Instructor’s Manual
Prologue
Corporate finance remains my favorite course to teach for several reasons.
1. Defined expansively it covers everything in finance from agency theory to valuation. It is the ultimate big picture course where I can weave the different strands that make up modern finance together.
2. It allows me to appeal to the greatest number of students. While many of our students may never value an option once they get out of school or even directly be confronted with valuing a business, they will all come face to face with corporate financial issues somewhere along the way. Whether they be entrepreneurs or advertising executives or corporate strategists, they can draw on one or more aspects of corporate finance along the way.
3. This is the class that allows participants to have the most “aha” moments. What is an “aha” moment? It is that moment of insight when students realize why something he or she has observed in practice, whether it be stock buybacks or restructurings, occur. It is what, in my view, makes teaching this class most rewarding.
4. It is a fun class to teach. The world provides thousands of examples of everything that we talk about in class each day
Each of us has our own way of teaching corporate finance and we each emphasize different aspects of it. Some of us spend a great deal of time on capital structure questions, while others examine investment decisions in far more detail. Some of us teach corporate finance as a valuation course, while others hardly ever mention valuation. I think this is both natural and healthy. I hope you will find a way to use my book to showcase areas that you find most fascinating.
Each corporate finance class is likely to be different and the content is likely to depend upon at least two factors:
While you might not find this works, I have prepared a table to help pick your way through the book depending upon the type of course and students that you have:
|
Type of Course |
Course Content |
|
Semester course to students who have already done present value, basic risk and return models and financial statement analysis (or accounting) 28 sessions of 80 minutes |
Chapter 2: 1 session Chapters 7-11: 11 sessions Chapters 12-15: 2 sessions Chapters 16-20: 6 sessions Chapters 21-23: 3 sessions Chapters 24-25: 3 sessions Chapter 26 or 27: 2 sessions Chapters skipped: 3-6 |
|
Semester course to students who have taken present value and financial statement analysis, but have taken no finance courses. 28 sessions of 80 minutes |
Chapter 2: 1 session Chapters 3-5: Skip or assign as reading Chapter 6: 2 sessions Chapters 7-11: 11 sessions Chapters 12-15: 2 sessions Chapters 16-20: 6 sessions Chapters 21-23: 3 sessions Chapter 24-25: 3 sessions Chapters skipped: Chapter 3-5,26, 27 |
|
Semester course to students who have not taken present value or financial statement analysis 28 sessions of 80 minutes |
Chapter 2: 1 session Chapters 3-5: 2 sessions Chapter 6: 2 sessions Chapters 7-10: 10 sessions Chapters 13,15: 2 sessions Chapters 16-20: 6 sessions Chapters 21-22: 3 sessions Chapter 24-25: 3 sessions Chapters skipped: Chapter 11,12,14,23,26 &27 |
|
Quarter course to students who have already done present value, basic risk and return models and financial statement analysis (or accounting) 20 sessions of 80 minutes |
Chapter 2: 1 session Chapters 7-10: 8 sessions Chapters 16-20: 5 sessions Chapters 21-22: 3 sessions Chapter 24-25: 3 sessions Chapters skipped: Chapter 3-6,11-15,23,26 &27 |
|
Quarter course to students who have already done present value and financial statement analysis (or accounting) but no finance 20 sessions of 80 minutes |
Chapter 2: 1 session Chapter 6: 2 sessions Chapters 7-10: 8 sessions Chapters 18-20: 4 sessions Chapters 21-22: 3 sessions Chapter 24-25: 2 sessions Chapters skipped: Chapter 3-5,11-15,23,26 &27 |
|
Quarter to students who have not taken present value or financial statement analysis 20 sessions of 80 minutes |
Chapter 2: 1 session Chapters 3-5: 2 sessions Chapter 6-7: 3 sessions Chapters 8-10: 5 sessions Chapters 18-20: 4 sessions Chapters 21-22: 3 sessions Chapter 24-25: 2 sessions Chapters skipped: Chapter 3-6,11-15,23,26 &27 |
|
Executive Course (Focus on applications) |
Chapter 2 Chapter 7 Chapter 8-10 Chapter 19,20 Chapter 22 Chapters 24-25 |
Clearly, by biases are showing. I tend to spend less time on working capital and more on estimating costs of equity and capital. I focus more time of finding an optimal mix than I do on describing financing instruments. Your biases are likely to be different, and I think I have provided enough material to feed those biases.
I also hope that the web site helps take some of the pressure off you. It is designed to allow students to read chapters that you assign and get supporting material. Since every example in the book has an excel spreadsheet, they should be able to see where the numbers come from and what happens as they change.
I have never found conventional instructor’s manuals to be particularly useful because they do not map on to how I teach the class. I teach with overheads, and I think that many of you do as well. Consequently, I have reproduced the overheads that I use to teach this class as power point presentations that you can download. I have put pdf versions of these presentations for students to download on the site. Be warned! There are more than 600 overheads for the book. You can prune and modify to make them suit your needs. I have also left them in barebones format! (No colors, no animation…) I will leave the formatting choice up to you. (You will need a password which you can get by contacting me at adamodar@stern.nyu.edu)
I have added notes to each page of the presentation. You can see the notes if you switch to notes format in power point. The notes are not profound and I consider them work in progress. I know you will find interesting things to add as you go along.
I thank you for choosing my book. I know that I can (and probably do) make your life difficult when I do not explain something clearly in the book or worse still, make a mistake in concept or calculation. While I would like to tell you that there are zero errors in this book, I cannot. I am sure I have made mistakes and I apologize in advance for them. All I can promise you is that I will bring the mistakes to the attention of you and your students as soon as I find them. Good luck and best wishes!
Aswath Damodaran