Financial Management 2 Course Outline 2021

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UNIVERSITY OF THE WEST INDIES

CAVE HILL CAMPUS
DEPARTMENT OF MANAGEMENT STUDIES
FACULTY OF SOCIAL SCIENCES
MGMT3048 – FINANCIAL MANAGEMENT II
COURSE OUTLINE
Semester 2, 2020-2021
Lecturer: Professor. Justin Robinson

Office: S14 Email: Justin.Robinson@cavehill.uwi.edu
Office Hours: By request.
Course website: Moodle
Lectures: Fridays 12.10 PM -2.00 PM
Text: Required:
 S. A. Ross, R. W. Westerfield and J. F. Jordan, Fundamentals of Corporate
Finance, 10th Edition, McGraw-Hill Irwin, Latest Edition. (Referred to as RWJ in
course outline.)
Additional Tools Required:

 Financial or Business Consultant Calculator (Texas Instrument BA-II strongly
recommended)
https://www.stocktrak.com:443/members/register?session=MGMT30532021
COURSE DESCRIPTION / RATIONALE

The modern corporation faces fierce competition not only in the product
markets but the capital markets as well. The modern corporations must
compete relentlessly with a plethora of competitors for the available pool of
capital. The ability to consistently create value for investors is critical if a firm
is to attract and retain the capital it needs to survive and prosper. This course
covers modern financial management concepts and techniques, and how they
can be applied in maximizing firm value. Specifically, the course covers time
value of money concepts and their applications, the valuation of a range of
financial instruments, modern capital market theory and concepts of risk and
return, evaluation of investment opportunities, arrangements for financing
such investments and the development of financial risk management
strategies. As such, the course provides students with an analytical framework
for determining the intrinsic value of a corporation and to assess the
effectiveness of corporate management in maximizing that value.
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COURSE OBJECTIVES:
The primary purpose of this course is to provide students with a thorough

understanding of the principles of financial management, and their application
to a broad variety of managerial issues. The course places emphasis on
maximizing shareholder value and opportunities to add value through the
finance function.
We expect that through your exposure to lectures, exercises, case analyzes and
classroom interaction, you will be able to:
 Analyze a variety of financing alternatives and recommend superior

courses of action;
 Develop corporate dividend policies;
 Apply the principles of business valuation to a variety of situations,
including mergers, acquisitions and initial public offerings;
 Identify and measure risks financial risks and devise appropriate
risk management techniques.
INSTRUCTIONAL METHODS:
The instructional methods to be employed in this course are Lectures, Case

Studies and Problems. Their success depends heavily on meaningful
preparation and participation by the Lecturer, tutors and students: I
therefore expect that you will:
 Meaningfully prepare cases and participate in discussions
 Be personally responsible for your own learning.
COURSE REQUIREMENTS
Case Analysis (Daktronics) 20%

Stocktrak 10%
Tutorial Participation 10%
Final Examination 60%
The case analysis and Stocktrak are assignments and are due on March 26
2021. Tutorial participation will be assessed during each tutorial session.
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COURSE OUTLINE
MODULE 1: FINANCIAL PERFORMANCE ANALYSIS
1.1 Review of Corporate Annual Reports

1.2 Financial Ratio Analysis
1.3 Triple Bottom Line
Cases, Problem Sets, and Readings

RWJ Chapters 1*, 2*, 3 & 4
CERES Gardening
MODULE 2: RISK AND RETURN
2.1 Review of Financial Mathematics

2.2 Some lessons From Capital Market History
2.3 Return, Risk, and the Security Market Line

State of South Carolina
MODULE 3: MANAGING THE CAPITAL INVESTMENT DECISION
3.1 Financial Performance Analysis

3.2 Net Present Value and Other Investment Criteria
3.3 Making Capital Investment Decisions
3.4 Project Analysis and Appraisal

Expansion at Hansoon
Tokyo Disneyland
MODULE 4: COST OF CAPITAL AND LONG-TERM FINANCIAL POLICY
4.1 Cost of Capital

4.2 Raising Capital
4.3 Financial Leverage and Capital Structure Policy
4.4 Dividends and Dividend Policy
4

Marriott Corporation
Cartwright Lumber
Blaine Kitchenware
MODULE 5: SHORT-TERM FINANCIAL PLANNING & MANAGEMENT
5.1 Short-term Finance and Planning

5.2 Cash and Liquidity Management
5.3 Credit and Inventory Management

Ocean Carriers
Jones Electrical
MODULE 6: TOPICS IN CORPORATE FINANCE
6.1 International Corporate Finance

6.2 Forwards, Futures and Options
6.3 Risk Management
6.4 Option Valuation
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Lecture Schedule
Lecture: Financial Performance Analysis
Lecture 2: Financial Performance Analysis
Lecture 3: Risk and Return: Capital Market Theory
Lecture 4: Risk and Return: Capital Market Theory
Lecture 5: Capital Budgeting
Lecture 6: Sources of Financing and Raising Capital
Lecture 7: Sources of Financing and Raising Capital
Lecture 8: Capital Structure Theory
Lecture 9: Dividend Policy
Lecture 10: Short-term Financial Planning and Management
Lecture 11: Derivatives and Corporate Finance
Lecture 12: Derivatives and Corporate Finance

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Tutorial Schedule
Tutorial 1: Ceres Gardening
Tutorial 2: State of South Carolina
Tutorial 3: Hansoon Case Study
Tutorial 4: Tokyo Disney Land Case Study
Tutorial 5: Marriott Corporation Case Study
Tutorial 6: Ocean Carriers
Tutorial 7: Cartwright Lumber Case Study
Tutorial 8: Blaine Kitchenware
Tutorial 9: Jones Electrical
Tutorial 10: Review Exercises
Tutorials 11: Review Exercises

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Individual Case Daktronics
1. Evaluate Daktronics’ past financial performance using financial ratios, common size
financial statements and equity cash flows. How does the company compare to industry
average? Is your analysis consistent with the stock price performance in fig.1 of the
case?
2. Using your historical financial ratio analysis and analysts’ reports estimate a percentage
of sales model for Daktronics’ pro-forma income statements and balance sheets for the
next four years. Make an exhibit of your planning assumptions and justify your choices.
3. Based on your percent of sales model, compare the financial ratios from the historical
period with the planning period.
4. Construct equity cash flows for the next four years and estimate how much Daktronics
can afford to pay as dividends, assuming that a cash balance of $20 million is required
each year (cash balances in excess of $20 million are “excess” cash flows which can be
paid out as dividends).
5. Evaluate the company’s current dividend policy? Should dividends be increased? What
are the advantages and disadvantages of increasing dividends? If dividends are
increased, what form should the distribution take? How much should the firm payout?
Discuss how different shareholder groups might respond to increased dividends.
6. Construct a cash flow to equity valuation model for the next four years and estimate a
share price today. Assume the required cash balances equal $20 million annually.
Estimate the terminal value using both a constant growth model and a multiple of
EBITDA of 9. How does your estimated price compare with the price given in the case?
7. Evaluate the company’s current capital structure. Discuss the implications of the various
theories of capital structure for Daktronics’ use of debt. Discuss the advantages and
disadvantages of increasing the amount of debt used by Daktronics.

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1

UNIVERSITY OF THE WEST INDIES

MGMT3048 – FINANCIAL MANAGEMENT II

Lecturer: Professor. Justin Robinson

Lectures: Fridays 12.10 PM -2.00 PM

Additional Tools Required:

COURSE DESCRIPTION / RATIONALE

The primary purpose of this course is to provide students with a thorough

 Analyze a variety of financing alternatives and recommend superior

The instructional methods to be employed in this course are Lectures, Case

 Meaningfully prepare cases and participate in discussions

 Be personally responsible for your own learning.

Case Analysis (Daktronics) 20%

MODULE 1: FINANCIAL PERFORMANCE ANALYSIS

1.1 Review of Corporate Annual Reports

Cases, Problem Sets, and Readings

MODULE 2: RISK AND RETURN

2.1 Review of Financial Mathematics

Cases, Problem Sets, and Readings

MODULE 3: MANAGING THE CAPITAL INVESTMENT DECISION

3.1 Financial Performance Analysis

Cases, Problem Sets, and Readings

MODULE 4: COST OF CAPITAL AND LONG-TERM FINANCIAL POLICY

4.1 Cost of Capital

Cases, Problem Sets, and Readings

MODULE 5: SHORT-TERM FINANCIAL PLANNING & MANAGEMENT

5.1 Short-term Finance and Planning

Cases, Problem Sets, and Readings

MODULE 6: TOPICS IN CORPORATE FINANCE

6.1 International Corporate Finance

Lecture: Financial Performance Analysis

Lecture 2: Financial Performance Analysis

Lecture 3: Risk and Return: Capital Market Theory

Lecture 4: Risk and Return: Capital Market Theory

Lecture 5: Capital Budgeting

Lecture 6: Sources of Financing and Raising Capital

Lecture 7: Sources of Financing and Raising Capital

Lecture 8: Capital Structure Theory

Lecture 9: Dividend Policy

Lecture 10: Short-term Financial Planning and Management

Lecture 11: Derivatives and Corporate Finance

Lecture 12: Derivatives and Corporate Finance

Tutorial 1: Ceres Gardening

Tutorial 2: State of South Carolina

Tutorial 3: Hansoon Case Study

Tutorial 4: Tokyo Disney Land Case Study

Tutorial 5: Marriott Corporation Case Study

Tutorial 6: Ocean Carriers

Tutorial 7: Cartwright Lumber Case Study

Tutorial 8: Blaine Kitchenware

Tutorial 9: Jones Electrical

Tutorial 10: Review Exercises

Tutorials 11: Review Exercises

Individual Case Daktronics

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