PGDM Core Subject
Corporate Finance
Course Objective
2. Course Description
This course transitions from recording financial data to utilizing it for strategic value creation. It focuses on the "Micro-foundations of Finance," specifically Time Value of Money (TVM), Capital Budgeting, and Risk Analysis. Students will master tools required to evaluate long-term investments and determine cost of capital using technological frameworks and advanced modeling to minimize cognitive bias.
3. Course Objectives (Learning Goals)
- To master Time Value of Money (TVM) for valuing future cash flows and financial instruments.
- To analyze and select investment projects using Capital Budgeting techniques like $NPV$ and $IRR$.
- To evaluate and mitigate investment risks using sensitivity analysis and algorithmic tools.
- To determine the optimal Cost of Capital and design value-centric capital structures for sustainable growth.
4. Course Outcomes (COs)
Mapped to Bloom’s Taxonomy and Taxila’s Program Outcomes.
|
CO Code |
Course Outcome Description |
Bloom's Level |
Primary PO Mapping |
|
CO1 |
Explain fundamental financial concepts including TVM, Risk-Return trade-off, and Market Efficiency. |
Understand (L2) |
PO1 |
|
CO2 |
Apply TVM formulas to calculate the present and future value of complex business cash flows. |
Apply (L3) |
PO1 |
|
CO3 |
Analyze capital investment projects using $NPV$, $IRR$, and Payback Period to drive value growth. +1 |
Analyze (L4) |
PO2 |
|
CO4 |
Evaluate project risk and uncertainty using algorithmic tools to minimize cognitive bias. +1 |
Evaluate (L5) |
PO2 |
|
CO5 |
Design a comprehensive capital structure and dividend policy for an entrepreneurial venture. +1 |
Create (L6) |
PO5 |
5. CO-PO Articulation Matrix
Correlation: 3 (High), 2 (Medium), 1 (Low).
|
CO Code |
PO1 |
PO2 |
PO3 |
PO4 |
PO5 |
PO6 |
PO7 |
PO8 |
|
CO1 |
3 |
2 |
- |
- |
1 |
- |
- |
1 |
|
CO2 |
3 |
2 |
- |
1 |
1 |
- |
- |
2 |
|
CO3 |
2 |
3 |
- |
- |
2 |
- |
- |
2 |
|
CO4 |
1 |
3 |
1 |
- |
2 |
- |
1 |
- |
|
CO5 |
3 |
2 |
2 |
2 |
3 |
1 |
- |
3 |
|
AVG |
2.4 |
2.4 |
1.3 |
1.3 |
1.8 |
1.0 |
1.0 |
2.0 |
6. Assessment Scheme
|
Component |
Marks |
Description |
Mapped CO |
|
Simulation |
20 |
Taxila Lab Simulations : +2 • Sim 1 (10 Marks): The Valuation & TVM Engine . • Sim 2 (10 Marks): The Capital Budgeting & Risk Challenge. |
CO2, CO3, CO4 |
|
Case Study |
10 |
"The Titanic Investment": Forensic analysis identifying ethical red flags and fraud risks in CAPEX. +1 |
CO4 |
|
Presentation |
10 |
"The Funding Pitch": Group presentation defending startup valuation. +1 |
CO5 |
|
Mid Term |
10 |
Written exam covering Modules 1 & 2. +1 |
CO1, CO2 |
|
Project |
10 |
"Equity Research": Ratio analysis project comparing two competitors. |
CO3 |
|
Class Participation |
10 |
Participation in financial modeling labs and daily prep. |
All |
|
End Term |
30 |
Comprehensive written exam. |
All |
7. Detailed Syllabus & Session Plan (20 Sessions)
Each session is 90 minutes of class time plus 60 minutes of pre-class preparation.
Module 1: Foundations of Time & Value (Sessions 1-5)
- Session 1: Introduction to Corporate Finance
Topic: Value Maximization and the Goal of the Firm.
Pre-Class Prep: Read Brealey et al., Chapter 1 ("Goals and Governance of the Corporation").
- Session 2-3: Time Value of Money (TVM)
Topic: $FV$, $PV$, Annuities, and Perpetuities.
Pre-Class Prep: Read Brealey et al., Chapter 2.
- Session 4: Valuation of Financial Instruments
Topic: Bond Valuation ($YTM$) and Stock Valuation ($g$).
Pre-Class Prep: Read Brealey et al., Chapters 3 & 4.
- Session 5: Taxila Lab Simulation 1
Topic: "The Valuation & TVM Engine".
Pre-Class Prep: Review "Chart of Accounts" and TVM models on LMS.
Module 2: Capital Budgeting & Strategic Investment (Sessions 6-11)
- Session 6-7: Investment Criteria
Topic: $NPV$, $IRR$, and Profitability Index.
Pre-Class Prep: Read Case: Revenue Recognition at Salesforce.com (HBS).
- Session 8: Cash Flow Estimation
Topic: Identifying Incremental Cash Flows and avoiding "Sunk Costs".
Pre-Class Prep: Read Case: Statements of Cash Flows: Three Examples (HBS).
- Session 9: Risk Analysis in CAPEX
Topic: Sensitivity, Scenario, and Simulation Analysis.
Pre-Class Prep: Read Brealey et al., Chapter 10.
- Session 10: Taxila Lab Simulation 2
Topic: "The Capital Budgeting & Risk Challenge".
Pre-Class Prep: Review "Indirect Method" format in the textbook.
- Session 11: Case Study: "The Titanic Investment"
Topic: Forensic analysis of failed capital projects.
Pre-Class Prep: Read Case: The Satyam Computer Services Scandal (IIM-A).
Module 3: Financing & Capital Structure (Sessions 12-16)
- Session 12-13: Cost of Capital
Topic: Weighted Average Cost of Capital ($WACC$) and $Beta$ calculation.
Pre-Class Prep: Read Brealey et al., Chapter 9.
- Session 14: Financial Leverage
Topic: The impact of debt on $EPS$ and shareholder value creation.
Pre-Class Prep: Read Note on "Pre-Money vs. Post-Money Valuation".
- Session 15: Capital Structure Theories
Topic: Modigliani-Miller ($MM$) and Pecking Order Theory.
Pre-Class Prep: Read Brealey et al., Chapter 17.
- Session 16: Dividend Policy
Topic: Cash Dividends vs. Share Buybacks and signaling effects.
Pre-Class Prep: Read Brealey et al., Chapter 16.
Module 4: Capstone & Future of Finance (Sessions 17-20)
- Session 17: Entrepreneurial Finance
Topic: Startup Valuation and Managing Equity Dilution.
Pre-Class Prep: Read Note on "The Startup Cap Table" on LMS.
- Session 18-19: Capstone Presentation: "The Funding Pitch"
Topic: Defending the valuation of a growth-stage startup.
Pre-Class Prep: Finalize slides and rehearse.
- Session 20: Emerging Tech in Finance (AI/ESG) & Review
Topic: AI in financial forecasting and ESG-driven sustainable growth.
Pre-Class Prep: Research "Hybrid Work Challenges" in finance teams.
8. Textbooks & Resources
- Mandatory Textbook: Principles of Corporate Finance by Brealey, Myers, Allen, and Mohanty (McGraw Hill).
- Lab Resources:
Taxila Lab Sim 1: The Valuation & TVM Engine.
Taxila Lab Sim 2: The Capital Budgeting & Risk Challenge.