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Corporate*Finance**EMBA*Global*

Columbia*Business*School*and*London*Business*School*

Fall*2015*

INSTRUCTOR*

Professor:!!!!!!!!!!!Mauricio!Larrain! !

Office:!! ! Uris!Hall!813!

Office!Phone:! 212:851:0175!

E:mail:! ! mlarrain@columbia.edu!

Office!Hours:! By!appointment

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TEACHING*ASSISTANT*

Gustavo!Bada.!Email:!gbada16@gsb.columbia.edu!

The!TA!will!do!the!review!sessions!of!the!course.!!

Office!hours!of!TA!are!available!by!appointment.!!You!can!also!contact!him!by!email!for!brief!exchanges.!

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REQUIRED*COURSE*MATERIAL*

The!following!items!are!required:*

• Teaching*notes!will!be!handed!out!in!class!and!posted!on!Canvas.!These!are!your!primary!reference!material!for!the!class.

• Case*material*and*assignments*will!be!posted!on!Canvas!under!the!folder!for!the!class!in!which!they!are!covered. !

The!textbook!is:!!

• Corporate(Finance,(3rd!edition, by!Jonathan!Berk!and!Peter!DeMarzo!(BDM).!Readings!from!this!book!for!each!session!are!listed!in!“Schedule!of!Sessions!and!Assignments”.!Readings!should!be!done!prior!to!class!and!will!serve!as!a!supplement!to!class!material.!The!book!is!not!required!but!is!highly!recommended!as!a!supplement!to!the!class!notes.! !

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!These!additional!materials!are!not!required,!but!may!be!useful!to!some!students:!

!• An!additional!treatment!of!valuation:!Valuation!by!McKinsey!&!Company!Inc.!

• The( Wall( Street( Journal! and/or! The( Financial( Times! are! fundamental! reading! for! any! business! school!student.!Class!discussion!will!often!reference!news!items.!

• (The(Wall(Street(Journal(Guide(to(Understanding(Money(and!Investing!by!Morris!and!Siegel!can!be!useful!for!those!who!are!not!as!familiar!with!the!language!of!finance.!!

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COURSE*DESCRIPTION*AND*OBJECTIVES*

Corporate!Finance!is!an!introductory!finance!course!that!is!required!for!all!EMBA!students.!It!is!therefore!designed!to!cover!those!areas!of!finance!that!are!important!to!all!managers!whether!they!specialize!in!finance!or!not.*At*the*end*of*the*course*you*will*be*able*to*value*a*firm.*In!order!to!reach!this!goal!we!will!cover!the!following!topics!along!the!way:*

1. General!framework!for!valuation!(including,!as!special!cases,!valuation!of!stocks!and!bonds,!and!evaluation!of!investment!opportunities)!

2. The!free!cash!flow!method!for!firm!valuation!3. Basic!concepts!of!risk!and!return!and!identification!of!opportunity!cost!of!capital!4. Choice!of!alternative!sources!of!external!funding!for!company!operations!

The!course!will!consist!of!approximately!one:half!lecture!and!one:half!in:class!case!discussions,!for!which!students!should! prepare! carefully.! The! aim! of! the! course! is! to! provide! students!with! an*understanding! both! of! sound!theoretical!principles!of!finance!and!of!the!practical!environment!in!which!financial!decisions!are!made.!

EVALUATION*AND*ASSIGNMENTS*

Grades!will!be!calculated!using!the!following!weights:!

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Case!write:ups

!The!text!of!the!case,!a!handout!with!the!“Assignment”!and!“Discussion!Questions”,!and!additional!materials!(such!as!excel!spreadsheets)!will!be!available!at!least!one!week!before!the!case!write:ups!are!due.!These!materials!will!be!on!Canvas!in!the!folder!for!the!session!when!it!is!discussed!in!class.!

You!are!required!to!complete!the!“Assignment”!portion!of!the!handout.!You!do!not!need!to!explicitly!answer!the!discussion!questions;!they!are!only!intended!to!give!you!ideas.!!

Each!learning!group*will!turn!in!a!completed!case!write:up.!!On!your!case!write:up,!please!include!the!names!of!

Participation! 10%!Cases! 25%!Problem!sets! 15%!Final!Exam! 50%!

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each!group!member.!!Case!write:ups!should!be!submitted!through!Canvas!by!the!beginning!of!class!the!day!that!they!are!due.!You!must!submit!the!write:up!as!a!PDF!file!and!submit!an!Excel!file!showing!all!calculations.!Late!assignments!will!not!be!accepted.!!You!should!make!a!copy!of!your!answers!to!refer!to!during!class!discussion.!

Case!write:ups!will!be!graded!on!a!ten:point!scale.!!However,!the!first!case!write:up!will!be!graded!leniently!so!that!

you!can!receive!feedback!that!will!help!you!do!your!future!case!write:ups.!

Problem!Sets!

Problem! set! questions! will! be! posted! on! Canvas! at! least! one! week! before! they! are! due.! You! should! work! on!

problem!sets!individually.!As!with!the!case!assignments,!problem!sets!should!be!submitted!through!Canvas!before!

the!start!of!class!on!the!due!date!(PDF!file!and!Excel!file).!Late!assignments!will!not!be!accepted.!!

Class!Participation!

Students!are!expected! to!be!prepared! for!every! class!and!participate! in! class!discussions.! Students! should!have!

thoroughly! prepared! any! assigned! case,! reviewed! previous! lecture! notes,! and! be! willing! to! answer! and! ask!

questions!during!class.!Sharing!your!expertise!when! relevant! is!good!participation,!as!is!asking!questions!

that!help!other!class!members.!!

Final!Exam

The! final! exam!will! take!place!on!December!3rd!during!at!11:30am! in! London.! ! It!will! involve! the!analysis!of! a!

case,! and! you!will! be! asked to! value! a! firm.! There!will! also! be! additional! questions! testing! your! knowledge! of!

finance!concepts that!are!introduced!throughout!the!course.!The!exam!is!open!book!and!notes.!You!will!need!your!

laptop!to!solve!the!case.!The!length!of!the!exam!is!five!hours.!

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Columbia*Core*Culture*

The!purpose!of!the!Columbia!Core!Culture!is!to!promote!a!consistent!classroom!environment!of!mutual!respect,!

preparation!and!engagement.!!Our!expectation!of!you!in!class!is!to!be:!!!

Present:!!Your!success!depends!on!being!on!time!and!present!for!the!entire!class!every!session.!!Attendance!will!be!part!

of!your!grade!for!class!participation!and!students!are!expected!to!sit!in!their!assigned!seats.!!!

Prepared:!!Bring!your!nameplate,!clicker,!and!complete!any!pre:work!needed!for!class!discussion.!!Expect!the!professor!

to!cold!call!in!class.!!!

Participating:!!Active!participation!calls!for!no!electronic!devices!such!as!laptops,!tablet!computers,!or!smartphones!

during!class,!except!when!the!professor!tells!you!as!part!of!in:class!work.!!!

Time Location Lecture Topic Read Prepare Turn1In

Sep19 16:30 1 Introduction

Time1Value1of1Money1and1Discounting Ch13,1Ch14

Sep110 8:30 2 Investment1Decision1Rules:1NPV1and1IRR Ch17

Introduction1to1Valuation1Methods:1Bonds Ch16

Sep112 8:30 3 Introduction1to1Valuation1Methods:1Stocks Ch191(p.1272O282) Problem1Set11

The1Free1Cash1Flows Ch12,1Ch181(p.1233O252)

Oct18 16:30 4 Pro1Forma:1Projecting1the1Future Clarkson11

Residual1Value1and1Valuation1With1Multiples Ch19.4

Oct19 8:30 5 Valuation11:1Going1Concern Clarkson12 Group1Case11

The1CAPM Ch110

Oct110 8:30 6 Applications1to1Corporate1Finance Ch112 Problem1Set12

WACC,1Leverage,1and1Project1Risk Walmart

Nov15 8:30 7 Valuation12:1Liquidation1 American1Chemical Group1Case12

Debt,1Equity1and1Capital1Structure:1M&M Ch114

Nov16 16:30 8 Optimal1Capital1Structure:1Taxes1and1Financial1Distress Ch115.1O15.3,1Ch116.1O16.4

Target1Capital1Structure American1Home1Products Group1Case13

Dec12 16:30 9 Valuation1Overview Problem1Set13

Valuation13:1Calaveras1Vineyards Calaveras1Vineyards Group1Case14

Dec13 13:00 10 Valuation14:1Telecom1Argentina Telecom1Argentina

Course1Summary

New

$York

PART$IV:$OPTIMAL$CAPITAL$STRUCTURE

Lond

on PART$V:$COMPREHENSIVE$VALUATION$CASES

Date

Class$Schedule

New

$York PART$I:$TOOLS

PART$II:$THE$FREE$CASH$FLOW$MODEL

Lond

on

PART$III:$RISK,$RETURN,$AND$THE$CAPM

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Date Time Location Session

Sep!10 7:15 New!York 1Oct!8 19:30 London 2Nov!4 7:15 New!York 3Nov!6 7:15 New!York 4Dec!3 11:30 London 5

EMBA!Corporate!Finance!2015!Review!Sessions