INDIAN INSTITUTE OF MANAGEMENT, KOZHIKODE IIM Kozhikode Campus P.O.

Kozhikode- 673 570

Course Term Credits Instructor

FM II III of 2012-13 3 S S S Kumar

This course picks up from where your FM I had left. Focusing on analysis of what capital structure should a firm choose in perfect capital markets? In the presence of market imperfections how firms are pushed towards equity and some towards debt. Next, we will look at equity payout strategies. These are some substantial themes in corporate finance with lot of academic research and yet without categorical answers. Now, the context is ready for looking at the interaction between the financing and investment decisions. These strategic aspects of finance will be followed up by topics that are operational in natureworking capital management. Subsequently the course moves into some eclectic ideas and topics in corporate finance like Leasing, Mergers and Acquisitions, International finance and derivatives. The following will be the tentative flow of topics:
Sl. No Likely number of Sessions Topic Readings

1 2 3 4 5 6 7 8 9

4 2 3 3 2 2 3 3 3

Capital structure Dividend policy Financing and valuation Leasing and Hire-purchase Working capital management Value-based management Mergers and Acquisitions International Finance Derivatives and real options

Chap -17 & 18 of BMA; Chap 18, 19 & 20 of AD Chap 16 of BMA; Chap 21 of AD Chap 19 of BMA; Handout Chap 25 of BMA Chap 30 of BMA Chap 25 of AD Chap 31 of BMA; Chap 25 of AD Handout Chap 20; 22 of BMA and Handout

The pedagogy is a two-phase model concept discussion session followed by working out exercises and caselets. The problems and exercises that will be used in the class are graded according to level of difficulty but are predominantly taken from the books mentioned in the references list. The course is a tad constrained by the hours available. We could make it more "fun" oriented but it would leave some gaps in your knowledge that could bite you. You can use either BMA (textbook that you used in your last term) or AD. For most topics both topics cover similarly and which book you want to use is a matter of your comfort level. For some topics like Dividend policy practices, Leasing, working capital management it pays to refer to an Indian book.

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As an instructor my concern is that you understand - the intuition behind the basics concepts, why you are using them along with the limitations of what you know. Grading All the tests and quizzes will be closed book and you are not allowed to use your laptops or any electronic gadget except for the calculator you normally use in the class. I propose the following evaluation for this course: Quizzes Class tests Midterm End term 20 - 20 25 35

Your attendance, policy on missing quizzes, tests and all other aspects are governed by PGP policies that will are in force. Reference books: 1. Corporate Finance by Aswath Damodaran (AD) 2. Principles of Corporate Finance by Brealey, Myers and Allen (BMA) 3. Financial Management by Prasannachandra 4. Financial Management by I M Pandey 5. Corporate Finance by Ross, Westerfield and Jaffe

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