized around three main components:

1. Financial strategy: Capital structure, dividend policy, and the issuance of securities
2. Valuation and value creation: Discounting cash flows, and the interaction between financing and investment decisions
3. Options in corporate finance: Real options, equity and debt as options, convertible debt

In the financial strategy section, we examine the trade-offs between the costs and benefits of equity versus debt financing. We study key capital structure theories and discuss conditions for an optimal capital structure. The section also covers dividend policy and the issuance process for both equity and debt instruments.

The second part of the course focuses on valuation and value creation. We apply cash-flow-based methods such as Weighted Average Cost of Capital (WACC), Adjusted Present Value (APV), and Flow-to-Equity (FTE) explicitly incorporating financing effects into valuation models.

In the third part, we study the role of options in corporate finance. This includes valuing projects with embedded real options and understanding how equity and debt can be viewed as contingent claims. This provides a more sophisticated framework for valuation under uncertainty.

The course also provides room for selected special topics, which may include mergers and acquisitions, initial public offerings (IPOs), financial distress, and risk management.

Knowledge

After completing this course, the student will have:

• advanced knowledge of theories and models of capital structure, dividend policy, and their implications for firm value
• in-depth understanding of discounted cash flow and valuation techniques, including real options and financial options
• advanced knowledge of how financial decisions affect investment choices and value creation
• the ability to critically assess risk, uncertainty, and the effects of mergers and acquisitions

Skills

After completing the course, the student should be able to:

• independently apply capital structure theory to develop appropriate financing strategies
• use and critically assess advanced discounted cash flow methods and cost of capital estimation
• critically analyze and reflect on investment decisions involving embedded real options
• critically analyze different risk management strategies and their effects on firm value
• structure and independently evaluate complex transactions such as mergers and acquisitions, including payment forms and incentive design

General competence

After completing this course, students will be able to:

• independently apply theoretical frameworks and methods from corporate finance to solve complex, real-world financial problems
• communicate advanced and complex financial analyses clearly and purposefully to both academic peers and decision-makers
• demonstrate critical reflection and professional integrity in financial judgment, and actively contribute to knowledge development in professional environments
• identify, analyze, and reflect on ethical dilemmas related to financial decision-making in a broader societal context