This course builds on Principles of Finance and examines important issues in corporate finance from the perspective of financial managers who are responsible for making significant financing and investment decisions. You will learn how investment and financing decisions interact to affect the value of the firm and how management can evaluate operating decisions, taking into account taxes and uncertainty.

There are two building blocks: In part 1, you will learn important foundations of valuation and capital structure. In part 2, we investigate hybrid financial instruments, focusing on the valuation and use of convertibles and mandatory convertibles. Throughout we emphasize the so-called corporate finance-view: relating the assessment of projects and firms to the valuation in a competitive market, taking into account the effects of time, uncertainty and incentives.

After completing this course the student will have the ability to:

• Understand the most important determinants of a firm's financial structure;
• Understand how the market value of a firm will be affected by financial decisions;
• Incorporate the effects of time, uncertainty, taxes, and incentives on the present value of firm cash flows;
• Analyze complex cases with a view on identifying the overall effect on shareholder value.

Moreover, the course contributes to students' ability to:

• demonstrate effective team skills in order to contribute appropriately to the production of a group output.
• work and communicate effectively alone and in a team situation and to function as a valuable and cooperative team member.
• structure complex problems.

The material in part 1 builds on Principles of Finance and selected chapters from Corporate Finance by Berk and DeMarzo. Please make sure that you brush up on the relevant material you covered in Principles of Finance and read the relevant chapters in Berk and DeMarzo before class. I plan to complete part 1 by the end of December. Part 2 applies what you learn in part 1, using your knowledge about derivatives payoff-structure and valuation. I provide reading material for this part when we get close to finishing part 1.

An important part of the course is to apply what you learned. You have to form a team in which you analyze a company of your choice (more in class).

Class participation is mandatory and important. I may call on individuals to lead a discussion or otherwise participate in the discussion.

Grades will be based on:

• Midterm (35 Points)
• Final (35 Points)
• Cases study (15 Points)
• Exercise in class (10 Points)
• Class participation (5 Points)

christian.laux@wu.at

Meeting by appointment via email.