Fundamentals of Corporate Finance

Corporate finance and financial manager; Financial manager’s responsibilities; Managerial actions to maximize shareholder wealth; Corporate finance and other functional areas; The agency problem: stockholders versus managers and stockholders versus creditors; Ethics in financial decisions; Corporate governance and corporate social responsibilities.

Nature of short-term financing; Advantages and disadvantages; Sources of short-term financing: accruals, accounts payable (trade credit), commercial paper, short-term bank loans – line of credit, revolving credit arrangement, transaction loans; Choosing a bank; Comparison of cost of trade credit, commercial paper, and short-term bank loan; Use of security in short-term financing: inventory financing and accounts receivable financing; Factors affecting in choosing the appropriate sources of short-term financing.

Term Loans: Concept, cost and benefits, loan repayment schedule; Lease financing: concept , merits and demerits of lease financing, forms of lease financing, Analysis of lease versusbuy/borrow decision using present value of cash flow approach; Lease financing in Nepal.

Long term debt: Debt instruments, Features of long-term debts; Types of bonds; Bond innovations; Advantages and disadvantages of bonds; Common stock: Features of common stock ; Legal rights and privileges of common stockholders; Advantages and disadvantages of common stock; Methods of selling securities: public offering, rights offering and private placement; Analysis of rights offering and effect of rights offering on shareholders’ wealth;The investment banks and investment banking process; Ranking of different types of securities.

Preferred stock: Features and advantages and disadvantages; Warrants, reasons for using warrants, value of warrants, warrant premium; Convertibles, reasons for using convertibles, conversion ratio, conversion price, conversion value, straight bond value, minimum price of convertibles and conversion premium.

Strategic planning; Operating plan and the financial plan; Sales forecast; Additional fund needed equation; Forecasted financial statements; Using regression to improve forecasts; Analyzing theeffects of changes in ratios.

Capital structure and financial structure; Determining the optimal capital structure; The effect of capital structure on stock prices and the cost of capital; Capital structure and value of the firm.

Nature of multinational corporations; Reasons for companies going global; Multinational versus domestic financial management; Exchange rates quotations; Cross rates; Interbank foreign currency quotations; Trading in foreign exchange rates: spot rates and forward rates; Interest rateparity; Purchasing power parity; Inflation, interest rates, and exchange rates; International moneyand capital markets; International capital budgeting; and International capital structure.

Rationale for mergers; Types of mergers; Level of merger activity; Hostile versus friendly takeovers; Merger analysis; Role of investment bankers; Corporate alliances; and Private equity investments.