Excerpt from course description

Corporate Finance and Financial Strategy in a Global Economy

Introduction

The overall goal of the course it to provide the participants with a sound understanding of financial decision-making in the national and multinational firm. However, whilst the course is presented from a managerial perspective and thus applied in nature, decision-making is approached using firmly established theories in economics and finance. The aim of the course is threefold: i) to study issues in corporate finance such as capital budgeting and capital structure from a domestic perspective. The course will give an introduction on how to deal in a systematic way with the link between sustainability and cash flows and sustainability and discount rates; ii) to study the laws that play a crucial role in the international economy and global financial markets; ii) to understand how firms can hedge exchange rate risk related to both their operations and strategic decisions.

Course content

The course can be broadly split into three parts. The first part of the course examines international financial markets and the determination of exchange rates. In the second part, we will consider the impact of exchange rates on the cash flows of firms. In particular, we will learn how to measure and manage (hedge) how different cash flows are exposed to unexpected changes in exchange rates. The third part of the course focuses on some traditional issues in corporate finance such as capital budgeting, cost of capital, and investments in physical assets, starting from a domestic perspective and extending it to deal with the effects of sustainability on cash-flows and discount rates. Below is a list of the topics discussed during the course.

  1. The International Monetary System: FX-rate quotation, foreign exchange market, triangular arbitrage, FX-rate regimes
  2. Parity relationships: covered and uncovered interest parity, purchasing power parity, international Fisher effect, carry trade
  3. The international monetary system, balance of payments, impossible trinity, central bank policies
  4. Currency futures for hedging
  5. Transaction (contractual) exposure: financial hedging with derivatives, special hedging problems, alternative hedging approaches
  6. Operating Exposure: reclassification of financial statements, measurement of linear vs non-linear exposure, financial hedging with derivatives, operational hedging.
  7. Balance sheet reclassifications, with a focus on operating cash flows, net working capital, CAPEX, FCF, FCF equity.
  8. Domestic Capital Structure: Modigliani-Miller theorems I and II without taxes, and with taxes.
  9. Net Present Value (NPV): theoretical foundations and exercises.
  10. Domestic Capital Budgeting: Weighted Average Cost of Capital (WACC), Adjusted Present Value (APV), and Flow to Equity approach (FTE)

Disclaimer

This is an excerpt from the complete course description for the course. If you are an active student at BI, you can find the complete course descriptions with information on eg. learning goals, learning process, curriculum and exam at portal.bi.no. We reserve the right to make changes to this description.