Financial Decisions
Professor Timothy A. Thompson
Fin Decisions (Finc 442)
Information for students bidding – day sections
Allowable group sizes are from three to six students, inclusive. Groups are often formed before bidding, so you should know that, while it is better for students in the same group to be enrolled in the same section of the class, I will not insist on it. If I am teaching more than one section of Financial Decisions, you are allowed to form cross section groups. Keep in mind, however, that when we do group presentations (which is not very often, but it does happen) that it can adversely affect your class participation, if you are not in the same section as most of your group members. You also must generally attend the section for which you are enrolled – e.g., you may not register for the 3:30 section and attend the 1:30 section. (I only have one day section in the Spring Quarter, so none of the above points about multiple sections is relevant). The syllabus below is from Winter Quarter. The syllabus for Spring will not be available until the first day of class. The structure will be basically the same howevr. There will be approximately the same number of case write-ups handed in in groups. The make-up day for Memorial Day will be as per the Academic Calendar. Our final meeting will be the Thursday of Week 10 -- we do not meet in finals week.
Many students form groups before bidding for Fin D. While I understand the rationale for this, I would request that people consider diversity in forming groups. The class is a lot of work, but the group learning is improved greatly by diversity in backgrounds and perspectives on the cases.
Introduction
This page is for Professor Thompson's Financial
Decisions course (FINC 442). This page has three purposes: first, to supplement
the material in the case packet. It contains materials which were handed out in
class, but were not in the case packet (e.g., the course syllabus). Many of the
files containing these materials accessible from this page are stored in Adobe
Acrobat format (those files stored in Adobe Acrobat format are preceded by
. To
read these files you will need the Adobe Acrobat reader. If you don’t have a
copy of this reader, you may need to download and install the reader. Click
here for instructions on downloading the Adobe
Acrobat Reader . Secondly, I will post updated versions of my teaching
notes such that they will be accessible from this page. Lastly, spreadsheet
files containing information from Case Exhibits are also accessible from here.
Course Description
Financial decisions should be considered a capstone course in corporate finance. While the only prerequisites for Finance 442 are Finance 430/441 or 440 (Turbo), financial decisions are not made in a vacuum and many other courses (e.g., Strategy, Marketing, Business Law, Accounting, Investment Banking, to name but a few) at Kellogg provide information which is often valuable. Real world experience is also very valuable.
There is very little in terms of new
theoretical results presented in this class. The purpose of this class is to put
the theories learned in Finance I and II to work in terms of real business
decisions faced by actual corporations. Each assignment is a case where a CEO,
CFO or a board of directors has at least one decision to make and your job is
to be a consultant to the decision-maker(s) and make specific recommendations.
While your recommendations will rest on assumptions, your job is not to give a
list of contingent recommendations: "If financial distress costs are
particularly high, then issue equity; otherwise issue debt..." Similarly,
if you assume something silly enough, you can show that a silly recommendation
follows from it, but it is not worth much. Assumptions should be justified if
possible, and the sensitivity of your recommendation to your assumptions should
be assessed, in any event. In summary, the class is about decision making,
which requires judgment. Good judgment usually comes from experience, and
experience usually comes from bad judgment. The cost of bad judgment is lower
in school than in the real world, so get going!
Course Syllabi
Dav sections, Winter 2009 Day Sections (Adobe
Acrobat Format).
Section
71, 76 Winter 2009 Wieboldt Sections (Adobe Acrobat Format).
Introductory Lecture is here.
Options lecture is here.
S&P Ratings Criteria Document is here.
Teaching Note PDF Documents available
Project Cash Flows teaching note.
Cost of Capital teaching note.
Teaching Note on Valuation Using Adjusted Present Value
vs. Weighted Average Cost of Capital
Teaching
Note on Valuation of PERCS
Powerpoint slides on Corporate Valuation
Other PDF files available
Memo concerning use of project cost of
capital rather than the company-wide cost of capital (Adobe Acrobat Format)
Is cost of capital an outmoded concept?
(Adobe Acrobat Format)
The
taxable-municipal yield spread: estimating Tpd (Adobe Acrobat Format)
Addtional Course Resources
Many of the cases we cover have spreadsheet files available containing information from case Exhibits. These may be accessed by clicking on the following text: Download Course Files .
Some additional excel files and excel add-in programs for option pricing applications have been made available by Professor Bob McDonald and can be accessed here . Please note the copyright restrictions.
If you have questions about this web page, send them to t-thompson2@kellogg.northwestern.edu .
Last Revised: October 24, 2008.