Advanced Corporate Financial Theory and Applications

This course focuses on advanced issues related to corporate financial decisions. Our first area of focus is on issues relating to the costs of equity and debt financing, and we define the firm’s overall cost of capital. We explore major tradeoffs involved in the choice of corporate capital structure and assess the value implications of these choices. Our second area of focus is firm valuation. We construct and analyze pro forma financial statements and projections of future cash flows. We develop spreadsheet valuation models incorporating cash flow projections and cost of capital estimates. Using discounted cash flow (DCF) methodology, we will value firms with both the weighted average cost of capital (WACC) and adjusted present value (APV) approaches. We extend this analysis to the valuation of firms with various multiples based on a comparable set of firms or transactions. Our third area is exploration of corporate finance situations such as mergers/acquisitions (M&A), initial public offerings (IPOs), leveraged buyout transactions (LBOs), valuation of synergies in M&A, and valuations of IPO firms and LBOs.