K. Geert Rouwenhorst
206 E
Office Hours Fri 1-3
telephone 432-6046
Secretary: Roberta Sutkowski


MPPM 540b
Financial Management 1
Spring 1995


Outline: MODULE 1

This module develops a theory of valuation to aid managers in financial decision making. We apply this theory to the valuation of financial assets, such as stocks and bonds, as well as to the real investment decision (projects) of the firm.

Examinations and grading policy


There will be a closed book midterm at the end of the module, on Friday, February 16. Your performance on this exam counts for 90 per cent of your grade for the first module. The remainder of the grade (10 per cent) is based on a Lotus assignment due on Monday, February 19 at 4 p.m. (no exceptions). The grade for the second module will be combined with the grades for the first and third module into a final grade for the course (each module counting for one third). Homework does not count towards your grade (but may play a role in borderline pass/fail cases). However, experience shows that participation in the homework assignments is strongly positively correlated with the final grade.

TA Sessions

Starting the third week of classes (1/29), there will be weekly review sessions to discuss homework problems:

Times and Locations
Section 1 6 p.m. - 7:30 p.m. Room A-51 Monday
Teaching Asistant Assignment TBA
Section 2 6 p.m. - 7:30 p.m. Room A-53 Wednesday
Teaching Assistant Assignment TBA
Section 3 6 p.m. - 7:30 p.m. Room A-53 Wednesday
Teaching Assistant Assignment TBA


TA's: Michelle Hollander, Sean McGeary, Aamer Mumtaz, Carlos Quevedo Lopez, Peter Rogers, Jonathan Vyorst.

Your homework has to be handed in to the TA's that are assigned to your section, not the TA's of the review session you choose to attend, before regular class. (Please put the homework in their mailboxes)

The required textbook for the course is:

S.A. Ross, R.W. Westerfield, and J.F. Jaffe (1996), Corporate Finance, 4rd edition, Irwin, Homewood, IL 60430


PPM 540b Financial Management 1:
Tentative Course Outline and Reading List (MODULE 1)


1/17Class 1Introduction and Course Overview
1/22Class 2Burmah Oil Case
Reading: The Story of Burmah Oil
RWJ chapter 1,2
1/24Class 3Theory of Value
Reading: RWJ chapter 3
1/29Class 4Net Present Value
Reading: RWJ chapter 4
Homework: RWJ chapter 3 problems 1,2,5,6,9
1/31Class 5Valuing Bonds, and the Term Structure of Interest Rates
Reading: RWJ chapter 5.1-5.3
2/5Class 6Valuing Stocks
Reading: RWJ chapter 5.4-end
Homework: RWJ chapter 4 problems 2,5,6,15,25,27,35,36,46
RWJ chapter 5 problems 2,6,7
2/7Class 7Alternative Investment Criteria
Reading: RWJ chapter 6
2/12Class 8Capital Budgeting
Reading: RWJ chapter 7
Homework: RWJ chapter 5 problems 10,13,20,24,26,27,28
RWJ chapter 6 problems 1,9,14,17
2/14Class 9Capital Budgeting, and Unfinished Business
Reading: RWJ chapter 8
2/15TA Review Sessions TBADiscussed will be RWJ chapter 7 problems 4,16,20
2/16 Final Exam Module IFriday 9 -12 am Room TBA
2/19Homework Due Homework Lotus Assignment