At the end of the course, the student will be able to:
Lectures on theory, classroom exercises and discussion of case studies
The Corporate Finance module focuses on two main topics: 1. evaluation and choice of company investments; 2. evaluation and choice of financing mechanisms for corporate investments.
In the first part of the course, the concept of present value of the expected cash flows of a corporate investment is presented. The present value is then compared with other investment valuation methodologies, such as the internal rate of return and the payback period, highlighting the applicability limits of the latter. The concept of present value is then enriched with the concepts of uncertainty and risk and its application to the valuation of shares and bonds issued by a company is discussed.
Furthermore, some concepts relating to stock markets and in particular to the statistical properties of financial time series are discussed. The Capital Asset Pricing Model is then presented in order to provide a quantitative model that links the cost / return of corporate equity to risk, conceived as systematic or market risk.
In the second part of the course, the financing decisions of a company are presented, with particular attention to its financial structure, i.e. the relationship between debt and equity. In particular, the fundamental results of the Modigliani-Miller Theorem are presented and demonstrated, in relation to the irrelevance of the financial structure and the independence of the weighted average cost of capital in conditions of perfect financial markets and in relation to the irrelevance of the financing mechanisms for investment decisions. The empirical evidence and the theory of the order of choice are then discussed in relation to the concepts of information asymmetry.
Brealey R., Myers S., Allen F. (2020) Principles of Corporate Finance. 13ed Mc Grwa Hill
https://www.mheducation.com/highered/product/principles-corporate-finance-brealey-myers/M9781260013900.html
Berck, DeMarzo (2017). Corporate Finance, 4/ed. Pearson
https://www.pearson.com/us/higher-education/product/Berk-Corporate-Fina…
Teaching material and scientific papers provided by the teacher
Ricevimento: On appointment
SILVIA MASSA (President)
MARCO RABERTO (President Substitute)
Written and oral exam
The exam aims to evaluate the student's understanding of corporate investment choice techniques according to different levels of risk and the student's ability to apply the aforementioned techniques to example cases. The knowledge of the different sources of financing for the company and their possible order of choice depending on market conditions is also evaluated.
