Birla Institute of Technology & Science, Pilani

Work Integrated Learning Programmes Division

Managerial Corporate Finance
Digital Learning Handout

Course Title Managerial Corporate Finance

Course No(s) MM ZG627
Credit Units 4
Credit Model
Instructor-In-Charge R SRIDHAR
Version Number
Date

Course Objectives:
 Gain basic understanding of the underlying concepts and building blocks related to managerial
corporate finance. Develop understanding of the relevant tools including time value of money and
financial statements analysis. Understand basic cost concepts and behaviour.
 Understand the relationship between risk and return and the drivers of risk. Individual security risk,
portfolio risk and diversification benefits
 Understand the application of cost of capital and do the necessary calculations of the components of
cost of capital and WACC; Basic principles of capital budgeting.
 Definition of working capital; Composition and determination of working capital; Inventories, credit
management, cash and marketable securities, etc. Understanding how leasing and hire purchase works;
different types of leases; Valuation
 Introduction to management control systems, budget preparation, analyzing financial performance
reports, performance measurement systems
 Focus on technology project management; Overview of DIAMOND framework for analyzing and
managing project risk, etc.

Text Book(s):
T1 Principles of Corporate Finance, 11th Edition (2014), by Brealey, Myers, Allen, and
Mohanty, published by McGraw Hill Education (India) Private Limited

Reference Book(s) & other resources:

R1 Fundamentals of Cost Accounting, 4th Edition (2013), by William Lanen, Shannon
Anderson, Michael Maher, published by McGraw Hill Company (USA)
R2 Management Control Systems, 12th Edition (2007), by Robert Anthony and Vijay
Govindarajan, published by McGraw Hill Education (India) Private Limited
R3 Reinventing Project Management, (2007), by Aaron J. Shenhar and Dov Dvir, published
by Harvard Business School Press
 R4 In addition (for some sessions) we will be referring to selected articles from top journals
relevant to the topics at hand; links and/ or references to the same will be provided later by
the instructor

LEARNING OUTCOMES

LO1 Apply Time Value of Money concepts for valuation.

LO2 Understand basic cost concepts and behaviour.

LO3 Distinguish between the different types of risk faced by a firm and express the
relationship between risk and return.

LO4 Able to calculate all the components of cost of capital as well as the overall WACC for a
firm.

LO5 Able to evaluate Capital Budgeting projects and make Accept/ Reject decisions based on
NPV/ other business rules.

LO6 Able to formulate corporate Financial Policies in the areas of Working Capital/ Cash
Management, Capital Structure, and Dividend Policy so as to maximize firm value.

LO7 Demonstrate solutions to "real" business/ financial problems by employing excel/

financial modeling in an optimal/ effective manner.

LO8 Analyze/ Evaluate real life business/ financial situations and identify/ apply the
appropriate framework/ concepts to solve it in an optimal/ effective manner.

LO9 Able to formulate budget preparation, analyzing financial performance reports,

performance measurement systems

LO10 Able to analyze and manage project risk using DIAMOND framework

Experiential Learning Components:

1. Lab work: None.

2. Project work: None.
3. Case study: None.
4. Work integrated Learning Exercise: Described Below.
5. Design work/Field work: None.
Content Structure:

Contact Hour List of Topic Title Sub-Topics Reference

 Overview of Managerial Corporate T1- Ch.1,2
Finance
Introductions  Investment and financing decisions
Overview of managerial  Shareholder wealth maximization
1-2 corporate finance  Agency problems and corporate
Investment and governance
financing decisions  Shareholder wealth maximization
 Agency problems and corporate
governance
 Basic principles of Time Value of T1- Ch.2
Money
 Calculation of FV, PV of a single
sum of money as well as for an
Time Value of Money annuity
3-4 (TVM)  Differentiate between an Ordinary
Annuity and an Annuity Due and
relevant calculations
 Concept of perpetuity
 Calculation of annual percentage
yield
 Relevant applications of TVM T1- Ch.3,4
Applications of TVM
5-6  Valuing bonds
 Valuing Stocks
 Basic concepts relating to costs R1- Ch.2
 Define and understand key cost
behaviours including fixed and
Cost concepts and variable costs
7-8 behavior  Identify components of a product's
costs
 Differentiate between financial and
contribution margin income
statements
 Understanding the key financial T1- Ch.28
statements - Balance Sheet, Income
Statement, Cash flow statement.
Key Financial
 Principles of Financial Statements
9-10 Statements
Analysis.
 Tools and Techniques used in
financial statements analysis.
 Ratio analysis.
  Understand the relationship T1- Ch.7
between Risk and Return
Risk Management  Portfolio risk - measurement and
11-12
calculations
 Individual security risk – beta
 Diversification benefits
 CAPM Model T1- Ch.8,9
 Determine the cost of various
Cost of Capital and
components of Capital, including
13-14 Capital Budgeting
debt, and equity and calculate the
WACC
 Analyzing project risk, etc.
 Basic concepts of project T1- Ch.5,6
evaluation, NPV and other
Capital Budgeting investment criteria
15-16
 Capital rationing
 Applying the NPV rule, timing of
cash flows, etc
 Basic concepts, definitions T1- Ch.30
Working Capital  Analysis of the major types of
Management, Project current assets including
17-18
Financing inventories, credit management,
cash and marketable securities
 Short term borrowings
 Basic concepts relating to leasing T1- Ch.25
and hire purchase
Project Financing
19-20  Operating leases
 Financial leases
 Valuation
 Introduction to management R2- Ch.1,16
Management Control
21-22 control systems
Systems
 Management control of projects
 Nature and use of Budget R2- Ch.9
Budget  Analysis of operating budget, etc.
23-24
 Budget preparation -process and
key steps
 Introduction to analysis of financial R2- Ch.10
performance - variance analysis
Financial Performance
 Revenue, mix and expense
25-26 Analysis
variance analysis
 Limitations of variance analysis,
behavioural considerations, etc.
 Financial and non-financial R2- Ch.11
Performance measures of performance
27-28 Measurement measurement
 Balanced scorecard approach
 Implementation process and
 possible issues
 Overview of the DIAMOND R2- Ch.3-7
Project Appraisal and
framework
29-30 Management
 Four key elements: Novelty,
technology, complexity, and pace
Case Studies &  Case Studies & Revision
31-32
Revision

Evaluation Scheme:

Legend: EC = Evaluation Component; AN = After Noon Session; FN = Fore Noon Session

Evaluation Name Type (Open Weight Duration Day, Date, Session, Time
Component (Quiz, Lab, Project, Mid- book,
term exam, End semester Closed
exam, etc.) book,
Online, etc.)
EC - 1 Quiz-I/ Assignment-I Online 5% September 10-20, 2020

Quiz-II Online 5% October 20-30, 2020

Quiz -III/Assignment-II Online 15% November 10-20, 2020

EC - 2 Mid-sem Closed book 30% 2 hours Saturday, 10/10/2020
(FN)
10 AM - 12 Noon
EC - 3 Comprehensive Open book 45% 3 hours Saturday, 28/11/2020
(FN)
9 AM – 12 Noon

Syllabus for Mid-Semester Test (Closed Book): Topics in Contact Hours: 1 to 16

Syllabus for Comprehensive Exam (Open Book): All topics
Important links and information:
Elearn portal: https://elearn.bits-pilani.ac.in
Students are expected to visit the Elearn portal on a regular basis and stay up to date with the
latest announcements and deadlines.
Contact sessions: Students should attend the online lectures as per the schedule provided on the
Elearn portal.
Evaluation Guidelines:
1. EC-1 consists of either two Assignments or three Quizzes. Students will attempt them
through the course pages on the Elearn portal. Announcements will be made on the
portal, in a timely manner.
2. For Closed Book tests: No books or reference material of any kind will be permitted.
3. For Open Book exams: Use of books and any printed / written reference material (filed or
bound) is permitted. However, loose sheets of paper will not be allowed. Use of
calculators is permitted in all exams. Laptops/Mobiles of any kind are not allowed.
Exchange of any material is not allowed.
4. If a student is unable to appear for the Regular Test/Exam due to genuine exigencies, the
 student should follow the procedure to apply for the Make-Up Test/Exam which will be
made available on the Elearn portal. The Make-Up Test/Exam will be conducted only at
selected exam centres on the dates to be announced later.
It shall be the responsibility of the individual student to be regular in maintaining the self-study
schedule as given in the course handout, attend the online lectures, and take all the prescribed
evaluation components such as Assignment/Quiz, Mid-Semester Test and Comprehensive Exam
according to the evaluation scheme provided in the handout.

Experiential Learning Components:

1. This course will feature experiential learning components in the form of projects and
assignments (such as financial modelling, simulation, etc.) that are designed to enable
the participants to learn by doing. This will also form part of the Evaluation
Components for the course.
2. Please note that experiential learning components are integrated into the following
modules:

Experiential Learning
Module Topic
Component
Financial Statements
1.5 Financial Modeling (MS Excel)
Analysis
1.5 Ratio Analysis Financial Modeling (MS Excel)
Time Value of
1.2 Financial Modeling (MS Excel)
Money
1.3 Equity Valuation Simulation
2.2 CAPM Simulation
3.1 WACC Financial Modeling (MS Excel)
3.2 NPV Financial Modeling (MS Excel)
Working Capital
4 Simulation/Game
Management

3. We will be building financial models and doing simulation using Microsoft Excel,
hence students will need a laptop/ PC preloaded with Microsoft Excel 2010 (or later)
for facilitating experiential learning.
4. For doing financial calculations it is recommended that students purchase/ obtain a
financial calculator. We recommend the Texas Instruments BA II plus calculator
because it is very intuitive/ easy to operate and also because it is economical to
purchase. This calculator comes in two versions, basic and professional. The basic
version is sufficient for our course work and indeed even for professional exams such
as CFA/ FRM. If you do not wish to purchase a financial calculator then you may fall
back on any basic/ standard calculator. Whichever calculator you decide to go with
make sure you become familiar with its operation and also practice using the
calculator throughout the course and not just before exam.
Instructor-in-charge

(MM ZC627)