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   Course Title    Valuation
Lecturer    Marek Jochec
Institution    Omsk State University
Country    Russian Fedaration

1. Overview of the course

This course is a two-semester advanced corporate finance course. Our goal is to learn about contemporary concepts and techniques of company valuation, based on DCF analysis. We will try to value a company and its securities, such as common stock, debt and possibly also warrants and stock options. The emphasis is on fundamental principles of modern finance and the approach will be analytical and rigorous. The perspective throughout the course will be that of financial manager of medium and large corporations and of institutional investor. Students will also gain practical skills of setting up pro-forma financial statements and modeling company's operation and accounts in Microsoft Excel. The nature of the material is such that it needs to be steadily absorbed over the semesters. Class attendance and regular work on homework assignments is therefore crucial.

Course prerequisites are: at least basic knowledge of financial accounting and reporting, basic knowledge of firm operations, good knowledge of Microsoft Excel.

Topics covered include (the topics coincide with the chapters of the assigned textbook):

  1. Financial Valuation Tools
  2. Using Financial Reporting Information
  3. Valuation: Processes and Principles
  4. Building Pro-Forma Financial Statements
  5. Analyzing the Firm's Environment
  6. Analyzing the Firm's Operations
  7. Projecting Financial Performance
  8. Capital Structure and the Cost of Capital
  9. Estimating Discount Rates
  10. Valuation by Multiples
  11. Valuing the Firm's Debt
  12. The Valuation of Convertible Securities
  13. Valuing Equity Cash Flows Directly

2. Course Materials

The course materials are of two types: readings (not available in an electronic version - mostly copies of selected chapters from assigned textbooks) and computer files (MS Word or MS Excel). It is also necessary to have a scientific or financial calculator (capable to solve powers and logarithms), and access to PC equipped with Microsoft Excel, Microsoft Word, e-mail, and Internet (or at least Intranet).

2.1. Readings

One or more reading packets will be available in the student library or study room (for exact instructions refer to my web page). The reading packets contain all material to be read in two semesters, sorted by chapters. The material may not be signed off and taken home - you may use it only in the library. I encourage you to make your own copies for your home study and to bring the copies to classes, since we will often refer to exhibits or tables when discussing the material in class.

The readings consist of:

  1. Benninga, Sarig: Corporate Finance - A Valuation Approach (selected chapters)
  2. Selected articles and case studies

2.2. Computer files

We will constantly work with computer files throughout the course. We will use Microsoft Word files (".doc") for class outlines, organization materials, announcements etc., and Microsoft Excel files (".xls") for solving exercises and problems. Questions to exams, problem sets and group problems (see below) are also in the form of word files, whereas solutions are in the form of Excel files. The way of distribution of these files to students is through the instructor's web page, where the files are available for download in a structured form.

The instructor's web page is a crucial tool in our course. The web page address will be announced to you by administration together with instruction how to access it. You should quickly familiarize yourself with the structure of the web page and visit it regularly throughout the semester to read announcements and download necessary files. The section designed for you is "Financial accounting"; you will see it after you open the title page and enter it by clicking on it with a mouse. It is structured in the following way: it starts with important announcements and information such as when and where our class meets, how to contact me (office, telephone, e-mail), and where to get readings etc. It then continues with class outlines, exams, problem sets, group problems. Finally, at the bottom there is an organization section where you find syllabus, academic calendar and schedule of classes, my resume and other documents related to the course organization. There might be also a "career development" section. You will find other useful information on my web page such as study abroad information and announcements of student conferences in the section "Student conferences and study abroad information", my e-mail address etc.

Class outlines provide the basic information for each class such as what will be covered and what is the assigned homework. You must download and read the respective class outline before each class. I recommend you to make a printout, too. I may update or change some outlines without notice, so download them shortly before our class.

As you will see in class outlines, I frequently ask you to work out the solution to homework in the form of computer files. Usually, you should bring a printout to class and e-mail me the file as an e-mail attachment one day before the respective class. I require that each student has his or her own e-mail account. E-mail is a primary way of communication between the instructor and students, and you must check your e-mail frequently, ideally before each class. I will make various announcements and forward you interesting documents (about scholarship opportunities, for example) using e-mail.

3. Course Requirements

At the end of the course students will receive pass/fail grades (i.e. "credit" or "no credit"). In order to receive a pass grade, students must receive a minimum of 600 points throughout the course out of possible 1,000, and must receive a minimum of 250 points on the final exam out of possible 500. Points will be received for the following:

Midterm exam 300 pts.

Final exam (must be taken and passed in order to pass the course) 500 pts.

Class participation 200 pts.

Maximum total: 1,000 pts.

Required to pass the course: 600 pts.

out of which minimum gained on the final exam: 250 pts.

The midterm exam will be a written in-class examination approximately in February (I will announce the exact date at least two weeks in advance). Final exam is a comprehensive written examination and is cumulative (i.e. covers the material of the whole course). Note that you must take the final and receive at least a passing grade in order to pass the course. The final exam will include one of the problems previously distributed in "Group problems" (your regular group homework assignments). This is to encourage your work on group problems and discourage "free riding".

In addition to points scored on exams, I will reward active class participation and timely attendance by 200 points maximum. Class participation is strongly encouraged. Class participation means not only the regular and on-time class attendance, but also your active approach to learning, participation in class discussions, and other forms of contribution to improve and enrich our learning environment. Not the quantity, but the quality of contributions will be evaluated. In order to encourage a regular and on-time attendance, I will keep attendance records for each class session. Students are allowed to miss or to be late for 2 sessions per semester without loosing points. Students must attend at least 50% of classes during the semester in order to qualify for a credit or grade. Also note that points can be lost for: 1. excessive absenteeism (if you skip more than two classes in a given semester you are penalized by a loss of 10 points for each additional skipped class - this applies to late comings, too) and 2. missed Group Problems or Group Problems handed in after deadline - 10-point loss for each class until you hand them in. "Group Problems" are group homework assignments. They must be handed in, however they are not graded.

To simulate teamwork usual in today’s professional businesses, some assignments will be performed in groups of 4-6 students. The groups will be formed in our first class; that's why it is necessary to come to the first class (I will announce the date, time, and room on my web page). I will assign students to groups in order to make sure that the teams are well balanced and mixed; this is to make sure that students of different backgrounds and skills join and take advantage of cross-learning. The groups are permanent throughout the course.

I may use some case studies to illustrate the practical use of the material we cover at class. The analysis and write-ups are to be done in groups. I will copy the cases and distribute them to groups. Classes based on case discussion are interactive and input from students is critical. You must come prepared to discuss the case. Groups will present their analyses to the rest of class on a voluntary basis. If there will be no volunteers I will call randomly the group, so each group should be ready to present the case. Either the whole group or the group representative(s) may present the case.

Student regularly attending the class, participating in class discussions, working regularly outside the class on Group Problems and/or cases, and submitting Group Problems in a timely manner is unlikely to fail the course.

4. Office Hours

Office hours are by appointment only in my office (or other agreed room). Contact information will be provided on my web page.

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