KATHMANDU UNIVERSITY SCHOOL OF MANAGEMENT

MBA Trimester II
Course Outline & Session Plan

Course : MFIN 521 Financial Decisions

Credit : 3 (48 contact hours)
Session : Fall 2017
Facilitator : Ajay Shah ([email protected])

Introduction & Objective of the Course

Creation of shareholder value should be the primary focus of the finance function
within any organization. Identification of the key drivers that create shareholder
wealth is a critical step in defining and implementing corporate strategy. This
course provides an in-depth, examination of the principles of financial decision-
making.

This course serves as an introduction to business finance (corporate financial

management and investments). The primary objective is to provide a framework,
concepts, and tools for analyzing financial decisions based on fundamental
principles of modern financial tools and theory by applying rigorous and analytical
methods.

Students will learn the concepts of value maximization, valuation of financial

securities, capital investment evaluation, the estimation of required rates of return
and financial statement analysis. The course will also analyze corporate financial
policy, including capital structure, cost of capital, dividend policy, and related
issues.

Enabling objectives

After completion of all the learning units and the requirements of the course,
students will be able to:
1. Analyze typical business situation from a financial perspective for decision
making

2. Use basic concept tools and techniques of finance to take decisions of

financial nature

3. Make use of valuation techniques for investment decisions

4. Demonstrate an understanding of various aspects of financing and capital

structure decisions.

Pre- requisites

Before entering into the subject, students must be well versed in the
following topics.
 1. Financial statement analysis i.e. (Balance Sheet, Income
Statement and Ratio Analysis)
2. Core economic concepts.

Delivery of the course

The approach of faculty during the session will be as a facilitator of the course not
as a teacher/lecturer. Necessary conceptual and methodological inputs will be
covered using interactive and active learning methods, e.g., interactive lecture,
group discussion, seminars and case study.

Students are required to actively participate in class. The sessions will be

interactive and facilitated by the instructor to discuss in depth of the subject being
dealt. There will be lectures by the instructor, case analysis and presentation by
students, feedback on presentations and assignments will be provided to students
on their progress.
Dialogue and discussions in the classrooms will be effectively complimented with
well-designed assignments. In order to enable students to base their learning upon
real world occurrence, a comprehensive project assignment is incorporated in the
internal assessment. The project assignment will serve as both a learning vehicle
for students and demonstrable output of the course. Students should prepare
reports of their project work and make the presentation.

Evaluation Criteria

The students’ academic progress will be evaluated on a continuous basis

throughout the trimester, with respect to the following components.

Test Activities No. Weight

Quizzes & Class tests (Individual) 3 15%
Assignments (Individual) 2 10%
Class participation & Presentation - 10%
Attendance - 5%
Mid Term Exam 1 15%
Project work & presentation ( Group ) 1 15 %
End-term Exam 1 30 %
TOTAL 100%

Grading
Marks and corresponding grading rule for evaluation shall be as follows:

80 - 85 75 – 80 70 – 75 65 – 70 60 – 65
Marks Above 85 -
 Range 90 90

Grade A A- B+ B B- C+ C

Grade 4 3.7 3.3 3 2.7 2.3 2

Point
Learning Unit
Learning Unit One 1. An Overview of Financial Management
Net Contact Hours 1.1 Concept and scope
- 3 hrs 1.2 Concept and role of Chief Financial Officer
1.3 Goals of companies
1.4 Corporate firms
1.5 Financial markets and institutions.
1.6 Nepali financial system
Learning Unit Two 2. Agency problem
Net Contact Hours 2.1 Concept
– 3 hrs 2.2 Separation of ownership and control
2.3 Agency cost and control
2.4 Agency problem in Nepal
Learning Unit 3. Time Value of Money
Three 3.1 Concept
Net Contact Hours 3.2 Present value
– 4.5 hrs 3.3 Future Value
3.4 Annuity
3.5 Uneven cash flows, Semi-annual and other
compounding periods
3.6 Loan amortization
Learning Unit Four 4. Analysis of Financial Statement
Net Contact Hours 4.1 Financial implication of Operating Cash Flow and Free
– 3 hrs Cash Flow
4.2 Economic Value Added
4.3 Market Value Added
4.4 Corporate Bankruptcy
Learning Unit Five 5. Security and their valuation
Net Contact Hours 5.1 Bond
– 8 hrs 5.1.1 Features and types of bonds
5.1.2 Bond valuation
5.1.3 Bond yields
5.1.4 Bond risks
5.2 Stocks
5.2.1 Features, Rights and privileges of common stockholders,
5.2.2 Types of common stock.
5.2.3 Valuation of stocks
5.2.4 Corporate valuation model
Learning Unit Six 6. Project and their valuation
Net Contact Hours 6.1 The Cost of Capital
-11.5 hrs 6.1.1 Financial Policy and Cost of Capital
6.1.2 Cost of Debt and Preference Capital
6.1.3 Cost of Equity Capital and adjustment for flotation cost
 6.1.4 Determining weight of capital
6.1.5 Target capital structure
6.1.6 Weighted Average Cost of Capital (WACC)
6.1.7 Marginal Cost of Capital
6.18 Issues and factors affecting cost of capital
6.2 Capital Budgeting
6.2.1 Concept and importance
6.2.2 Project classification
6.2.3 Capital budgeting rules (Payback period, Discounted
payback period, NPV, IRR, MIRR)
6.2.4 Comparing projects with unequal lives (Replacement
Chain Approach and Equivalent Annual Annuities)
6.2.5 Capital Rationing
6.3 Estimation of Project Cash Flows and Risk Analysis
6.3.1 Basic Principles of Cash Flow estimation
6.3.2 Issues in project analysis
6.3.3 Project Cash Flows and its estimation
6.3.4 Sensitivity Analysis and Scenario Analysis
6.3.5 Incorporating Project risk into Capital Budgeting
6.3.6 Biasness in cash flow estimation
Learning Unit 7. Strategic Financial Decision
Seven 7.1 Capital Structure Basics
Net Contact Hours 7.2 Target Capital Structure
– 4.5 hrs 7.3 Business and Financial Risk
7.4 Operating Leverage
7.5 Financial Leverage
7.6 Total Leverage
7.7 Impact of Financial Leverage on Profitability
Learning Unit Eight 8. Dividend Policy
Net Contact Hours 8.1 Concept
– 3hrs 8.2 Theories
8.3Determinants of Dividend Policy
8.4 Stock Dividends and Stock Splits, Stock Repurchases
8.5 Dividend policy practice in Nepal
Learning Unit Nine 10. Working Capital Management
Net Contact Hours 10.1Concept
– 4.5 hrs 10.2 Importance of Working Capital Management
10.3 Zero concept of Working Capital
10.4 Determinants of Working Capital
10.5 Cash Conversion Cycle
10.4 Cash management, Receivable Management and
Inventory Management
Total Contact 45 hrs
Hours
Course Delivery Skill learning – pre-session reading, interactive lecture
Method and Skill analysis- case analysis, company analysis and group work
Other Requirement Skill application- project and other assignments
Basic Text Brighman, E.F. & Ehrhardt, M. (2012). Financial Management:
Theory and practice
(12th ed.). New Delhi: Cenange Learning
References 1. Van-Horne, J.C. & Wachowicz, J.M.(2010).Fundamental of
Financial Management (13thed.). New Delhi: PHI Learning
2. Srivastava R, & Misra A. (2011) Financial Management (2nd
ed.).New Delhi: Oxford University Press
3. Brealey, R.A, Myers S.C., Allen, F. Mahanty, P. (2007).
Principles of Corporate Finance. New Delhi: Tata Mcgraw Hill
4. Pradhan, R.S., (2006)“Research in Nepalese Finance”(2nd
ed.). Kathmandu: Buddha Academic Publication and
Distributors Pvt. Ltd
Articles 1. Altman, E.I., “Financial Ratios, Discriminant Analysis and
the Prediction of Corporate Bankruptcy”, Journal of Finance,
Vol. XXIII, September 1968, pp. 589-609.
2. Blum, M., “Failing Company Discriminant Analysis”, Journal
of Accounting Research, Spring, 1974, pp.1-25

Important Notes on:

1. Assignment:
Do not copy solutions to your assignments from your friends. All would get zero
regardless of who copied whom. Submit your hand-written assignment on time.
Neither computer types nor the late submission of assignment will be accepted
after the due date is over.
2. Tests:
There will be no retakes for the test (Class tests, Mid-term and End-term). So
do not miss it.
3. Case Study Presentation:
Each student should make a presentation of the given case study/journal
article. In case you are not able to make presentation on the day, ask your
friend to replace you on the day. Otherwise you will lose marks.