FTMBA 2023_II Corporate Finance

• Develop an understanding of different financing sources and their main characteristics
• Become familiar with the concept of weighted average costs of capital (WACC) and the determinants of an optimal capital structure
• Develop practical skills to estimate the cost of capital of a single project or a firm
• Be able to identify agency problems and information asymmetries between firms and investors and assess their impact on financing conditions
• Identify potential governance problems within corporations and develop an awareness of the role of corporations in society

This course covers the basic principles of corporate finance and develops the necessary practical tools for capital budgeting and financial decision making in an international context, as well as the basic concepts of corporate valuation.

After a brief introduction, which motivates the goals of a firm against the background of different corporate governance regimes, we will take a closer look at the relationship between stock prices and the cost of equity. In this context, we will discuss practical guidelines to derive the cost of capital for single projects and for the whole firm. We will then cover the determinants of the optimal debt/equity mix and the consequences for a firm’s cost of capital and valuation.

In addition, the course will provide an overview of a firm’s external financing alternatives (debt and equity), with a focus on the security issuance process (IPOs). Additional topics include select issues in corporate governance, such as the board of directors and executive compensation, as well as a brief introduction into mergers and acquisitions (M&A). Against this background, we will discuss the role of corporations in society and how the concept of ESG (environmental, social, governance) is related to value creation.