FIN 540: Corporate Finance I – Lecture (Capital Structure, Cost of Capital and Valuation)

Corporate Finance studies how corporations finance their operations. The emphasis of this part of the curriculum is on shareholder value and company valuation. We will also study the cost of capital, introduce theories of capital structure, and initial public offerings. The objective of this course is to introduce the fundamental theoretical concepts of company valuation.

Learning outcomes
After completing this course, students will know and understand state-of-the-art tools such as DCF, Residual Income, EVA, and Multiples. In particular, participants will know how to determine the cost of capital for corporations and projects using real world data. Further, participants will learn how to identify value drivers by applying financial ratio analysis. Students will also be familiar with event studies in order to analyse how capital markets react to important corporate events like merger announcements or earnings announcements.

Necessary prerequisites

Recommended prerequisites
Every student participating in this course should have completed the equivalent of the 2-semester finance module, which is part of the Mannheim Bachelor program. The lectures generally assume basic knowledge in accounting (balance sheets, income statements, financial ratios), finance (present value methods, portfolio theory, CAPM), mathematics (calculus, optimization) and statistics (mean, variance, standard deviation, univariate and multivariate regressions). The course assumes that students already manage the material in Brealey, Myers, Allen, Corporate Finance, (McGraw-Hill, 10th edition, 2010), chapters 1–19.

Forms of teaching and learningContact hoursIndependent study time
Lecture2 SWS12 SWS
ECTS credits5
Graded yes
Form of assessmentWritten exam (60 min.)
Restricted admissionno
Further information
Performing lecturer
Marc Gabarro, Ph.D.
Marc Gabarro, Ph.D.
Frequency of offeringFall semester
Duration of module 1 semester
Range of applicationM.Sc. MMM, M.Sc. Bus. Edu., M.Sc. Econ., M.Sc. Bus. Inf., M.Sc. Bus. Math., MAKUWI
Preliminary course work
LiteratureBerk, Jonathan and Peter DeMarzo: Corporate Finance, latest edition, Pearson
Hiller, Grinblatt, Titman, Financial Markets and Corporate Strategy, 2nd edition, Irwin/McGraw-Hill
Benninga, Simon, Financial Modeling, 4th edition, MIT Press
Weston, Mitchel, Mulherin, Takeovers, Restructuring , and Corporate Governance, 4th edition, Prentice Hall
Additional books and articles
Course outlineCompany valuation
Generating financial forecasts
Residual income approaches
Measuring the cost of capital
Corporate finance and taxes
Capital structure policy
Event-study methodology
Initial public offerings