THE UNIVERSITY OF NORTH CAROLINA AT GREENSBORO
Joseph M. Bryan School of Business and Economics
Accounting and Finance
Meeting Time and Place
.01, Corporate Strategy and the Finance Function
, Bryan School (Room
Daniel T. Winkler
Used extensively in this course
Office Hours: 11:45 a.m.
12:15 p.m., 5:30 p.m.
6:15 p.m. M; 1:15 p.m.
1:45 p.m. TR
MBA 605, 617; Co
Douglas R. Emery, John D. Finnerty, and John D. Stowe
. Corporate Financial
Harvard Business Review Cases purchased and downloaded online at:
HP (Hewlett Packard) 10 B I
I, 17BII financial calculator
or the equivalent.
Course Description and Purpose
Finance in the st
rategic management process; corporate strategies and shareholder value
creation, financing decisions, distribution policy, and long
term investment decisions.”
The learning outcomes from this course are as follows:
Recognize the role played by the financ
e function in developing a global strategic
Evaluate the extent to which a firm’s investment, financing, and dividend
decisions contribution to creating value for its common shareholders. Assess the
degree to which these financial policies support t
he firm’s overall corporate
Identify the major stakeholders in the modern corporation. Explain how the
interests of the stockholders in a multinational firm may be in conflict with other
Estimate the required rate of return for a f
irm, and where appropriate, its various
divisions. Use this financial standard as a basis for making investment decisions
that create value for the shareholders.
Understand how dividends and share repurchases affect the firm’s financial
statements and ope
Estimate the firm’s debt capacity and use it to choose a target capital structure
that is consistent with the firm’s overall corporate strategy.
Class Organization, Procedures and Expectations
There are two different versions of M
BA 625. This section is designed for evening
students who have more work experience. The
1½ hour of class will be devoted
to lectures on selected topics.
PowerPoint slides have been placed on Blackboard for you
to review and print, but due to
time constraints, I will focus on selected slides in class.
You are expected to be ready to discuss all assigned material, but in particular, it is
important that you work the Participation Challenge problems that are included t
the PowerPoint sl
The last half of the class will be devoted to discussion of an
So please work the assigned case and answered the study questions
. It is
on this basis that you will receive a class participation grade.
Your final gra
de you receive in this class largely depends on your grades on exams, case
assignments and participation. The course requirements have the following grade
% of final grade
The general format of
The multiple choice questions may include definitions
concepts and assigned
The exam will be scheduled for
Please see the tentative schedule for the assigned problems.
It is important that you work
chapter problems because they will be the basis for math problems on the
cause of limited time, we will generally not have time to solve these
problems in class. However, the solutions to these problems are posted on Blackboard,
and if you have difficulty doing them after seeing the solution, please contact me.
There are no
The weight attributable to a missed exam will be allocated
to the final exam. Unless you receive permission from me, you are not permitted to take
an exam in one of my other classes.
If you plan to take an early exam,
least 48 hours
the reason for your
within 24 hours
the scheduled exam
F grade (exam
score of zero)
will be recorded
At the time of notification, I will determine whether to
consider the absence as excused or unexcused and follow University policy. If you miss
an exam because of medical or psychological circumstances, you must provide me with
In the event of a fire alarm or bomb threat, I will
collect the exams and we will
proceed outside the building. If an alternate test site is available and we can quickly
reassemble, you will complete the exam at that site. If not, I will give you time the
following class period to complete the exam.
he final grading scale is as follows:
Once everything is taken into cons
ideration, the numerical score is rounded no more than
half point to determine your letter grade. Once final grades are submitted, I will not
change grades based on subjective considerations or re
grade old exams or assignments.
cases eligible for a write
and you must choose
of them. The
are indicated in the Tentative Schedule shown on page 6
be no longer than
clusive of exhibits (such as tables, charts and fig
addition to these
pages, you may have a cover page, and
another page (
the last page
of the write
should be an assessment of group member contributions (to be discussed
Please use an 11 point font with a 1.5”
(for my cor
A suggested format is as follows
(the explanation is provided in
Statement of the Problem
(One or two sentences that clearly state the problem to be
dentify what has caused this problem in
one or two sentences)
List and briefly describe
what the company should do
Explain how to implement your recommended solution
ion should be based on the available data in the case and address
the decision and/or policy issues facing the firm
. The proposed discussion questions are
designed to help you think through the problem, the underlying cause, and proposed and
please focus your write
up on what you believe ar
The grade you receive on the case write
up will is based on your ability to identify the
problem and cause, propose good alternatives, and
provide a recomme
nded solution that
you can defend well from an organization policy/strategy point of view and that is also
supported by a strong financial analysis. In addition, you will be graded on grammar,
format and general appearance of your c
The case write
up is designed to be a group effort. You should have
If the class size does not permit a group size of three for all groups, one or two
groups may have a group size of two (2).
f a student wit
hdraws from the c
remaining group member is
responsible for completing the case
, either as a group or
individually (only if no other group members are available)
However, no additional credit
to groups with a lesser number of students.
You select your own group members,
and the only names that appear on the paper will receive the credit for the case write
The last page
of the case write
will be a one page synopsis of group member
allocate 100 points among
in mind that if
all group members provide the same contribution, each will receive the same group grade.
Students who have a greater than equal contribution will receive a higher grade than the
overall group grade, while those co
ntributing less than an equal contribution will receive a
grade lower than the overall group grade.
The overall weighted average of the group
member grades, however, must average to the group grade. If group member
please provide a brief paragraph or more stating the
rationale for the point allocations. The rationale should be based on the allocation as
decided by the majority. However, a dissenting group member may send me an email
describing his/her point of view
with regard to the point allocation and rationale.
your case, please follow these guidelines:
clearly explained, and that it focused.
Please make a focused decision and be sure that your decision is c
conveyed to the reader.
The final paper should be void of grammatical, spelling, punctuation and
Use your allotted space effectively by assuming that the reader already knows
the details of the case. These details need not be r
An important determinant of your grade is how well you support your decisions
such as alternatives and your proposed solution. It is important that your
recommendations flow from your analysis and that these are logical. There is not
ne right answer” but rather there are many possible answers with the
best one being the one that you are able to best support. In other words,
concentrate your efforts on supporting your answer rather than finding “the right”
Be sure that you beco
me familiar with terminology or details that you do not
understand. You are responsible for learning anything in the case that you need
Do not raise additional questions that you cannot answer. They waste space and
annoy the reader.
p is due at the beginning of class on the night that we discuss the case. No
late case write
ups will be accepted.
Participating in class will give you the opportunity to learn from the diverse experiences
dge of your colleagues.
The participation will be based on the assigned cases,
but also on selected problems in the PowerPoint slides that you are asked to work.
Although I may sometimes call on volunteers in class
to answer questions
, I will also call
those who have not volunteer
. The reason is that calling on non
volunteers will help
to learn to think through one’s view, and articulate and defend the view. It will also
motivate preparation for the class. Sometimes the questions will have one cor
answer, and other times,
there will not be one “right” answer. The explanation and
thought process are always important in the evaluation of participation. Grading will be
based on my discretion and observation of an individual’s performance.
participation, it will be based on the quality of participation rather than the quantity. That
your addition to everyone else’
s understanding is the basis of the class participation
grade rather than how many minutes of “talk time” were gene
rated. Students who do not
contribute can expect lower class participation grades.
Basis of Evaluation
95 or 100
offers little insight
Was not present in class to answer the question
It is your responsibility to a
sk me about your
participation grade if you are unsure about
how you are being evaluated
keep in mind that you are responsible for any
announcements made du
ring class even if you absent.
Attendance is expected in this class, and therefore, I w
ill keep an attendance record. The
first step towards having first
rate participation is to be present in class.
one class (a grace period), each additional class missed will results in an F grade (score of
50) in class participation for the
class missed. Therefore, missed classes will quickly
overall class participation grade.
Although a student’s att
itude is not explicitly in the participation grade
, it may be
considered in the determination of the final grade. Discou
rteous and/or unprofessional
behavior to me and/or fellow students may adversely affect a student’s grade. The
amount of the grade reduction is at my discretion.
The Bryan School has adopted expectation guidelines for faculty and students which
be found at
We will implement
these guidelines. In addition, a
dherence to the Academic Integrity Policy is ex
required of all students for all exams and assignments. Failure to abide by this policy will
result in disciplinary action. Details of the Academic Integrity Policy are available
In the event of inclement weather, the class will strictly follow the University schedule.
The University posts on its web page the status of class cancellation.
This is an important course, and may d
ifficult for some students. If you are difficulty with
understanding the concepts or doing the problems, please see me as soon as possible.
This course builds on cumulative knowledge from other courses, and also, it builds
cumulatively within the course.
Topic: Overview of Corporate Financial Strategy, and Investment vs. Financing Decisions
1, 2, 3
Topic: Capital Budgeting
Reading: Chapter 10 (Review Chapter 9)
Problems (Chapter 10)
: A2, A10
, A11, B2, B4, B7, B9, B10, B15, B20
Minicase: The Power to Cool Off in Florida (end of Chapter 10)
Topic: Capital Budgeting in Practice
Reading: Chapters 11
: A5, A7. A8, A9, B2, B4, B6, B8
Minicase: Getting Off the Ground at Boeing (
end of Chapter 11)
Topic: Cost of Capital
Reading: Chapter 8 (Review Chapter 7)
A3, A4, A5, A9, B6, B8, B10, B13, C2
Case: Cost of Capital at Ameritrade (9
(eligible for write
Reading: Chapter 16
Problems: A2, A4, A6, A8, B1, B5, B7, B8
Minicase: PepsiCo’s Capital Structure Choice
A2, A3, B1, B4, B6, B7, B13
ase: Debt Policy at UST Inc.
eligible for write
Topic: Dividend Decisions
: Chapter 18
Problems: A1, A7, A9, B3, B4, B5, B6, B8
Case: Dividend Policy at Linear Technology
(eligible for write
Class discussion will focus primarily on the reading chapter(s) directly on the topic for the evening. Review
chapters are recommended background reading already discussed in MBA 605.
ions to problems have been posted on Blackboard. Contact me if you have any questions.
ase: Dividend Policy at Linear Techno
logy . . .continued
Case Study Questions
Cost of Capital at Ameritrade
What factors should Ameritrade management consider when evaluating the proposed advertising
program and technology upgrades? Why?
w can the capital Asset Pricing Model be used to estimate the cost of capital for a real (no
financial) investment decision?
What is the estimate of the risk
free rate that should be employed in calculating the cost of capital
What is the e
stimate of the market risk premium that should be employed in calculating the cost of
capital for Ameritrade?
In principle, what are the steps for computing the asset beta in the CAPM for purposed of
calculating the cost of capital for a project?
e does not have a beta estimate as the firm has been publicly traded for only a short
time period. Exhibit 4 provides various choices of comparable firms. What comparable firms do
you recommend as the appropriate benchmarks for evaluating the risk of Ame
advertising and technology investments?
Using the sotck price and returns data in exhibits 4 and 5, and the capital structure information in
Exhibit 3, calculate the asset betas for comparable firms.
ld Joe rickets, the CEO of Amer
itrade, view the cost of capital estimate you have
Debt Policy at UST Inc.
What are the primary business risks associated with UST Inc.? What are the attributes of UST
Inc.? Evaluated from the point of view of a bondholder.
Why is UST Inc.
considering a leveraged recapitalization after such a long history of conservative
Should UST inc. undertake the $1 billion recapitalization? Calculate the marginal (or incremental)
effect on UST’s value, assuming that the entire recapitaliza
tion is implemented immediately
(January 1, 1999).
Assume a 38% tax rate.
Prepare a pro
forma income statement to analyze whether UST will be able to make
For the basic analysis, assume the $1 billion in new debt is constant and perpetu
UST alter the new debt via a different level or a change in the amount of debt through
UST Inc. has paid uninterrupted dividends since 1912. Will the recapitalization hamper future
Dividend Policy at Linear Technology
Describe Linear Technologies payout policy.
What are Linear’s financing needs? Should Linear return cash to its shareholders? What are
the tax consequences of keeping cash inside the firm?
f Linear were to pay out its entire cash balance as a special
dividend, what would be the
effect on value? On the share price? On earnings? On earnings per share? What if Linear
repurchased shares instead? Assume a 3% interest rate. Why do firms pay dividends? Why
has the rate of dividend initiations changed o
What should Paul Coghlan recommend to the board?