Finance II course page -- Prof. Sapienza

Corporate Finance
Professor Paola Sapienza
Finance II (441)
Supplementary Material for Corporate Finance

This page will include material that I may use or not use in class. It is helpful material to better understand the lectures. I have sorted the links by lecture. If you want to see the links in the slides, you need to download them first.

Overview

· Lecture 1: Efficient Markets.

1. Spreadheet with arbitrage strategy (see classnotes)
2. Slides.
3. Takeaway.

· Lecture 2: Capital Budgeting

Interactive Yield Curve. You can compare the current yield curve to historic yield curves and see how the level, slope, and shape have changed over time. There is also a glossary of bond terms.
Current term structure. This link has the current government bond term structure. Do you want to learn more about interest rates? Professor Arvind Krishnamurthy teaches "Money Markets and the Fed" (Finance 451)
Calculate expected IBM returns.
Expected vs. Promised return.
Coupon rate and promised rate. What coupon rates do firms actually choose. These results are based on research from Kellogg faculty.
Slides
Takeaway

· Lecture 3: Corporate Valuation

On Corporate Valuation. This is what Goldman Sachs thought about Enron in July of 2001.This is not a joke (some of you asked whether it was!).
Lecture 3 Spreadsheet. This is the spreadsheet I use in Lecture 3. It is a very helpful tool to solve homework 2. Also, this is the PLUG example that I discuss in class.
Free cash flow definitions
Slides
Takeaway

· Lecture 4-5: Financial Options and other Derivatives

Swap Agreement. This is a copy of a generic swap agreement that a customer (a non-financial firm) would sign with its bank.
Option Pricing. Professor McDonald has kindly offered to share his option pricing excel spreadsheets with us. Professor McDonald teaches the advanced derivatives course (Finance 467). The enclosed spreadsheets can be used to price calls and puts using the Black-Scholes formula (which we mentioned in class) and the binomial formula. These spreadsheets are for your interest only. You can use them to verify the option prices which I use in the class notes and homework assignments.
Slides (lect 4)
Slides (lect 5)
Takeaway (lect 4)
Takeaway (lect 5)

· Lecture 6: Real Options

Do you want to learn more about real options? Look at course Finance 924
Slides
Takeaway

· Lecture 7:

Review questions on dividends
Slides (lect 7)
Takeaway

· Midterm review session. In class I will review what we did so far (look at the slides for a preview). Then, I will go through some practice problems. For those of you who cannot attend the review session here are the answers to the practice problems. Try the problems on your own before looking at the solutions.

· Lecture 8: Capital Structure Irrelevance

Slides (lect 8)

Takeaway

· Lecture 9: Capital Structure with Taxes

Nabisco RJR LBO.
Slides lecture 9

· Lecture 10:

Slides

· Lecture 11:

Slides.

Takeaway.

· Lecture 12: Capital Structure with conflict of interests,

Slides