Principles of Finance 350 – Fall 2020

Syllabus for Principles of Finance 350, 3 credits, Fall 2020
SHELDON B. LUBAR SCHOOL OF BUSINESS
University of Wisconsin – Milwaukee
Lecture 404 is Tues/Thurs 9:00-9:50 AM (16504) synchronously taught online
Lecture 405 is Tues/Thurs 1:00-1:50 PM (16505) synchronously taught online


COVID-19 ADJUSTMENTS:  Since my classes are large, they will be taught synchronously at 9am and 1pm on Tuesdays and Thursdays via Canvas Collaborate Ultra, but the recordings will be available online for those who find those times difficult after classes and discussions.  The University’s policies on COVID are at:  https://uwm.edu/cetl/covid-19-syllabus-statements/. Our Discussion Sections will be in-person on Fridays but materials from Discussion Sections will also be available on Canvas if you find in-person risky for your health.  Due to rules for cleaning, Discussion Sections will only be 35 minutes long.

INSTRUCTOR: Richard D. Marcus, Ph.D.is an Associate Professor of Finance and Managerial Economics and the Chair of the LSB Executive Committee.  I typically prefer Dick to Richard, or Prof, or Hey-You works too.

OFFICE: S430F in Lubar Hall. My mailbox is also on the fourth floor of Lubar Hall, but I am not likely to be there this semester except on most Fridays.

MY TELEPHONE and OFFICE HOURS414-510-7731 (my cell for calls or text messages, but if you text, say who you are in the message please).  As many come on Fridays, my office hours are Fridays 10 – noon by phone. I am not supposed to meet in my office, but we can go to large area such on the third floor to talk out issues you have.  I will also stop in occasionally at Discussion Sections to say hi and answer questions.

TEACHING ASSISTANTS:  Our TA’s are experienced in finance and accounting. Both are graduate students in business:  They are Stefan Stojanovic at stojano8@uwm.edu phone 262-420-6300 and Zachary Myers zamyers@uwm.edu phone 920-860-5414.  They both have taken my class before.  They are both upbeat, friendly, and natural teachers.  Stefan will lead discussions 607-610Zach will lead discussions 601-605. You can meet all three of us in a short Greeting video on Canvas.

LOCATION OF DISCUSSION SECTIONS:  Discussion Sections are taught in-person in large lection halls to preserve social distancing.  Discussion Sections 607 – 610  with Stefan Stojanovich will meet in the Physics Building 137. Discussion Sections 601 – 605 with Zach Myers will meet in Sabin Hall G-90.  As some may also not wish to attend in person, we will put materials and a video each week of one of the Discussion Sections on our Canvas site.

MY EMAIL: marcus@uwm.edu. When sending me an email about Finance 350, please write “Finance 350 Lecture 404 or 405 or 9AM or 1PM” in the subject line.

MY HOMEPAGE: https://sites.uwm.edu/marcus

PRINCIPLES OF FINANCE 350: Examines the fundamentals of financial management, asset/liability valuations, risk and return, investment analysis, sources and uses of funds, cost of capital, and cash management. Prerequisites are soph st; Econ 103(P) & 104(P); Bus Adm 201(P) or 207(P); Bus Adm 210(P) or 211(P).

REQUIRED MATERIAL FOR FINANCE 350: McGraw-Hill electronic textbook with SmartBook and Connect Assignments, 10th Edition, Essentials of Corporate Finance (copywrite 2020) by Ross, Westerfield, and Jordan. Also needed is a financial calculator. See more on this below.

TEXTBOOK and CONNECT FINANCE:  The start date to get our electronic textbook and Connect assignments is Monday, August 28. To register for your electronic textbook Essentials of Corporate Finance with SmartBook and Assignments for just $85, which is fifteen dollars lower than last year. The best way to get registered is to go to our Canvas site and click one of the two assignments for Chapter 1 (SmartBook or Assignment #1).  This will let you to register for our electronic book, SmartBook, and Assignments.

REGISTERING FOR CONNECT:  There is a 3 minute video for understanding Canvas and McGraw-Hill Connect at: https://vimeo.com/showcase/5316669/video/281874940 and also a link to it in Canvas. The video talks of a “rental” and “purchase” price, but the $85 is the price. If after using the electronic version, you would like a loose-leaf paper version mailed to you, McGraw-Hill will do that for $39 more. The electronic version is printable as well. Or, if you go to e-Campus, you can buy the electronic AND loose-leaf for $170.78. They will give you a 16-digit code to access the electronic book, Connect and SmartBook as well as get a looseleaf paper copy that will be mailed to you in 2 days. If you want more help in signing up, see this one-page PDF called “Connect + Canvas Deep Integration” link or chat with Dick Marcus or your TAs: Connect + Canvas Deep Integration Student Registration (6) . Or you could also read McGraw-Hill’s one page: Syllabus Language for Bus Adm 350

FINANCE CONNECT ASSIGNMENTS: There are two types of assignments. SmartBook has you work through a chapter in 20 minutes. There are 14 SmartBook chapters and 140 points possible. The second type are multiple choice style quizzes, called Assignments. There are 14 graded assignments Each of the assignments is worth 5 points each for 14 assignments, for a total of 70 points. The questions are algorithmic so that each student gets different numbers for most problems. The assignments have unlimited number of attempts to retake up to the due dates listed in the “Daily Schedule of Lectures, Discussion Sections, and Connect Assignments” appearing below. There is no penalty for retaking the assignment. I permit (and encourage you) to print assignments for exam practice problems, but you must enter your answers on the website.

SUPPORT AND TIPS FOR CONNECT: If you have any issues while registering or using Connect, please contact the Care Team for McGraw-Hill through http://www.mhhe.com/support. They have a good team for a chat session, or you may call them at 1-800-331-5094. Our course examines Chapters 1-14. To avoid problems related to unexpected technical issues, you are advised not to wait until the last moment to complete assignments.

FINANCIAL CALCULATOR OPTIONS AND PERMISSION TO USE CELL PHONE VERSIONS FOR OUR CLASS: You will need a financial calculator of your own choosing. My recommendation is Texas Instruments BAII Plus or the professional version. The textbook is designed for use of either HP-10B or TI BA II Plus Financial Calculators. Either the TI or HP is fine with me. Accounting classes tend to like the TI BA II Plus. There are some free apps that work with ads:  Android has BA Calc ( https://play.google.com/store/apps/details?id=com.cfa.calculator&hl=en_US ).  Apple has one that charges $1.99 BA Plus Calculatorhttps://apps.apple.com/us/app/ba-plus-calculator/id1510190657).  Be aware that while many apps for smart phones include some financial calculator functions, but few of the free apps have all that is needed for bond analysis, such as IRR and uneven cash flows. It is possible to purchase a BA II Plus App for $14.99 on iTunes. For even less, can use 10bii Financial Calculators for $5.99 from i-Tunes or Android, or Vicinno FinCalc Pro for $1.99 for i-Tunes and Android. If you plan on being a Finance Major, I suggest that you get a physical (non-cell-phone) calculator, as other classes will not permit use of a cell phone, but I do permit cell phones in my class. BYC means Bring Your Calculator!

ROSS, WESTERFIELD, and JORDAN’s FINANCE BLOG: What does the recent corporate tax rate do to leverage of firms? What does it do to stock prices? What are “Black Rhino” Bond? Our authors have a semi-active blog: http://essentialsofcorporatefinance.blogspot.com/

470 POINTS FOR MIDTERMS, FINALS, HOMEWORK ASSIGNMENTS, and SMARTBOOK: There will be two midterm examinations and one final. Each midterm exam (of 40 questions) is worth 80 points each. The Final is worth 100 points (50 questions, but we have 2 hours). We will also have 14 homework multiple choice assignments of 5 points each that will constitute 70 points that are completed on Connect Finance from McGraw-Hill. There is a SmartBook for each chapter on Connect Finance is worth 10 points each or 140 points. The total possible points are 470 = 80+80+100+70+140. Scores will be posted on Canvas.

MIDTERM EXAM DATES: The midterms for 350 are during our assigned time class periods but online.  If you need a different time, this can be arranged in advance.  Contact Prof Marcus via his email.  The first midterm is on Thursday, October 1 on CANVAS at your assigned times of 9AM or 1PM and covers Chapters 1-5 for 40 questions (80 points). The second midterm is on Tuesday, November 10 also on CANVAS at your assigned times of 9AM or 1PM and covers Chapters 6-10 for 40 questions (80 points). The final covers Chapters 11-14. 50 questions in 2 hours and 100 points, which is also on CANVAS. I provide list of key financial formulas for taking both midterms and the final. Students will need their financial calculator or cell-phone apps for these exams.

FINAL EXAM: 350 Finance Lecture 401 is on FRIDAY, December 18 at 8 P.M. to 10 P.M. This is a Joint Final with both lectures 404 and 405, but it will also be given online via CANVAS. The final covers Chapters 11-14 for 50 questions, which amounts to 100 possible in the course. The final has more time available, permitting a slightly longer exam than the midterms.  If any conflicts for time and day arrive, please let me know before the final.

SUPPLEMENTAL INSTRUCTION: Panther Academic Support Services (PASS) offers Supplemental Instruction (SI) review sessions for this course.  Micah Dykema, email is : mddykema@uwm.edu is our S.I. this year.  He will let us know when his hours are for chatting with you.

COURSE GRADES:  Grades will be assigned by points for both midterms and the final as clues to how you will be graded in the course.  Each of these exams do not use fixed percentage correct levels as the exams vary in difficulty.  I use the mean of the total points or points on a specific test.  Those who are at the mean or higher receive a B or better, with approximately equal groups of A, A-, B+, and B grades.  Those who are below the mean receive B-, C+, C, and a few C- grades. Note that I use the total number of points (470), which includes 280 points from three exams and 190 points from Connect assignments and SmartBook chapters.

CLASSROOM POLICIES: UWM has long-standing policies on academic misconduct, sexual harassment, discrimination, adding, dropping, withdrawal, repeating classes, and changes of grade. These policies are available at: https://sites.uwm.edu/marcus/policies/

SPECIAL NEEDS: If anyone has a need for note-taking or testing assistance, please feel free to discuss this with me early in the semester. Slide presentations are available weekly in class and will be available on Canvas.  The class meetings will also be recorded and shared via Canvas.

SOCIAL CONNECTIVITY: Financial announcements of stock splits, leverage buyouts, and dividend changes occur daily. Some will be highlighted for special attention both in class and on Facebook. Students will be invited to like a fan page that for Professor Marcus’ 350 class. It is called UWMFinance350.  You can look at messages clicking Facebook link on Canvas whether or not you have a Facebook Account. Or you may click the like “thumps up” icon in Facebook to have it appear on your cell phone or computer. I am also relatively active on LinkedIn at: https://www.linkedin.com/in/dick-marcus-8176251/detail/recent-activity/shares/  I also post a LinkedIn article I write on UWMFinance350.

UNIVERSITY POLICIES: Policies on issues of religious observance, military service, sexual abuse, misconduct, grade appeals, and other matters are at:   https://uwm.edu/secu/wp-content/uploads/sites/122/2016/12/Syllabus-Links.pdf

OBJECTIVE: To understand the everyday financial activities of collecting from customers and paying suppliers, finding long-term financing to pay for investments, and deciding which investments offer the greatest promise. These are issues sometimes called Financial Management, but they are duties of a financial manager. Financial managers who do these tasks well reduce the risk of financial distress and increase the opportunities for growth and profits.


Schedule of Lectures, Discussions, & Connect  Assignments

WEEK 1: Lecture #1 on Thursday, September 3: Chapter 1– Introduction to Financial Management

Discussion Session #1: Friday, September 4: Meet your TA. They will demonstrate using Connect Finance assignments, SmartBooks for studying chapters, and discuss class links to Facebook for UWMFinance350. They will also work with you to do textbook problems 1.3, 1.5, 1.6 and 1.15 on Sarbanes-Oxley (pp. 19 – 20 in the electronic or paper textbook).

WEEK 2: Lecture #2 is on Tuesday, September 8: Chapter 2 – Financial Statements, Taxes, and Cash Flows.

Lecture #3 on Thursday, September 10: Chapter 2 (continued) – CFFA or Cash Flow From Assets

Discussion 2: Friday, September 11: OCF and CFFA problems (especially question 2.2 on page 42, 2.3 and 2.9 on page 43, and Bleyk Paving question 18, and Prescott Football question 20 on page 45 at the end of the Chapter).

WEEK 3: Lecture #4 on Tuesday, September 15: Chapter 3 – Working with Financial Statements (with emphasis on ratio analysis).

Lecture #5 on Thursday, September 17: Chapter 3 (continued) – The Du Pont Identity

Discussion 3: Friday, September 18: Du Pont Identity questions and sustainable growth questions 17 through 25 on pages 87 and 88.

WEEK 4: Lecture #6 on Tuesday, September 22: Chapter 4 Introduction to Valuation (BYC = Bring Your Calculator!)

Lecture #7 on Thursday, September 24: Chapter 5 – Discounted Cash Flow Valuation (BYC) means Bring Your Calculator.

Discussion 4: Friday, September 25: TVM (Time Value of Money) from end of Chapter 4 using your financial calculator – BYC (bring your calculator!) HINT: Do all the worked problems on page 631-633 (textbook Appendix D) for TI BA II Calculators and HP-10B Calculators.  Also, textbook question 19 on page 157 and questions 36, 37, 40, 47, and 54 on pages 159 through 161.

WEEK 5:  Lecture #8 on Tuesday, September 29: Chapter 5 (continued) – Effective Annual Rates (EARs), Perpetuities, Midterm 1 Overview.

Thursday, October 1: is our MIDTERM #1 on Canvas during your regular class period at 9am for Lecture 404 or 1pm for Lecture 405.  Midterm 1 covers Chapters 1-5BYC but you don’t need a pencil for the scantron as it is all online.  This is a night of a Full Moon, so watch out for werewolves. See my LinkedIn comments on the Werewolf Effect on Investing https://www.linkedin.com/pulse/chain-your-inner-werewolf-avoid-massive-investment-moves-dick-marcus/

Discussion 5: Friday, October 2: A Midterm Answer Sheet will appear on Canvas. The TAs will discuss some of the midterm’s most frequently missed questions.  Scores on your Midterm 1 will be in GRADES in Canvas.

Monday, October 5 – Final Due Date for all SmartBook Chapters 1-5 and Connect Assignments for the first third of our class.

WEEK 6: Lecture #9 on Tuesday, October 6: Chapter 6 – Interest Rates and Bonds

Lecture #10 on Tuesday, October 8: Chapter 6 (continued) – Bond Features, Bond Types, and Yield Curves.

Discussion 6: Friday, October 9:  Discuss “The Five Keys to Bond Valuation,” which will appear on Canvas.  Also questions 6.1 and 6.2 on page 197 and 6.9 on page 198 and question 6 on page 199.

WEEK 7: Lecture #11 on Tuesday, October 13: Chapter 7 – Equity Markets and Stock Valuation

Lecture #12 on Thursday, October 15: Chapter 7 (continued) – Preferred Stocks, Primary Markets, and Secondary Markets for Equities

Discussion 7: Friday, October 16: DGM – The Dividend Growth Model and selected problems from Questions and Problems on pages 230-231 of 1, 2, 5, 7, 8, and 10.

WEEK 8:  Lecture #13 on Tuesday, October 20: Chapter 8 – NPV is Net Present Value and IRR is Internal Rate of Return

Lecture #14 on Thursday, October 22: Chapter 8 (continued) – Capital Budgeting and Capital Rationing.

Discussion 8: Friday, October 23:  Finding NVP and IRR using Excel and on calculators, and selected problems: 1 – 7, and do problem 8 using Excel, and question 12 on page 268.

WEEK 9: Lecture #15 on Thursday, October 27: Chapter 9 – Making Investment Decisions.

Lecture #16 on Tuesday, October 29: Chapter 9 (continued) – Sensitivity Analysis of Capital Projects and Managerial Options. Aside: Do you think Professor Marcus should wear a Halloween costume?  A fish, a penguin, or a cowboy for his lecture this day?  Or maybe he should be disguised as an absent-minded professor as he wears that one pretty well most days.

Discussion 9: Friday, October 30: Calculating project Operating Cash Flows (OCF) examples such as 9.4 on page 302; 9.10 on page 303; 1 and 4 on page 304; and the H. Cochran OCF problem 9 on page 305; and if time permits Pappy’s Potato problem 22 on page 306. Do you include the survey cost of $120,000?

WEEK 10:  Lecture #17 on Tuesday, November 3: Chapter 10 – Lessons from Capital Market History.  This is election day.

Lecture #18 on Thursday, November 5: Chapter 10 (continued) Capital Market Efficiency and review for Midterm #2.

Discussion 10: Friday, November 6:  Preparing for Midterm 2.  Also, what is the difference between a sample standard deviation and a population standard deviation? We will be working on example problems as midterm 2 prep.

WEEK 11:  Tuesday, November 10: is our MIDTERM #2 on Canvas. BYC! Midterm 2 covers Chapters 6-10.

Wednesday, November 11 is our Final Due Date for Connect assignments and SmartBook Chapters 5-10.

Lecture #19 on Thursday, November 12: Chapter 11 – Risk and Return.

Discussion 11: Friday, November 13: Return answer to Midterm 2 on Canvas. Correct answers will be posted on Canvas. Arithmetic versus Geometric Returns from Chapter 11. Perhaps some problems as well from pages 342-345.  The TAs will also go over a few of the most missed questions on Midterm 2.

WEEK 12: Lecture #20 on Tuesday, November 17: Chapter 11 (continued) – The Security Market Line and CAPM (The Capital Asset Pricing Model)

Lecture #21 on Thursday, November 19: Chapter 12 – The Cost of Capital

Discussion 12: Friday, November 20:  Review of CAPM and Cost of Capital, Problems: 1, 2, 3, 4, 5, and 8 on pages 416-417.

THANKSGIVING WEEK 13: Lecture #22 on Tuesday, November 24: Chapter 12 (continued) – Some methods for finding the cost of capital for projects not similar to the whole firm.

Thursday, November 26 is THANKSGIVING.

No school and no discussion sections the rest of this week during Thanksgiving, November 25 through November 28. Oddly, this is the THIRD YEAR in a row when there is no Packer game on Thanksgiving,  Weird.  Growing up in Michigan, watching the Lion’s on Thanksgiving Day was a given.  But we are supposed to meet Da Bears at Lambeau Field on Sunday, November 29.  Even though I lived in Chicago for 4 years while attending the University of Chicago, and a form Lion’s fan, I’ve definitely become a Packer’s Fan,  in case Charlie Berens is checking up on me.

WEEK 14: Lecture #23 on Tuesday, December 1: Chapter 13 – Leverage and Capital Structure

Lecture #24 on Thursday, December 3:  Chapter 13 (continued) – An Optimal Capital Structure?

Discussion 14: Friday, December 4L   What is a Workout and what is a Bankruptcy? Selected problems from the end of Chapter 13. Try questions 8 and 10 on page 453.

WEEK 15: Lecture #25 on Tuesday, December 8: Chapter 14 – Dividends and Dividend Policy

Lecture #26 on Thursday, December 17: Chapter 14 (continued) – Stock Dividends, DRIPs, Should Firms Repurchase their own Shares?, and Review for the final.  

Discussion 15 on Friday, December 11,  Review the four types of dividend policies.  And Review Chapters 11-14 for the final.

WEEK 16: FRIDAY, December 18: is our JOINT FINAL on CANVAS, which has been assigned to us in December. This is joint final of both Lectures 404 and 405 from 8PM to 10PM. Remember to BYC!   The Final covers Chapters 11-14.

Saturday, December 19 is Final Deadline at midnight for LearnSmart Chapters 10-14 and graded Connect assignments 10-14.

Scores and grades will be posted on Canvas and an email notice will be sent to everyone when grades have been reported on PAWS.