Corporate Finance II: Financing Investments and Managing Risk

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Description

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  • Paid plan: Commit to earning a Certificate—it's a trusted, shareable way to showcase your new skills.

About this course: In this course you will learn how companies decide on how much debt to take, and whether to raise capital from markets or from banks. You will also learn how to measure and manage credit risk and how to deal with financial distress. You will discuss the mechanics of dividends and share repurchases, and how to choose the best way to return cash to investors. You will also learn how to use derivatives and liquidity management to offset specific sources of financial risk, including currency risks. Finally, You will learn how companies finance merger and acquisition decisions, including leveraged buyouts, and how to incorporate large changes in leverage in standard valuat…

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When you enroll for courses through Coursera you get to choose for a paid plan or for a free plan

  • Free plan: No certicification and/or audit only. You will have access to all course materials except graded items.
  • Paid plan: Commit to earning a Certificate—it's a trusted, shareable way to showcase your new skills.

About this course: In this course you will learn how companies decide on how much debt to take, and whether to raise capital from markets or from banks. You will also learn how to measure and manage credit risk and how to deal with financial distress. You will discuss the mechanics of dividends and share repurchases, and how to choose the best way to return cash to investors. You will also learn how to use derivatives and liquidity management to offset specific sources of financial risk, including currency risks. Finally, You will learn how companies finance merger and acquisition decisions, including leveraged buyouts, and how to incorporate large changes in leverage in standard valuation models. Upon successful completion of this course, you will be able to: • Understand how companies make financing, payout and risk management decisions that create value • Measure the effects of leverage on profitability, risk, and valuation • Manage credit risk and financial distress using appropriate financial tools • Understand the links between payout policies and company performance • Use derivatives and liquidity management to offset financial risks • Pick an appropriate financing package for an M&A or leveraged buyout deal This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.

Created by:  University of Illinois at Urbana-Champaign
  • Taught by:  Heitor Almeida, Professor of Finance, Stanley C. and Joan J. Golder Chair in Corporate Finance

    Department of Finance, College of Business
Basic Info Course 6 of 7 in the Financial Management Specialization Language English How To Pass Pass all graded assignments to complete the course. User Ratings 4.9 stars Average User Rating 4.9See what learners said Complete this course to work toward: Financial Management Specialization This course is part of the 7-course Financial Management Specialization from University of Illinois at Urbana-Champaign Learn More Master of Business Administration (iMBA) This course is part of the fully-online 18 courses plus three capstone projects degree program Learn More Coursework

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University of Illinois at Urbana-Champaign The University of Illinois at Urbana-Champaign is a world leader in research, teaching and public engagement, distinguished by the breadth of its programs, broad academic excellence, and internationally renowned faculty and alumni. Illinois serves the world by creating knowledge, preparing students for lives of impact, and finding solutions to critical societal needs.

Syllabus


WEEK 1


Course Orientation
You will become familiar with the course, your classmates, and our learning environment. The orientation will also help you obtain the technical skills required for the course.


2 videos, 5 readings, 1 practice quiz expand


  1. Video: Corporate Finance II Welcome
  2. Video: Welcome to Corporate Finance II: Financing Investments and Managing Risk
  3. Reading: Syllabus
  4. Reading: About the Discussion Forums
  5. Reading: Glossary
  6. Reading: Social Media
  7. Reading: Getting to Know Your Classmates
  8. Practice Quiz: Orientation Quiz


Module 1: Raising Financing: The Capital Structure Decision



In Module 1, we will discuss the differences between debt and equity financing for corporations. We will then learn how to avoid usual mistakes that people make when analyzing the choice between debt and equity. We will work with financial statements to understand the impact of higher debt on corporate profits, and we will learn how debt and risk are fundamentally related. Finally, we will use our knowledge to understand how companies choose how much debt to have.


12 videos, 2 readings, 2 practice quizzes expand


  1. Reading: Module 1 Overview
  2. Reading: Module 1 Readings
  3. Video: Objectives and Overview
  4. Video: Issuing Debt and Equity – The Mechanics
  5. Video: Should a Company Issue Debt or Equity?
  6. Video: Two Misconceptions
  7. Video: Debt Increases Systematic Risk
  8. Practice Quiz: Practice Quiz 1
  9. Video: Evidence From the Field: Which Type of Capital Do Firms Prefer?
  10. Video: The Effect of Leverage On Taxes and Profits
  11. Video: Leverage and Personal Taxes
  12. Video: Leverage and the Risk of Financial Distress
  13. Video: The Trade-off Theory of Capital Structure
  14. Practice Quiz: Practice Quiz 2
  15. Video: Analog Outfitters
  16. Video: 1-11: Module 1 Review

Graded: Module 1 Quiz

WEEK 2


Module 2: Understanding Debt Financing and Payout Policy



In Module 2 we will dig deeper into the mechanics and the institutional details that are important to understand debt financing. We will learn models that allow us to link default probabilities to yields on a company’s debt. We will discuss the roles of credit ratings and credit default swaps for debt markets. We will learn the importance of non-price contractual terms such as debt covenants, collateral and seniority. We will use this knowledge to understand how companies choose between bank debt and bond financing. Finally, we will discuss how payout decisions (dividends and share repurchases) affect firm value and how companies choose their optimal payout policy.


12 videos, 2 readings, 3 practice quizzes expand


  1. Reading: Module 2 Overview
  2. Reading: Module 2 Readings
  3. Video: Objectives and Overview
  4. Video: Pricing Debt: Yield to Maturities, and Default Probabilities
  5. Video: Credit Ratings: Determinants and Implications
  6. Practice Quiz: Practice Quiz 1
  7. Video: Credit Default Swaps
  8. Video: The Many Different Types of Debt
  9. Video: Bank or Market Financing?
  10. Practice Quiz: Practice Quiz 2
  11. Video: Do Dividends and Share Repurchases Affect Firm Value?
  12. Video: Main Factors Driving Payout Decisions
  13. Video: Dividends or Repurchases?
  14. Practice Quiz: Practice Quiz 3
  15. Video: 2-10: Module 2 Review
  16. Video: Assignment 1 Overview
  17. Video: Assignment 1 Discussion

Graded: Module 2 Quiz
Graded: Module 2 Assignment

WEEK 3


Module 3: Risk Management



In Module 3 we will identify good and bad reasons why companies engage in risk management, or hedging. We will learn the mechanics of how to use derivatives such as forwards and futures to eliminate specific risks. We will also discuss how to manage risks that cannot be hedged with derivatives. In particular, we will learn that appropriate liquidity management can work as a substitute for hedging strategies. We will also discuss how and why to hedge currency risk, and how to think about a company’s cost of capital when making cross-border investments.


11 videos, 2 readings, 2 practice quizzes expand


  1. Reading: Module 3 Overview
  2. Reading: Module 3 Readings
  3. Video: Objectives and Overview
  4. Video: Good and Bad Reasons to Hedge
  5. Video: Forward Contract
  6. Video: Futures Contracts
  7. Video: Hedge Ratios and Imperfect Hedging
  8. Practice Quiz: Practice Quiz 1
  9. Video: Liquidity as a Substitute for Hedging
  10. Video: Bilateral Contracts
  11. Video: Operational Hedging
  12. Video: Currency Risk and the Cost of Capital
  13. Video: Adjusting the Cost of Capital for International Projects
  14. Practice Quiz: Practice Quiz 2
  15. Video: 3-11 Module 3 Review

Graded: Module 3 Quiz

WEEK 4


Module 4: Financial Management of Acquisitions and R&D



In Module 4, we will apply the financial management tools that we developed in this course to M&A decisions and R&D programs. We will learn how to finance an M&A deal, and how companies choose between cash and stock payments to acquire target companies. We will also discuss the financing of LBOs (leveraged buyouts), and learn how to model a leveraged buyout using Excel. We will then discuss the financial management of R&D programs, with an emphasis on risk management. Specifically, we will learn how to think about the financing of R&D in a dynamic framework that considers the need to make uncertain follow up investments.


14 videos, 2 readings, 3 practice quizzes expand


  1. Reading: Module 4 Overview
  2. Reading: Module 4 Readings
  3. Video: Objectives and Overview
  4. Video: Means of Payment in M&A
  5. Video: Capital Structure and Payout Policy in M&A Part I
  6. Video: Capital Structure and Payout Policy in M&A Part II
  7. Practice Quiz: Practice Quiz 1
  8. Video: Financing Private Equity Deals Part I
  9. Video: Financing Private Equity Deals Part II
  10. Video: Leveraged Buyout (LBO) Modeling Part I
  11. Video: Leveraged Buyout (LBO) Modeling Part II
  12. Practice Quiz: Practice Quiz 2
  13. Video: Financing R&D Investments
  14. Video: Risk Management for R&D Projects
  15. Practice Quiz: Practice Quiz 3
  16. Video: Nona Inc.
  17. Video: 4-11: Module 4 Review
  18. Video: Assignment 2 Overview
  19. Video: Assignment 2 Discussion

Graded: Module 4 Quiz
Graded: Module 4 Assignment

Course Conclusion
You will find out where to go next after completing this course and be able to share any thoughts you have on this course experience.


1 video expand


  1. Video: Conclusion
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