IB25415 Principles of Finance 2
Introductory description
This is an elective module available for nonWBS students.
Make students critically aware of the key financial decisions taken by firms.
Develop in students a sound understanding of the main theories and models of Corporate Finance.
Make students aware of key empirical tests of models of Corporate Finance, and the implications of those empirical findings.
Provide students with structured opportunities to practice using the key tools and techniques of Corporate Finance.
Prepare students for advanced undergraduate and postgraduate studies in Finance
Module aims
Make students critically aware of the key financial decisions taken by firms.
Develop in students a sound understanding of the main theories and models of Corporate Finance.
Make students aware of key empirical tests of models of Corporate Finance, and the implications of those empirical findings.
Provide students with structured opportunities to practice using the key tools and techniques of Corporate Finance.
Prepare students for advanced undergraduate and postgraduate studies in Finance
Outline syllabus
This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.
Capital Budgeting:
Discounted Cash Flow techniques for appraising capital projects.
Equity valuation:
Dividend growth models, P/E and other methods, growth opportunities.
Real Options:
Investment appraisal under uncertainty.
Cost of Capital:
Weighted average of cost of equity and cost of debt in the presence of taxes.
Risky Debt:
Valuation of risky debt using option pricing. Effects of volatility.
Capital Structure:
Irrelevance propositions, taxes, costs of financial distress, agency costs, signalling.
Payout Policy:
Irrelevance proposition, taxes, transactions costs, signalling, agency effects. Share buybacks as an
alternative to dividends.
Mergers / Acquisitions:
Vertical vs. horizontal mergers, motives for mergers, methods of financing mergers, merger process.
Initial Public Offerings:
IPO process, underpricing, underperformance.
Learning outcomes
By the end of the module, students should be able to:
 Critically assess the factors that determine the optimal investment, financing and payout decisions of a firm.
 Compute the cost of capital of a firm under alternative assumptions.
 Identify the reasons why firms raise capital.
 Define key shareholder ratios (e.g. earnings per share, dividend yield and price earnings ratio) and use discounted cashflow techniques to estimate share prices.
 Discuss the main motives for mergers and acquisitions.
 Explain key theoretical models, and reflect critically on the limitations of those models and the assumptions that underpin them.
 Interpret empirical evidence.
 Solve structured numerical problems and analyse case study information
 Communicate complex ideas effectively, both verbally and in writing.
Indicative reading list
REQUIRED TEXT:
Hillier D, Ross SA, Westerfield RW, Jaffe J & Jordan BD, Corporate Finance (2nd ed. 2013), McGrawHill
OTHER TEXTS:
Berk J & DeMarzo P Corporate Finance (3rd ed. 2013), Pearson
Copeland TE, Weston JF & Shastri K, Financial Theory and Corporate Policy (4th ed. 2005), Pearson AddisonWesley
Subject specific skills
Solve structured numerical problems. Write informed critiques of key issues in corporate finance. Analyse case studies and construct arguments to support a particular solution.
Transferable skills
Apply option valuation techniques to value a firm's equity and debt, and its real options.
Use webbased resources to find and retrieve data on companies, and spreadsheets to process that data.
Explain and interpret corporate financial information.
Study time
Type  Required 

Lectures  10 sessions of 1 hour (7%) 
Seminars  9 sessions of 1 hour (6%) 
Online learning (independent)  10 sessions of 1 hour (7%) 
Private study  48 hours (32%) 
Assessment  73 hours (49%) 
Total  150 hours 
Private study description
No private study requirements defined for this module.
Costs
No further costs have been identified for this module.
You do not need to pass all assessment components to pass the module.
Assessment group D7
Weighting  Study time  

Participation  10%  8 hours 
Online Examination  90%  65 hours 
Exam ~Platforms  AEP

Assessment group D8
Weighting  Study time  

Participation  10%  8 hours 
Online Examination  90%  65 hours 

Assessment group R2
Weighting  Study time  

Online Examination  100%  
Exam ~Platforms  AEP

Feedback on assessment
Feedback via My.WBS
Prerequisites
To take this module, you must have passed:
Courses
This module is Optional for:
 Year 4 of UIBAMN34 Law and Business Four Year (Qualifying Degree)

UECA3 Undergraduate Economics 3 Year Variants
 Year 2 of L100 Economics
 Year 2 of L100 Economics
 Year 2 of L100 Economics
 Year 2 of L116 Economics and Industrial Organization
 Year 2 of L116 Economics and Industrial Organization
 Year 3 of L116 Economics and Industrial Organization
 Year 3 of L116 Economics and Industrial Organization

UECALM1D Undergraduate Economics, Politics and International Studies
 Year 2 of LM1D Economics, Politics and International Studies
 Year 2 of LM1D Economics, Politics and International Studies
 Year 2 of UIPAL8N1 Undergraduate Global Sustainable Development and Business
 Year 4 of UIBAMN32 Undergraduate Law and Business Studies
 Year 5 of UIBAMN37 Undergraduate Law and Business Studies (Qualifying Degree) with Intercalated Year
 Year 5 of UIBAMN36 Undergraduate Law and Business Studies with Intercalated Year (4+1)

USTAG300 Undergraduate Master of Mathematics,Operational Research,Statistics and Economics
 Year 3 of G300 Mathematics, Operational Research, Statistics and Economics
 Year 4 of G300 Mathematics, Operational Research, Statistics and Economics

USTAG1G3 Undergraduate Mathematics and Statistics (BSc MMathStat)
 Year 3 of G1G3 Mathematics and Statistics (BSc MMathStat)
 Year 4 of G1G3 Mathematics and Statistics (BSc MMathStat)

USTAG1G4 Undergraduate Mathematics and Statistics (BSc MMathStat) (with Intercalated Year)
 Year 4 of G1G4 Mathematics and Statistics (BSc MMathStat) (with Intercalated Year)
 Year 5 of G1G4 Mathematics and Statistics (BSc MMathStat) (with Intercalated Year)
This module is Unusual option for:

UPHAV7ML Undergraduate Philosophy, Politics and Economics
 Year 3 of V7ML Philosophy, Politics and Economics (Tripartite)
 Year 3 of V7ML Philosophy, Politics and Economics (Tripartite)
 Year 3 of V7ML Philosophy, Politics and Economics (Tripartite)
 Year 3 of V7ML Philosophy, Politics and Economics (Tripartite)
 Year 3 of V7ML Philosophy, Politics and Economics (Tripartite)
 Year 3 of V7ML Philosophy, Politics and Economics (Tripartite)
This module is Option list B for:
 Year 4 of UMAAG105 Undergraduate Master of Mathematics (with Intercalated Year)

UMAAG100 Undergraduate Mathematics (BSc)
 Year 3 of G100 Mathematics
 Year 3 of G100 Mathematics
 Year 3 of G100 Mathematics

UMAAG103 Undergraduate Mathematics (MMath)
 Year 3 of G100 Mathematics
 Year 3 of G103 Mathematics (MMath)
 Year 3 of G103 Mathematics (MMath)
 Year 3 of UMAAG106 Undergraduate Mathematics (MMath) with Study in Europe

USTAGG14 Undergraduate Mathematics and Statistics (BSc)
 Year 3 of GG14 Mathematics and Statistics
 Year 3 of GG14 Mathematics and Statistics
 Year 4 of USTAGG17 Undergraduate Mathematics and Statistics (with Intercalated Year)
 Year 4 of UMAAG101 Undergraduate Mathematics with Intercalated Year

USTAY602 Undergraduate Mathematics,Operational Research,Statistics and Economics
 Year 3 of Y602 Mathematics,Operational Research,Stats,Economics
 Year 3 of Y602 Mathematics,Operational Research,Stats,Economics
 Year 4 of USTAY603 Undergraduate Mathematics,Operational Research,Statistics,Economics (with Intercalated Year)
This module is Option list G for:

UPHAV7ML Undergraduate Philosophy, Politics and Economics
 Year 2 of V7ML Philosophy, Politics and Economics (Tripartite)
 Year 2 of V7ML Philosophy, Politics and Economics (Tripartite)
 Year 2 of V7ML Philosophy, Politics and Economics (Tripartite)