Department of Finance

School of Management and Economics

The Chinese University of Hong Kong, Shenzhen
AY2024/2025 Semester 2

FIN 4210 Corporate Finance Course Syllabus

Course code FIN4210

Course title Corporate Finance
Course schedule 8:30am – 9:50am (Tue & Thu) @TB-102
10:30am –11:50am (Tue & Thu) @TB-102

Instructor Yabo Zhao

Email [email protected]
Telephone (0755) 842-73451 (Emergency Only)
Office Teaching Complex TxD 807
Office hour Tuesday 2 – 3pm

Teaching Assistant Ruining Yue

Email [email protected]
Office TxD
Office hour Thursday 1:30 – 2:30pm

Tutorials TBA one week in advance

USTF office hour Hao Lou [email protected] Wed. 3:30-4:30pm
Chenyi Jiang [email protected] Fri. 10:00-11:00am
Venue: start up zone library L103

Course Description
This course introduces students to the fundamental financial issues of the corporation. It covers basic
concepts of capital budgeting methods; cash flow forecasting and risk analysis; debt and equity sources
of financing and valuation; and the cost of capital. It also introduces students to the process of security
issuance and techniques of financial planning and forecasting.

Pre-requisites
ECO2121 Basic Statistics
FIN2010 Financial Management
FIN2020 Foundation of Finance

1
Required Textbooks and Materials
The core reading for this module consists of selected chapters from:
Berk, J., and P. DeMarzo (Hereafter BD) “Corporate Finance”, 3rd (global) edition, Pearson

Course Structure
The course will be run with two seminars weekly, each for 80 mins. There will be no break in the middle.
PDFs/PPTs of slides (class notes) will be posted on Blackboard before the class, for most classes, unless
circumstances dictate otherwise. Assignments and other class materials will be posted to Blackboard.

Grading policy
Class Participation 5%
Problem Sets 15%
Mid-term Exam 30%
Group Project and Presentation 15%
Final Exam 35%

Class Participation: You are expected to come to the class. Contributions to class discussions and
question/answer sections will be rewarded. Distracting behavior in class, such as chatting, sleeping,
cellphone ringing, etc. will be punished.

Problem Sets: There will be two problem sets, one before the midterm and one after. Problem sets will be
distributed though Blackboard. You are reminded to submit your homework at the beginning of the class
on the due date. If an assignment is turned in late, it will not be accepted and you will not receive a credit
for your work.

Exams: There will be an in-class midterm exam and a final exam. Both exams are closed book and closed
notes. Calculators approved by the Registration and Examinations Section of the University might be
allowed. Please notice that no make-up test will be given except for extreme situations. If you do not have
a legitimate reason to miss an exam, you will be assigned a grade of zero for the test.

Group Project and Presentation: The group project involves developing a detailed presentation to analyze
one prominent corporation you pick. More details and instructions about the project will be given after
the Mid-term exam. The presentations of your project will be in-class. Each team should prepare a
presentation and a Q&A session following the presentation.

2
Honor Code: You are reminded of University policy and regulations on honesty in academic work. You
are expected to do your work in a manner consistent with the guidelines of the Honor System.

Learning Objectives and Outcomes

Part 1: Asset Pricing
1.1 Review of asset pricing models. Empirical Test of CAPM. Multiple factor models.
Idiosyncratic risk and systematic risk. (BD Chapter 10 and 11)
Part 2: MM Theorems and Capital Structure
2.1 MM theorem I: Irrelevance theorems in a perfect financial market (BD Chapter 14)
2.2 MM theorem II: Tax benefit and bankruptcy costs. Classic Trade-off theory (BD Chapter 15)
2.3 Agency frictions: Debt Overhang and risk shifting. Empirical evidence (BD Chapter 16)
2.4 Asymmetric Information: Adverse Selection. Pecking Order Theory (BD Chapter 16)
Part 3: Payout policy: Dividend and share repurchase (BD Chapter 17)
3.1 MM theorem in payout policy: Irrelevance theorems in a perfect financial market
3.2 Tax Disadvantage of Dividend and Dividend Signaling Model
Part 4: Capital Budgeting and Valuation (BD Chapter 18 and 19)
4.1 Derivation of WACC from MM theorems with leverage.
4.2 Cash flow projection and a basic valuation practice.
4.3 APV and cash flow to equity valuation.
Part 5: Other Corporate Finance Topics
5.1 Mergers & Acquisitions (BD Chapter 28)
5.2 Corporate governance (BD Chapter 29)
5.3 IPO, SEO, and venture capital (if time permits)

Upon completing this course, students will:

 be able to understand basic asset pricing theories and use them as foundations for other subjects in
finance;
 be able to define the role of the financial manager, the types of decisions (s)he is required to make,
the objectives and constraints that apply, and the potentially distorted incentives (s)he may have;
 be able to evaluate and rank different investment opportunities, taking into account issues of
accounting practice, taxation, understanding how risk and uncertainty of cash flow forecasts
affects the investment appraisal process;
 be familiar with the different ways in which the firm can raise funds to finance investment, and
understand the implications of the firm’s debt/equity mix on its value, tax burden, and the influence
of agency conflicts and information asymmetry;

3
  understand the implications of the firm’s payout policy on shareholder wealth and long-term
growth prospects, and how these may determine an “optimal” policy.

Tentative Course Outline

The following schedule is a tentative outline of the course. More details will be updated as we proceed.

Week Date Topic Reading

Tue 7-Jan No class
1
Thu 9-Jan Introduction: Syllabus + Overview
Tue 14-Jan Risk & Return BD Chapter 10 & 11
2
Thu 16-Jan Risk & Return
20-Jan
Public Holiday (Chinese New Year)
9-Feb
Tue 11-Feb Risk & Return
3 BD Chapter 10 & 11
Thu 13-Feb Risk & Return
Tue 18-Feb MM Theorems and Capital Structure
4
Thu 20-Feb MM Theorems and Capital Structure
BD Chapter 14, 15 & 16
Tue 25-Feb MM Theorems and Capital Structure
5
Thu 27-Feb MM Theorems and Capital Structure
Tue 4-Mar Payout Policy
6 BD Chapter 17
Thu 6-Mar Payout Policy
Tue 11-Mar Capital Budgeting
7 BD Chapter 18 & 19
Thu 13-Mar Capital Budgeting
Tue 18-Mar Buffer class / prep for midterm exam
8
Thu 20-Mar Midterm
Tue 25-Mar Capital Budgeting
9 BD Chapter 18 & 19
Thu 27-Mar Capital Budgeting
Tue 1-Apr Mergers and Acquisitions
10
Thu 3-Apr Mergers and Acquisitions
Tue 8-Apr Mergers and Acquisitions
11 BD Chapter 28 & 29
Thu 10-Apr Mergers and Acquisitions - An Example
Tue 15-Apr Mergers and Acquisitions - An Example
12
Thu 17-Apr Mergers and Acquisitions - An Example
Tue 22-Apr Capital Governance
13
Thu 24-Apr Group Presentation
Tue 29-Apr Group Presentation
14
Thu 1-May Public Holiday (Labor Day)
Tue 6-May Group Presentation
15
Thu 8-May No class, prep for final exam