15.414
Financial Management
Provides a rigorous introduction to corporate finance and capital markets, with an emphasis on applications vital to corporate managers. Exposes students to the major financial decisions made by leaders within a firm and to the ways the firm interacts with investors, with a focus on valuation. Topics include project and company valuation, measuring risk and return, stock pricing, corporate financing policy, the cost of capital, and risk management. Presents a broad overview of both theory and practice. Restricted to Sloan Fellow MBAs.
Summer 2003
Topics
- Introduction
- Case: Acid Rain: The Southern Co.
- Firm Valuation (2)
- Introduction to Risk and Return
- Two Cases: Debt Policy at UST, Inc. and Massey-Ferguson Ltd. - 1980
Readings
- Brealey, R., and S. Myers. Principles of Corporate Finance. 7th ed. Irwin/McGraw Hill. ISBN: 0073368695.
- ‘Brealey and Myers’ is the world’s most popular finance textbook. It provides a thorough introduction to financial theory and practice.
- Chapters refer to Brealey, R., and S. Myers. Principles of Corporate Finance. 7th ed. Irwin/McGraw Hill. ISBN: 0073368695. Articles in the reading packet are referenced using the authors’ last names. The study questions listed after each class are recommended, not required, and can be found at the end of the chapter under “Practice Questions.”
- What is Finance? What Types of Questions Will We Answer? Chapter 1
- Dial, J. and K. Murphy. Incentives, Downsizing, and Value Creation at General Dynamics . Journal of Financial Economics 37, 1995, pp. 261–314.
- Opportunity Cost Of Capital; Present Value; Discount Rates; Comparables Chapter 2, 3
- Study Questions: Chapter 2: 6, 7, 10 Chapter 3: 1, 3, 5, 10, 12, 21, 27, 30
- Chapter 6, 12.1 - 12.3
- Myers, S. Finance Theory and Finance Practice . Interfaces 14, 1984, pp. 126-137. Reprinted in Midland__Corporate Finance Journal 5, Spring 1987.
- Study Questions: Chapter 3: 4, 7, 6, 13 Chapter 6: 6, 8, 9, 11, 18
- 4 · Case · Reinhardt, Forest. Acid Rain: The Southern Co. (A). Boston, MA: Harvard Business School, 1993. Case No. 9-792-060.
- Real Options, Internal Rate Of Return Chapter 5, 10, 11
- Study Questions: Chapter 5: 3 - 8 Chapter 10: 3 - 5, 10, 11
- Growth and Free Cashflows Chapter 4
- Study Questions: Chapter 4: 5 - 8, 11
- Valuation Models, Accounting vs. Economic Returns Chapter 12.4 - 12.6
- Kim, M. and J. Ritter. Valuing IPOs . Journal of Financial Economics 53, 1999, pp.409-437.
- Study Questions: Chapter 4: 1, 10, 12, 17, 19
- 8 · Case · Piper, Thomas R. Cooper Industries, Inc. Boston, MA: Harvard Business School, 1993. Case No. 9-274-116.
- Historical Evidence; Measuring the Risk of a Portfolio; Statistics Review Chapter 7 (pp. 153-165)
- Study Questions: Chapter 7: 1, 3, 4, 5
- Risk in a Portfolio Context, Diversification; Optimal Portfolios Chapter 7 (165-end), 8.1
- Study Questions: Chapter 7: 6 - 11, 15 Chapter 8: 2 - 4
- Quantifying the Trade-off between Risk and Return; Measuring the Risk of a Stock Chapter 8.2 - 8.5
- Study Questions: Chapter 8: 1, 5, 7, 8, 11 - 13
- Graham, J. and C. Harvey. The Theory and Practice of Corporate Finance: Evidence From the Field . Durham, NC: Duke University Working Paper, 2000, pp. 1-10.
- Study Questions: Chapter 9: 1, 3, 5 - 9, 14
- 13 · Case · Mitchell, Mark. Cost of Capital at Ameritrade. Boston, MA: Harvard Business School, 2001. Case No. 9-201-046.
- Sources of Funds; Trade-offs; Empirical Evidence; Stock Market Reaction Chapter 14, 15
- Smith, C. Raising Capital: Theory and Evidence . Midland Corporate Finance Journal 4, pp. 6-22, 1986.
- The Choice between Debt and Equity; MM Theorem; Leverage and Risk; Fallacies Chapter 17
- Graham, J. and C. Harvey. The Theory and Practice of Corporate Finance: Evidence From the Field . Durham, NC: Duke University Working Paper, 2000, pp. 10-22.
- Study Questions: Chapter 17: 2 - 6, 10 - 13
- Taxes and the After-Tax WACC, Financial Distress, Debt Overhang Chapter 18, 19.1 - 19.4
- Myers, S. The Search for Optimal Capital Structure . Midland Corporate Finance Journal 1 , 1983, pp. 6-16. Reprinted in D. Chew, Ed. _The New Corporate Finance: Where Theory Meets Practice._McGraw Hill, 1993, pp. 142-150.
- Bank of America Roundtable on the Link between Capital Structure and Shareholder Value . Journal of Applied Corporate Finance 10 (2), 1997. Reprinted in D. Chew, Ed. The New Corporate Finance: Where Theory Meets Practice , 3rd edition. McGraw Hill, 2001, pp. 247-274.
- Study Questions: Chapter 18: 1 - 7, 10 - 12
- Mitchell, Mark L., and Janet Mitchell. UST, Inc. South-Western College Publishing, 1996. ISBN No. 0-538-85800-1.
- Baldwin, Carliss Y., Scott P. Mason, and Jennifer H. Hughes. Massey-Ferguson Ltd. - 1980. Boston, MA: Harvard Business School, 1990. Case No. 9-282-043.
- Empirical Evidence; Implications for Corporate Managers Chapter 13
- Ball, R. The Theory of Stock Market Efficiency: Accomplishments and Limitations. Journal of Applied Corporate Finance 8, 1995, pp. 4-17.
- Study Questions: Chapter 13: 1, 2, 3, 11, 13
- Chapter 20, 21
- Case: Tufano, Peter, and Michael Lewittes. Sally Jameson: Valuing Stock Options in a Compensation Package. Boston, MA: Harvard Business School, 1993. Case No. 9-293-053.
- Study Questions: Chapter 20: 3, 4, 8 - 10, 16 Chapter 21: 10, 14, 15
Prerequisites & course information
Prereq: 15.511 G (Fall) 3-0-6 units Credit cannot also be received for 15.724
Sources
- Course catalogue ↗2026–2027
- MIT OpenCourseWare ↗Summer 2003
- MIT OCW syllabus ↗
- MIT OCW calendar ↗
- MIT OCW readings ↗
- Historical MIT OpenCourseWare offering. Named reading entries and schedule topics are automatically extracted from the linked source pages.