This module offers an introduction to the study of Corporate Finance. The basic aim is to develop an understanding of the methods studied and how they are applied to real world situations in today's corporate world.
The material will develop from that covered in standard undergraduate (second year) course in microeconomics. We will make frequent references to concepts of asset pricing, notably to the Capital Asset Pricing Model (CAPM). The first few lectures of the course will be devoted to the basics of valuation techniques and their real world applications. We then move to the topic of 'Capital Structure', explore useful theorems and assess their relevance for valuation. Finally, we will cover the topic of 'Corporate pay-out policy' and develop understanding of how corporations chose to distribute cash to investors. We will explore, as with capital structure, how a firm's pay-out policy is shaped by institutional constraints such as taxes and marked imperfections such as asymmetric information.
Upon successful completion of this module students will have acquired an appreciation of how economic reasoning can inform an understanding of corporate finance in economic terms and evaluate simple models to understand the financial relation between firms and the financial markets.