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BØK 3632 Financial Strategy

APPLIES TO ACADEMIC YEAR 2016/2017
Norwegian version

BØK 3632 Financial Strategy


Responsible for the course
Siv J Staubo

Department
Department of Finance

Term
According to study plan

ECTS Credits
7,5

Language of instruction
Norwegian

Introduction
The essence of business administration includes corporate finance (i.e. investment and financing). Good knowledge within these areas is a necessary prerequisite to understand the economic content of investment and financing decisions, obtain decision-relevant information, discuss and assess alternatives, make correct decisions and convey relevant and useful information.

The aim of this course within the field of corporate finance is to provide the students with essential basic knowledge and skills, so that they can take part in discussions on problems in finance and carry out simple analyses within the field, make correct decisions and communicate the results of the analyses in a comprehensible manner.

The course Financial Strategy is mainly focused on financing issues and management of financial risks. By studying the main activities carried out in a company as financing projects over multiple periods, emphasis is placed on evaluating all economic effects of the project and of taking a long-term perspective. The course therefore starts with capital structure and dividend decisions, followed by an introduction to option pricing and management of foreign exchange risk.


Learning outcome
Acquired knowledge
After completing the course, students are requiered to master tasks such as

Understand the concepts of debt and equity, such as bonds and equity issues:

  • Understand the concept of capital structure and the relationship between leverage and risk
  • Understand the meaning of perfect capital markets
  • Understand the impact of taxes on valuation of assets
  • Understand the importance of dividend
  • Understand option pricing
  • Understand basic concepts in currency
  • Understand the parity models and basic risk management
Acquired skills
Students having completed the course are requiered to conduct analytical exercises sush as:
  • Calculate the value of a bond and a share issue
  • Calculate impact on of debt-to equity ratios on risk in equity and the value of the company with or without debt v
  • Explain the importance of taxes for valuation of the assets
  • Explain the importance of the dividend
  • Explain theories contrary to the perfect capital markets
  • Explain the principles in the options pricing
  • Calculate the cross rates in Exchange, parity models and give a general explanation of risk managemen

Reflection
The course is based on Modigliani and Miller’s propositions for capital markets, and then explains challenges in real world. The student should be able to relate to the importance of these different theories for the business, the owners, the employees and the community. The student should be able to ask critical questions to all the aspects that have a bearing on a company's value. Moreover, the students, after this course, should be able to reflect on how a business should be run in order for it to be a positive contribution to society in general.


Prerequisites
The course Basic Financial Management from the Bachelor of Business Administration Program, Intreodution to Finance or equivalent..

Compulsory reading
Books:
Bøhren, Øyvind og Dag Michalsen. 2012. Finansiell økonomi : teori og praksis. 4. utg. Fagbokforlaget. Kapittel 6-11
Korsvold, Pål og Geir Bjønnes Høidal. 2012. Finansiell risikostyring. Cappelen Damm akademisk


Other:
Rentetabeller. Siste utgave. Handelshøyskolen BI


Recommended reading
Books:
Korsvold, Pål E. og Geir Bjønnes Høidal. 2012. Finansiell risikostyring : Oppgaver og løsninger. Cappelen Damm Akademisk. Kapittel 1-4

Course outline

  1. Short summary of the course Introduction to Finance
  2. Financial Leverage and Risk. BM ch. 6
  3. Capital Structure Decisions. BM ch. 7-8
  4. Adjusted Present Value. BM ch. 9
  5. Dividend Policy. BM ch. 10
  6. Option Pricing Theory. BM ch. 11
  7. FOREX and Risk Management. KB ch. 1-4

Computer-based tools
Students are recommended to use spreadsheets.

Learning process and workload
The course will include a combination of lectures and plenary tutorials where solutions to exercises will be explained.

Please note that the students is responsibility to obtain any information provided in class that is not included on the course homepage/It's learning or the text book.

The following is an indication of the time required:
Activity
Hours
Lectures
36
Plenary tutorials where exercises will be explained
6
Preparation for lectures and plenary tutorials
pluss work on two voulentary hand-in assignments
118
Preparation for the final exam
40
Total recommended use of time
200


E-learning
In course delivery as online courses or evening classes, will lecturer, in collaboration with the Academic Services Network and evening studies, organize an appropriate combination of digital and class room teaching. Online students are also offered a study guide, which will help progression and overview. Total recommended amount of time for completion of the course also applies here.



Examination
A three-hour individual written exam concludes the course.
Examination code(s)
BØK 36321 - Written exam examination, counts 100% towards the grade in the course BØK 3632 Financial Strategy, 7,5 ECTS credits.

Examination support materials
A BI-approved exam calculator and interest rate tables are allowed.
Examination support materials at written examiniations are explained under examination information in the student portal @BI. Please note use of calculator and dictionary. https://at.bi.no/EN/Pages/Exa_Hjelpemidler-til-eksamen.aspx


Re-sit examination
A re-sit examination is offered every term.

Additional information