FIN 401 Managerial Finance II – Winter 2018

Instructor: Mike Inglis

Office: TRS 1-085
Office Hours:
E-mail: [email protected]

PREREQUISITE: FIN 300 or ECN 320 or HTA 602

E-MAIL USAGE & LIMITS: Only Ryerson email accounts are to be used for all email correspondence with me.
Emails from any other domain (Hotmail, Gmail, etc.) will not be opened or answered. Please be sure to include your
full name, student number, and section number in all correspondence. Emails will be answered within 2 business days.
If you have not received a response within 2 business days, please send me a follow-up e-mail or see me during office
hours.

COURSE DESCRIPTION:
This course builds on the material in Finance 300. The topics cover various aspects of corporate decision making,
including capital budgeting and cost of capital, leasing, capital structure, dividend policy, raising capital, and mergers
and acquisitions, with the fundamental concept of value maximization being emphasized throughout. In addition,
students are introduced to derivative securities and their uses for corporate risk management. The course concludes
with an examination of issues in corporate governance and financial ethics.

COURSE OBJECTIVES:
Upon completion of the course, students will be able to:
1. Understand more fully the role of capital budgeting, leasing, and mergers and acquisitions in the corporate
financial decision-making process.
2. Understand the issues involved in the capital structure and dividend policy decisions, why the decisions are not
irrelevant, and what types of financing are available to firms.
3. Understand the importance of risk management in the corporate financial decision-making processes.
4. Be able to recognize some of the ethical issues inherent in corporate financial decision making.
5. Read the Financial Section of the newspaper.

REQUIRED TEXT AND MATERIALS:

Textbook: Berk, DeMarzo, Harford, Stangeland, and Marosi, 2017. Fundamentals of Corporate Finance, Second
Canadian Edition, Pearson.

MyFinanceLab Access Code: MyFinanceLab access can be purchased from the RU bookstore bundled with the course
textbook or as a stand-alone option.

A financial calculator or a calculator that performs financial functions is required.

Other materials will be handed out in class or put on D2L Brightspace, as needed.
EVALUATION:

The grade for this course is composed of the mark received for each of the following three components:

Course Component Percent/Weight

MyFinanceLab Labs 20%
Midterm Exam 35%
Final Exam 45%
TOTAL 100%

You DO NOT have to pass the combination of the Midterm and Final exams in order to pass the course. You
DO need to obtain a grade of 50% or higher in the course overall to pass the course.

MyFinanceLab Labs: There are a total of nine MyFinanceLab Labs that must be completed by each student. The
students must do these labs individually. MyFinanceLab labs are due by the Sunday of each week. No extensions will
be granted to lab deadlines. The schedule/due dates for all labs will be posted in MyFinanceLab and on D2L
Brightspace. Each of the labs covers material that students will be covering in class and in the homework. The
student’s highest score for any lab will be the one recorded for grading purposes. Students may make a maximum of
TWO attempts at any MyFinanceLab question/page. However, after the due date has passed, students will not be able
to make any additional attempts at the labs for marks.

Exams: Any and all material covered in class will be examinable, as will any and all material assigned from the
readings that are not covered in class. The final exam is comprehensive, covering the material from the entire course.
The format of the regularly-scheduled exams will be 100% multiple choice. Please note that there will be reading
material assigned that cannot be covered in class, due to time constraints, and conversely, that some of the material
covered in class will not be covered in the assigned readings.

Both the midterm and final exams are closed book. You will be able to use ONE double-sided note sheet, 8.5” x 11”
for the midterm and the final exam. You will not be supplied with this sheet – you will be responsible for preparing it
on your own. Students are allowed to have whatever content they wish on their note sheet. The note sheet does NOT
have to be handwritten. Regulations concerning conduct during exams are contained in the Code of Student Conduct
and the Ryerson Calendar.

If students do not attend the midterm exam and follow the proper procedure (outlined below), they will have the
opportunity to write a makeup exam. There will be one date for the makeup exam for the midterm with the location to
be determined. If a student is unable to attend at this date and produces the satisfactory documentation, the weight of
the midterm will be added to the pre-existing weight of the final exam.

If students do not attend the final exam and follow the proper procedure (outlined below), they will have the
opportunity to write a makeup exam. There will be one date for the makeup for the final exam with the location to be
determined.

Students who do not attend the midterm/final exam will receive a grade of zero for that test unless (1) they submit
within three business days completed and approved medical documents to their program office attesting to their
inability to attend the test, AND (2) they contact me by e-mail prior to or during the time of the exam to notify me.
Emails received after the exam time is completed will not be considered.

Please note: makeup exams may be any combination of formats (short answer, essay, multiple choice, etc.)

Missed Classes and/or Evaluations

When possible, students are required to inform their instructors of any situation which arises during the semester which
may have an adverse effect upon their academic performance, and must request any consideration and accommodation
according to the relevant policies as far in advance as possible. Failure to do so may jeopardize any academic appeals.
  Health certificates – If a student misses the deadline for submitting an assignment, or the date of an exam or
other evaluation component for health reasons, they should notify their instructor as soon as possible (in the
case of an exam, before the exam is complete), and submit a Ryerson Student Health Certificate AND an
Academic Consideration Request form within 3 working days of the missed date. Both documents are
available at www.ryerson.ca/senate/forms/medical.pdf. If you are a full-time or part-time degree student, then
you submit your forms to your own program department or school; otherwise, you submit your forms at the
front desk of the Chang School of Continuing Education.

 Religious, Aboriginal and Spiritual observance – If a student needs accommodation because of religious,
Aboriginal or spiritual observance, they must submit a Request for Accommodation of Student Religious,
Aboriginal and Spiritual Observance AND an Academic Consideration Request form within the first 2 weeks
of the class or, for a final examination, within 2 weeks of the posting of the examination schedule. If the
requested absence occurs within the first 2 weeks of classes, or the dates are not known well in advance as
they are linked to other conditions, these forms should be submitted with as much lead time as possible in
advance of the absence. Both documents are available at
http://www.ryerson.ca/senate/forms/relobservforminstr.pdf. If you are a full-time or part-time degree student,
then you submit the forms to your own program department or school. If you are a certificate or non-
certificate student, then you submit the forms to the staff at the front desk of the Chang School.

 Academic Accommodation Support – Before the first graded work is due, students registered with the
Academic Accommodation Support office (AAS) should provide their instructors with an Academic
Accommodation letter that describes their academic accommodation plan.

For more detailed information on these issues, please refer to Senate Policy 134 at (Undergraduate Academic
Consideration and Appeals) and Senate Policy 150 (Accommodation of Student Religious Observance Obligations).
Both can be found at www.ryerson.ca/senate/policies/.

COURSE OUTLINE AND SCHEDULE:

Please note that most materials posted on D2L Brightspace under the heading of Course Materials will be used in class,
and that you are responsible for all of them. You should also review those materials in advance of coming to each
class. Problems assigned from the text are not evaluated. You should do them as a helpful exercise but you do not
submit them.

Class Topic and Class Preparation

1 Introduction to FIN 401
Introduction to the Course; Review of Selected Topics from FIN300
Readings: Chapters 1, 4, 6, and 7 (sections 7.1 – 7.4)
Problems: Ch. 4: 1 – 15, 18 – 29, 31, 32, 34, 35; Ch. 6: 1 – 19, 21, 22; Ch. 7: 1 – 20
2 Capital Budgeting and the Cost of Capital
Readings: Chapters 8 (all), 9 (excluding sections 9.5 and 9.6), and 12 (all)
Problems: Ch. 8: 1 – 17, 21, 23 – 27, 30, 33; Ch. 9: 1 – 17; Ch. 12: 1 – 3, 5 – 25
3 Leasing
Readings: Chapter 23
Problems: 6 – 10
4 Capital Structure – Part I
Readings: Chapter 16 – sections 16.1 and 16.2
Problems: 1 – 6
 5 Capital Structure – Part II
Readings: Chapter 16 – sections 16.3 to 16.7
Problems: 7, 10, 11, 13 – 20, 24, 26
6 READING WEEK – NO CLASS

7 Dividend Theory and Policy

Readings: Chapter 17
Problems: 1 – 8, 11, 14, 15, 19 – 22
8 MIDTERM EXAM (covering Chapters 4, 6-9, 12, 16, 17, and 23)
No teaching will be done in this class.

9 Raising Equity Capital and Debt Financing

Readings: Chapters 14 (all) and 15 (section 15.1)
Problems: 1 – 3, 7, 8, 10 – 20
10 Options
Readings: Chapter 13 (sections 13.1 – 13.3) and “Convertible Provisions” section of
Chapter 15
Problems: Ch. 13: 1 – 9; Ch. 15: 5, 6
11 Risk Management
Readings: Chapter 21 (sections 21.2 – 21.3, excluding “Swap-Based Hedging”)
Problems: 5 – 10
12 Mergers and Acquisitions
Readings: Chapter 24
Problems: 1 – 8
13 Financial Ethics: Agency Theory, Corporate Governance & Executive Compensation
If time allows, Course Review and Exam Preparation
Readings: Chapter 1, Sections 1.3 and 1.4

Please note that the topic order will be as stated above, but if we get off schedule, the dates may get backed up. I
reserve the right to add or subtract readings and other forms of class preparation from the above schedule. Course
evaluation will be as stated.

METHOD OF INSTRUCTION:

This course will incorporate the following teaching/learning methods. We will use a combination of lectures,
discussion, and problem solving. You will find that I encourage both questions and answers from my students. I will
encourage you to think, analyze, evaluate, and problem solve, not memorize.

I will assume that you have prepared for class (i.e., have read the assigned materials and have attempted the assigned
problems) and I invite you to come to see me during office hours or make an appointment if you have any problems
with the material.

You will find that if you don’t prepare for class, the classes may be tough to follow. Historically, this course has
had a high failure rate. Effective preparation before class will really help.
POLICIES & COURSE PRACTICES:

Course Management

Every effort will be made to manage the course as stated. However, adjustments may be necessary during the term at
the discretion of the instructor. If so, students will be advised, and alterations will be discussed prior to
implementation. Students will be advised through the use of in-class announcements and/or by an announcement on
D2L Brightspace.

Academic Integrity

Ryerson’s Policy 60 (the Academic Integrity policy) applies to all students at the University. Forms of academic
misconduct include plagiarism, cheating, supplying false information to the University, and other acts. The most
common form of academic misconduct is plagiarism – a serious academic offence, with potentially severe penalties
and other consequences. It is expected, therefore, that all examinations and work submitted for evaluation and course
credit will be the product of each student’s individual effort (or an authorized group of students). Submitting the same
work for credit to more than one course, without instructor approval, can also be considered a form of plagiarism.

Suspicions of academic misconduct may be referred to the Academic Integrity Office (AIO). Students who are found
to have committed academic misconduct will have a Disciplinary Notation (DN) placed on their academic record (not
on their transcript) and will normally be assigned one or more of the following penalties:
 A grade reduction for the work, include a grade of zero for the work.
 A grade reduction in the course greater than a zero on the work. (Note that this penalty can only be
applied to course components worth 10% or less, that any additional penalty cannot exceed 10% of the
final course grade, and that information explaining that such a penalty may be assigned must be included
on the course outline.)
 An F in the course
 More serious penalties up to and including expulsion from the University

The unauthorized use of intellectual property of others, including your professor, for distribution, sale, or profit is
expressly prohibited, in accordance with Policy 60 (Sections 2.8 and 2.10). Intellectual property includes, but is not
limited to:
 Slides
 Lecture notes
 Presentation materials used in and outside of class
 Lab manuals
 Course packs
 Exams

For more detailed information on these issues, please refer to the Academic Integrity policy and to the Academic
Integrity Office website.

Student Responsibilities in Academic Appeals

 Students should read the Undergraduate Academic Consideration & Appeals policy:
www.ryerson.ca/senate/policies/pol134.pdf
 It is the student’s responsibility to notify and consult with either the instructor, or the Chair/Director of the
teaching department/school, depending on the situation, as soon as circumstances arise that are likely to affect
academic performance. It is also the student’s responsibility to attempt to resolve all course related issues with the
instructor and then, if necessary, with the Chair/Director of the teaching department/school as soon as they arise.
An appeal may be filed only if the issue cannot be resolved appropriately. Failure to deal with a situation as soon
as it arises will jeopardize any appeal.
 Students who believe that an assignment, test, or exam has not been appropriately graded must review their
concerns with their instructor within 10 working days of the date when the graded work is returned.
Maintaining a Professional Learning Environment

Laptop computers, cell phones, or other devices should not be used for non-classroom activities as they are distracting
to other students and your instructor. Your professor may ask you to leave the class in question if you are caught using
a device in this way.

Academic Grading Policy

Evaluation of student performance will follow established academic grading policy outlined in the Ryerson GPA
Policy http://www.ryerson.ca/senate/policies/pol46.pdf. The grading system is summarized below:

Definition Letter Grade Grade Point Conversion Range

A+ 4.33 90-100
Excellent A 4.00 85-89
A- 3.67 80-84
B+ 3.33 77-79
Good B 3.00 73-76
B- 2.67 70-72
C+ 2.33 67-69
Satisfactory C 2.00 63-66
C- 1.67 60-62
D+ 1.33 57-59
Marginal D 1.00 53-56
D- 0.67 50-52
Unsatisfactory F 0.00 0-49