1. Introduction to Financial Management
Administrative Issues and Course Overview
FIn 351: Lecture 1

2. Today’s plan administrative issues course overview syllabus
prerequisite
add, drop and withdraw
three quizzes
three cases
final
final grade
course overview
FIn 351: Lecture 1

3. The instructor My name is George Li Office: BUS 315 and DTC 582
Call me George, not professor
Office: BUS 315 and DTC 582
Website:
Office hours:
Monday (Bus 315): 1:30 to 3:30 p.m.
Thursday ( DTC 582) 3:30 -5:30 p.m.
Research interest:
Corporate finance: real options, technological innovations, and valuations
Asset pricing: information and stock prices
FIn 351: Lecture 1

4. Textbook fundamentals of corporate finance, by
Brealey, Myers and Marcas (6th edition)
sorry about the cost
this is a standard textbook used in many major schools for the first course in corporate finance
FIn 351: Lecture 1

5. Prerequisite
You are required to take FIN 350 with a grade of at least C-.
It is the school’s policy that all the students in this course must satisfy this requirement and there is no exception
FIn 351: Lecture 1

6. Add, drop and withdrawal policy
The business school has the policy for add, drop and withdrawal
In the first four weeks, you have to get enrolled in the class, if you want.
Students can withdraw once
Please read the bulletin for detail information
FIn 351: Lecture 1

7. Pass or no pass grade Fin 351 is a letter graded course.
Please don’t change to pass or no-pass grade course; otherwise you will get a no-pass grade.
FIn 351: Lecture 1

8. Homework
To help you understand the concepts taught in class, and prepare for the quizzes and the final exam, there is a weekly homework set, which is not graded, but its solution will be posted in my website. The best way to learn is to do a lot of problems.
FIn 351: Lecture 1

9. Quizzes
There are three quizzes, which are in the form of multiple choice questions and take about minutes each.
There are no makeup or in-advance quizzes.
Two highest quizzes count for the final grade ( each 20 pts). If you miss one, that is the quiz you will drop.
You are supposed to allocate your time to take all the quizzes
FIn 351: Lecture 1

10. Three cases There are three cases to be discussed in class.
You are asked to read the case before coming to the case discussion.
Case problems are related to some problems in the final.
It is very important that you bring in a calculator and a pen at every lecture
FIn 351: Lecture 1

11. Class attendance and performance
It is required that you come to each lecture and case discussion.
If you miss one lecture or are late for two lectures without a legitimate reason, talk or speak to disturb the whole class, your score in the class attendance and performance will be reduced at the instructor’s discretion.
FIn 351: Lecture 1

12. The final exam
The final exam will be in class (closed book), with a form of multiple choice questions.
There are no makeup or in-advance exams.
The final exam is cumulative, based on the lectures, quizzes, homework and three cases.
The final exam will be at the same classroom and start at the same time. The final exam takes 150 minutes.
FIn 351: Lecture 1

13. Final grade
Your overall course grade will be based on your performance in the class, the quizzes, homework problem sets, the team project, and the final exam.
Class attendance: pts
Quizzes (2 of 3 total) pts
Final exam: pts
Total pts
FIn 351: Lecture 1

14. Grading policy
Your grades are based on the distribution of the scores of the class. Specifically, your final grade is based on the following table.
Ranking Grade
0%-10% A range
10%-50% B range
50%-85% C range
85%-95% D range
95%-100% F
FIn 351: Lecture 1

15. Motivation for taking Fin 351?
Why are you taking Fin 351?
nothing better to do today ?
become a millionaire overnight?
the instructor is a nice guy for a good grade?
get a “stamp of approval” to get a job ?
learn finance for fun ?
simply a required course ?
learn finance to be more successful?
FIn 351: Lecture 1

16. My objective in this course
I want everyone in the room to learn finance very well this semester
i want you to feel more comfortable talking about finance and answering finance questions.
i want you to have a better understanding of a set of concepts and ideas that will help you look at the world in a slightly different way.
What is standing in the way of those objectives?
Over-confidence
Under-confidence
FIn 351: Lecture 1

17. Two ways of learning Positive Negative
Can be a fun, since it is an opportunity to improve your future career, open your mind and broaden your vision
Look at each difficulty as an opportunity to learn new things
Good performance
Negative
Can be boring, since it is regarded as a burden, a task
Look at each difficulty as a “torture” or pain
Bad performance
FIn 351: Lecture 1

18. My approach of teaching Fin 351
Focus on several fundamental, important concepts,
Applications and economic intuitions
Avoid too many materials
Help understand finance better.
FIn 351: Lecture 1

19. Corporate finance: what is it?
A set of concepts, theories and approaches that help the firm make financial decisions
FIn 351: Lecture 1

20. Financial decisions Capital budgeting (use of the capital)
Real investments
Mergers; acquisitions
Financing (capital structure decision)
Equity
Debt
FIn 351: Lecture 1

21. FIN 351: course organization
Module 1
Fundamentals of valuation
Module 2
Valuing risky investments
Risk and return
Module 3
Corporate financial decisions
Module 4
Market efficiency and options
Fundamentals of PV
Financial decision
Interest rates
Portfolio theory
Diversification and covariance
Types of securities
Stocks, bonds and other
Weak, semi-strong and
strong form efficiency
Information and stock prices
Perpetuities and
annuities calculation
Tangency portfolio, CAPM
risk and return
Modigliani-Miller theorem 1
Pizza size is independent of
how sliced
Options and Black-Scholes
Valuing stocks
and bonds
NPV and other criteria
Effect of leverage
WACC and discount rate
Modigliani-Miller theorem 2
WACC
Binomial model, replication
Risk-neutral probabilities
FIn 351: Lecture 1

22. Course organization (2)
This course is broken-down into four modules
Module 1: time value of money
Module 2: risk and return
Module 3: capital structure
Module 4: financial markets
FIn 351: Lecture 1

23. Time value of money
This module is a “skill building” block in this course
We will soon have the necessary skills needed to value stocks and bonds
In this module, we don’t consider risk
It is assumed that future cash flows are riskless
It is assumed that the discount rate is riskless
FIn 351: Lecture 1

24. Risk and return This part teaches us about uncertainty
How do we measure risk?
How much is a risky cash flow in the future worth (today)?
There are both:
skill building sections
conceptually more difficult sections
FIn 351: Lecture 1

25. Financing decisions If you are the CEO of an industrial company
you can make your company more valuable by choosing “better” projects
we want to know if you (and the CFO) can make your company more valuable by changing the mixture of your financing (i.e. the ratio of debt to equity)
FIn 351: Lecture 1

26. The efficiency of financial markets
We will look at how information gets into security prices
We will learn three forms market efficiency
We will examine the implication of market efficiency on financing
FIn 351: Lecture 1