Corporate Finance Online Class

cfonline

This is a course of 36 short webcasts (about 12-20 minutes apiece), designed both to capture what I do in my regular semester-long corporate finance class and to supplement my book, Applied Corporate Finance (Fourth Edition), John Wiley & Sons. With each session, you can download slides for that session and a post-class test to go with it (and solutions). If you have my book, the relevant sections of the book are highlighted. The first part are the webcast related to the class and the second part are in-practice webcasts, designed to help you apply the concepts to real companies. The class webcasts are on You Tube and you will need to be online, to watch them. The in-practice webcasts are downloadable to your computer or device and can be watched at your convenience. I have also created a version of this class on iTunes U, and you can get to that class by clicking here. I owe a debt of gratitude to David Schumacher, who helped record and edited these videos. He was a master at making me look good (or at least as good as I could look).

Class Webcasts

	Session Webcast	Short Description	Supplementary Material	ACF 4th Edition
Intro	Class Overview
1	What is corporate finance?	Define what corporate finance covers and its first principles	1. Slides 2. Post-class test & solution	Preface, Chapter 1
2	The Objective in Decision Making I: Utopia and Let Down	Explain why we need a singular objective, why we pick maximizing stock prices & what can go wrong.	1. Slides 2. Post-class test & solution	Chapter 2
3	The Objective in Decision Making II: Reality and Reaction	Look at alternative corporate governance mechanisms and why stock price maximization may still be the best one.	1. Slides 2. Post-class test & solution	Chapter 2
4	Hurdle Rates I: Defining and Measuring Risk	Define risk at its core, examine how conventional models measure risk & define the marginal investor.	1. Slides 2. Post-class test & solution	Chapter 3
5	Hurdle Rates II: Risk free Rates	Go through processes for estimating risk free rates not only in safe currencies but also in risky ones.	1. Slides 2. Post-class test & solution	Chapter 4
6	Hurdle Rates III: Equity Risk Premium Basics	Define what an equity risk premium is and evaluate standard approaches for estimating that premium.	1. Slides 2. Post-class test & solution	Chapter 4
7	Hurdle Rates IV: Implied, Country and Company ERP	Present an alternate approach to estimating equity risk premium for a mature market and builds on it to get country and company equity risk premiums.	1. Slides 2. Post-class test & solution	Chapter 4
8	Hurdle Rates V: Regression Betas	Describe the regression approach to estimating beta and what the rest of the regression output tells us about a company.	1. Slides 2. Post-class test & solution	Chapter 4
9	Hurdle Rates VI: Beta Fundamentals	Connect betas to fundamental choices that a company makes about what business to be in, how to run that business & how much to borrow.	1. Slides 2. Post-class test & solution	Chapter 4
10	Hurdle Rates VII: Bottom up Betas - Basics	Develop an alternate approach for estimating betas that is more robust & intuitive.	1. Slides 2. Post-class test & solution	Chapter 4
11	Hurdle Rates VIII: Bottom up Betas - Extensions	Continue with the alternate approach and extend it to private businesses.	1. Slides 2. Post-class test & solution	Chapter 4
12	Hurdle Rates IX: Debt and its Cost	Define what goes into debt and what it costs to borrow.	1. Slides 2. Post-class test & solution	Chapter 4
13	Hurdle Rates X: Weights & Cost of Capital	Determine the weights to use to estimate a cost of capital & explain how and why it differs from cost of equity.	1. Slides 2. Post-class test & solution	Chapter 4
14	Investment Returns I: Setting the Table	Contrast earnings with cash flows and explain how to estimate the accounting returns on a project (company).	1. Slides 2. Post-class test & solution	Chapter 5
15	Investment Returns II: Getting to time-weighted cash flows	Go from earnings to cash flows to incremental time-weighted cash flow based measures of return.	1. Slides 2. Post-class test & solution	Chapter 5
16	Investment Returns III: Wrapping up loose ends	Look at the effect of currency choices on investment analysis and examine how best to deal with uncertainty in your analysis.	1. Slides 2. Post-class test & solution	Chapter 6
17	Optimal Financing Mix I: The trade off	Look at the pluses and minuses of using debt, as opposed to equity.	1. Slides 2. Post-class test & solution	Chapter 7
18	Optimal Financing Mix II: The cost of capital approach	Explain the basics of the cost of capital approach to deriving the optimal debt ratio for a company.	1. Slides 2. Post-class test & solution	Chapter 8
19	Optimal Financing Mix III: Following up the cost of capital approach	Evaluate why moving to the optimal debt ratio benefits stockholders in a company & deal with concerns.	1. Slides 2. Post-class test & solution	Chapter 8
20	Optimal Financing Mix IV: Wrapping up the cost of capital approach	Extend the cost of capital approach to commodity and private companies and examine the determinants of optimal debt ratios.	1. Slides 2. Post-class test & solution	Chapter 8
21	Optimal Financing Mix V: Alternate Approaches	Look at the Adjusted Present value approach as well as sector averages as guides to optimal debt ratios.	1. Slides 2. Post-class test & solution	Chapter 8
22	Moving to Optimal Financing Mix	Examine whether and how quickly a firm that has too much or too little debt should move to its right mix.	1. Slides 2. Post-class test & solution	Chapter 9
23	The Right Type of Financing	Determine the right kind of financing for a company and evaluate existing debt to see if it measures up.	1. Slides 2. Post-class test & solution	Chapter 9
24	Dividend Policy: Trends & Measures	Describe historical patterns/trends in dividend policy and look at measures of dividends paid.	1. Slides 2. Post-class test & solution	Chapter 10
25	Dividend Policy: The Trade off	Look at the reasons (good and bad) why companies initiate and change dividends.	1. Slides 2. Post-class test & solution	Chapter 10
26	Dividend Policy: Assessment	Evaluate how much companies can afford to return to stockholders and compare to cash returned.	1. Slides 2. Post-class test & solution	Chapter 11
27	Dividend Policy: Action and follow up	Use the dividend assessment to make judgments on whether companies should return more or less cash to stockholders.	1. Slides 2. Post-class test & solution	Chapter 11
28	Dividend Policy: End Game	Examine how companies end up with dysfunctional dividend policies and how they can change those policies.	1. Slides 2. Post-class test & solution	Chapter 11
29	Valuation: First Steps	Lay out the different ways in which you can approach valuation and define the key drivers of value.	1. Slides 2. Post-class test & solution	Chapter 12
30	Valuation: Cash flows & Discount Rates	Look at the estimation processes and challenges associated with cash flows and discount rates in valuation.	1. Slides 2. Post-class test & solution	Chapter 12
31	Valuation: Future Growth	Evaluate the different ways in which you can estimate growth and why it has to be tied to fundamental actions by the firm.	1. Slides 2. Post-class test & solution	Chapter 12
32	Valuation: Terminal Value	Put in place key constraints on the inputs used to get the terminal value.	1. Slides 2. Post-class test & solution	Chapter 12
33	Valuation: Loose Ends	Examine how to get from the present value of cash flows to the value of equity per share.	1. Slides 2. Post-class test & solution	Chapter 12
34	Valuation: The value of control	Define control as the difference between two values, status quo and optimal, and examine implications.	1. Slides 2. Post-class test & solution	Chapter 12
35	Valuation: It is all relative	Estimate the price of an asset or stock based on how similar assets or stocks are trading at.	1. Slides 2. Post-class test & solution	Chapter 12
36	Corporate Finance: Closing Thoughts	Provide a narrative that ties first principles to models and tools.	1. Slides

In-Practice Webcasts/Material

Topic	Description	Webcast	Supporting material
Corporate Governance	The first step in understanding a company is to recognize how corporate governance works in the company. Taking a look at who is on the board of directors and whether the rules of the game are skewed in favor on incumbent managers is a part of this process. In this webcast, I use HP to illustrate how you can use public data to make this assessment.	Webcast	Presentation HP Annual Report HP DEF14A
Stockholder composition (for risk measurement)	Knowing who owns stock in your company is useful on many levels. In particular, it can alert you to potential conflicts of interest that may arise down the road and how a company's policies may reflect those conflicts.	Webcast	Presentation
Estimating the risk free rate	The risk free rate should be easy, right? In some cases, it may be, but it can be difficult to get risk free rates in some currencies, especially when there is default free entity. In this webcast, I look at the ways in which you can extract default spreads for governments to get to a risk free rate in a currency.	Webcast	Presentation Moody's ratings CDS spreads
Estimating implied equity risk premium	I have been a strong proponent of implied equity risk premiums, forward looking estimates that are extracted by looking at stock prices today and expected cash flows in the future. While I have an implied equity risk premium spreadsheet on my website, I try to get some of the mystery out of both the process and the inputs in this webcast.	Webcast	Presentation Spreadsheet S&P 500 on buybacks S&P 500 earnings
Reading a regression beta page	A regression of returns on your stock against returns on a market index is the standard approach to estimating betas. While I do not like these "single slice of history" estimates, the regression still provides useful information about the performance of a stock during the regression period and its riskiness.	Webcast	Bloomberg beta page Spreadsheet for analysis Disney Annual Report (2012) Excel regression beta page Disney (Raw Data) S&P (Raw Data)
Estimating a botttom up beta	A single regression beta is a flawed measure of relative risk. A bottom up beta, which builds up to the beta of a company from its businesses, is not only more precise but also more flexible and forward looking. In this webcast, I describe the mechanics of estimating a bottom up beta.	Webcast	United Technologies 10K Spreadsheet for bottom up beta
Debt and the cost of debt	You need the market value of debt and a pre-tax cost of debt to compute a cost of capital. To get the market value of debt, you first have to determine what items on the balance sheet qualify as debt and convert the book value of the debt into market value. You also have to bring lease and other contractual commitments into the equation. Finally, all of this will require that you estimate a current, long term cost of borrowing.	Webcast	Home Depot 10K Home Depot 10Q S&P rating for HD Spreadsheet
Measuring accounting returns	In assessing whether a company's existing investments are good or not, we draw on accounting return measures: return on invested capital and return on equity. However, navigating what should be in invested capital and what should not, and how to adjust for accounting inconsistencies is tricky.	Webcast	Walmart 10K (2013) Walmart 10K (2012) Spreadsheet
Identifying a "typical" project	Knowing what a typical project for a firm looks like is useful not only to undertstand cash flow patterns & risks in investment analysis but also in structuring financing and dividend policy.	Webcast	Presentation
The trade off on debt	The first step in assessing whether a firm can borrow, and if so, how much, is to look at the benefits of debt and weigh them against the costs, at least on qualitative terms.	Webcast	Presentation Spreadsheet Marginal tax rates by country Effective tax rates by sector (US)
The optimal debt ratio	To assess the optimal debt ratio, you can use the cost of capital approach, where you minimize cost of capital (in the standard approach) or maximize firm value (when there are indirect bankruptcy costs)	Webcast	Dell 10K Dell optimal capital structure
Debt design	The "right' debt for a firm reflects its assets and cash flows. To design this debt, you can either start with the typical project and work intuitively to the right debt or try a more quantiative approach.	Webcast	Presentation Spreadsheet WMT financial summary
Dividend Trade off	As a company, should you pay dividends? And if so, how much? In this session, I look at the trade off on dividends and why some companies may come under more pressure than others to initial and increase dividends	Webcast	Presentation
Dividend policy assessment	With every firm, there are three key questions that lie at the heart of dividend policy: (1) How much cash does this firm return to stockholders, (2) How much could it have returned and (3) Do you trust management?	Webcast	Spreadsheet Disney Annual Report (2012)
Valuation	Valuation is the end game, where all of the aspects of corporate finance - investing, financing and dividend policies - come together in one number.	Webcast	Spreadsheet Apple 10K (Sept 2012) Apple 10Q (Mar 2013)