University of Southern California



UNIVERSITY OF SOUTHERN CALIFORNIA

MARSHALL SCHOOL OF BUSINESS

CORPORATE FINANCIAL STRATEGY

FBE 532 54 out of 54 (9 on waitlist) Duke K. Bristow, Ph.D.

Monday 6:30 – 9:30 p.m. Office: Accounting Hall 301C

Classroom: JKP Room 202 Voice/Fax (213) 740-6513/ (213) 740-6650

Spring 2016 Office Hours: 5:30 pm on M and by appt.

Please Use Blackboard Email: dbristow@usc.edu

This course is modeled closely on previous courses taught by Profs. Dietrich and Ozbas - both of USC. They are thanked for the use of their syllabi from which with my changes this syllabus comes. You may not record any portion of the class without my prior written permission.

COURSE OBJECTIVES

The primary objective of “Corporate Financial Strategy” is for students to understand the implications of financial theory in real world situations. To stimulate your learning and class discussion, we will utilize three sources of real situations: formal cases (most from HBS), the real-life business experiences of the students and the professor, and current news from the Wall Street Journal (and related business publications). A primary teaching objective is to improve your critical thinking and to communicate, simply and clearly, the implications of your analyses to an informed audience. These audiences include CEOs, CFOs, Corporate Directors, Investment Bankers, Commercial Bankers, Venture Capitalists, Lawyers, Accountants, Regulators, etc. A second objective is for students to appreciate the demands and opportunities of pursuing careers in different functional areas of finance, such as corporate financial management, commercial banking, investing and investment banking. The course outline is organized around specific finance functions, like commercial and investment banking and private equity investment, to emphasize the different finance functions. A final objective is for students to refine and expand specific skills and use of financial analytical tools in a real-world context.

At the conclusion of FBE 532, hard-working students will be able to:

• Value companies and link capital structure to valuation;

• Analyze motivations for mergers and acquisitions;

• Understand issues from bank loans to venture-capital financing;

• Appreciate the significance of ownership structure on value and performance;

• Relate business and financial strategies using sustainable growth models;

• Assess strategic factors affecting corporate investment;

• Compare alternative sources of financing in international markets;

• Use derivatives (e.g. futures, options, and swaps and others) to manage risk;

• Integrate shareholder wealth creation in formulating corporate decisions.

PREREQUISITES

See MBA catalog.

REQUIRED READINGS

1. FBE 532 Case Reader [CR] available at the USC bookstore.

2. Ross, Westerfield and Jaffe, Corporate Finance, 10th or 9th ed., Irwin, McGraw-Hill

RECOMMENDED READINGS

1. Higgins, Analysis for Financial Management, 9th ed., Irwin, McGraw-Hill

Background readings for class discussion and case preparation are provided in the course schedule in the MBA-level text, Corporate Finance by Ross, Westerfield, and Jaffe, 9th edition (RWJ). This best-selling text is similar to basic finance texts used at other business schools (e.g. Brealey and Myers, Principles of Corporate Finance) and is the graduate-level text corresponding to the book used in BUAD 306 (Fundamentals of Corporate Finance by Ross, Westerfield, and Jordan). Many students not familiar with financial statement analysis will benefit from reading Higgins, Analysis for Financial Management. If needed, reading this text as soon as possible is best. Students may review subjects in corresponding chapters of texts other than RWJ if they choose. MBAs at the Marshall School will benefit from the more extensive and higher-level treatment of subjects in RWJ and I recommend they consider using this text as a source for background reading in this course and as a reference for other finance courses. Students are expected to follow relevant business developments reported in the business press, especially the Wall Street Journal (WSJ), and it is highly recommended that students also read other periodicals, especially The Economist, Forbes or Fortune magazines. You are expected to read WSJ before each class and be prepared to discuss What’s News- columns. If you are not interested in how current events impact corporate finance you should not take this course. No one may sign you in except yourself; signing others in is cheating and will not be tolerated. The class is taught in a discussion with the students being active participants. If you don’t plan to come prepared please drop the course. You should post your short bio and an updated resume on Blackboard by the end of the second week of classes.

STUDENT DISABILITIES

Any student requesting academic accommodations based on a disability is required to register with Disability Services and Programs (DSP) each semester. A letter of verification for approved accommodations can be obtained from DSP. Please be sure the letter is delivered to me as early in the semester as possible. DSP is located in STU 301 and is open 8:30 a.m. - 5:00 p.m., Monday through Friday. The phone number for DSP is (213) 740-0776.

ELECTRONIC RESOURCES

FBE 532 has a course website on Blackboard. Using the discussion board in a productive fashion will count toward your grade. Post thoughtful questions and answer others’ postings. Some course materials are distributed through Blackboard. The website may also contain links to useful financial information and data sources available on the Internet. At times, I will also distribute materials and notify students through class discussions.

COURSE ORGANIZATION

Case discussions are scheduled to illustrate different finance functions. Lectures and recommended readings covering some important issues and relevant material for each case will precede the case assignments. Students in the class will be formed into groups of four or five students after enrollment has stabilized to work outside of class to discuss, analyze, and write group case memoranda. Students as individuals must also hand in write-ups for at least two cases. Group case assignments are marked as such and cases eligible for individual student write-ups makeup the remainder. Cases require write-ups and students must be ready to answer questions and discuss issues raised by these cases during the class discussion. I will distribute some questions for some cases to provoke thinking but these questions are not to be taken literally or as guides to case solutions: the case analysis should be a coherent assessment of these and other issues.

All written case analyses must include a cover sheet listing the group members (alphabetically by last name) for group write-ups or student’s name for individual write-ups, and the case name. Write the analysis like a memo to a key decision-maker, CEO, CFO, etc., assuming that the reader is financially sophisticated. Stick to the finance issues raised by the case, i.e. do not review a corporation’s business or history. Case memoranda should consist of analysis and recommendations limited to one page typewritten in length. An appendix may contain 1-3 pages of graphs, spreadsheets, or data, which are expected to make the case analysis clearer. No credit will be granted for a case handed in after the beginning of the class; students should retain a copy of their write-ups for reference during the class discussion. BRING AT LEAST TWO COPIES to class – hand one in and keep one for your use (and one each for any other group members).

Case analysis is time consuming and several readings of the case will be necessary. Students should allow plenty of time to survey the case contents, digest case facts, and analyze issues raised. You may not be able to identify a single theme or issue: cases may involve marketing and accounting and other business disciplines as well and financial issues. Students should focus only on the financial implications of business problems described in the case. There is sometimes no single right answer to a case and none will be distributed. Analyses and discussion must be clearly related to the corporate financial strategy issues in the case. There are wrong answers.

COURSE GRADING

The grade will be based upon class attendance, participation, Blackboard work and there will be case 5 write-ups (collected at random), a midterm and a final examination. Two individual case preparations and three group case preparations must be handed in before the case discussion for credit. These will be called for before class begins and will be collected on random dates. Therefore, you must prepare for each class because it may the one that is collected. There are no makeup cases or exams. Course grading will be based on the following weights:

Class Attendance, Participation, Blackboard 20%

Case Analyses 30%

Individual write-ups 10%

Group write-ups 20%

Midterm (20) and final exams (30) 50%

Total 100%

Class participation will be based on students’ ability to respond to cold-call questions (on a random basis). Zero credit is given when a student is called upon and is absent. Good responses will advance the discussion, not merely demonstrate attendance in class. There is no reward for talking at length or repeating my or others comments. In this class, the truth is rewarded: If you do not know saying “I do not know” gets higher credit than talking for 2 minutes and demonstrating you have no idea what is being discussed. In addition, the grade will be based on the general quality of a student’s contribution to the class discussion, their contributions to the Blackboard discussion boards and the overall learning experience.

The individual and group case write-ups will be graded on brevity, clarity, and persuasiveness of the written presentation. Each will be communicated via a formal letter of transmittal which includes the summary action or your conclusion in one to three sentences. Grades will be check plus, check, or fail. Case notes will not be distributed. If you are uncomfortable with the case method including cold calling you should not take this course. Individual team member’s grade for the group case write-ups may be adjusted according to individual team member’s contribution as determined by a peer evaluation form which may be distributed at the end of the semester.

UNIVERSITY OF SOUTHERN CALIFORNIA

MARSHALL SCHOOL OF BUSINESS

FBE 532 Duke K. Bristow, Ph.D.

Spring 2016 Accounting Hall 301C

(213) 740-6513 email: dbristow@usc.edu

Preliminary COURSE SCHEDULE subject to change

| | | |

|Dates |Topic |Readings / other |

| | | |

|Week 1 | | |

|Jan 11 |Course Syllabus / Introduction |Plan for your groups |

| |Butler Lumber (Session I) (Individual) |RWJ Chapters 2, 3 |

| | |Higgins Chap 1-3 |

| |Lecture Capital Structure I, II, & III (begin) |RWJ on Capital Structure |

|Week 2 | |

|Jan 18 |No Class University Holiday | |

| | | |

| | | |

|Week 3 | |

|Jan 25 |Lecture Capital Structure I, II, & III (cont.) |RWJ on Capital Structure |

| |Butler Lumber (Session II) (Individual) |RWJ Chapters 2, 3 |

| |UST Inc. (Individual) |Select your groups |

| | |Higgins Chap 4 |

|Week 4 | |

|Feb 1 |Massey-Ferguson, 1980 (Group) |Higgins Chap 5 |

| |Lecture Dividend Policy |RWJ on Dividends |

| | | |

|Week 5 | |

|Feb 8 |Intel Corporation, 1992 (Individual) | |

| |General Electric Healthcare, 2006 (Group) |RWJ on Risk |

| |Lecture Risk Management |FST HBR |

|Week 6 | |

|Feb 15 |No Class University Holiday | |

| | | |

| | | |

|Week 7 | |

|Feb 22 |American Barrick Resources Corporation (Group) | |

| |Lecture Capital Market History |RWJ on Capital Markets |

| |Midterm Review | |

|Week 8 | | |

|Feb 29 |MIDTERM EXAM | |

| | | |

| | | |

| | | |

| | | |

| | | |

|Week 9 | | |

|Mar 7 |British Satellite (group case) |RWJ on valuation |

| |Valuation Lecture |Higgins Chap 6 & 7 |

| |Discussion of Real Options |Readings on real options |

|Week 10 | | |

|Mar 14 |Spring Break | |

| | | |

| | | |

|Week 11 | | |

|Mar 21 |Dixon Corp Session 1 (Individual case write ups) |Higgins Chap 8 & 9 |

| |Dixon Corp Session 2 (group case & presentations) | |

| | | |

|Week 12 | | |

|Mar 28 |MW Petroleum Corporation (A) (Group Case) | |

| | | |

| | | |

|Week 13 | | |

|Apr 4 |Valuing a Company | |

| |The Southland Corporation (A) (Group Case) |Jensen, HBR |

| | | |

|Week 14 | | |

|Apr 11 |Lecture and Discussion on Venture Capital |Gompers notes (both) |

|Week 15 | | |

|Apr 18 |ZEFER (Group Case) | |

| |Radio One (Group Case) | |

| | | |

|Week 16 | | |

|Apr 25 |Flex Day | |

| |Comprehensive Final Review | |

| | | |

| |FINAL EXAM TBD | |

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