**Principles of Finance (FIN 311)**

FIN 311-01

Spring 2014

PRINCIPLES OF FINANCE

SYLLABUS

Instructor: Donald W. Swanton

Contact Information: office Wabash 1112z, telephone (312) 281-3278, fax (312) 281-3290, email dswanton@roosevelt.edu, web site http://sites.roosevelt.edu/dswanton/. My web site has information about office hours *etc*.

Time: Tuesday-Thursday 12:30-1:45

Location: WB 611

Text: *Foundations of Financial Management * 14^{th} ed. by Block, Hirt, and Danielson, (B), McGraw-Hill ISBN-9780077454432. Students should have financial calculator (TI BA-II or II+ or TI 83+, TI84, or TI89). If you bought a graphing calculator for MATH 116 or 121, you have the right one. I will be handing out my *Notes on Finance* (S) in class as the semester progresses.

Prerequisites: ACCT 210 (but** not **211), ECON 101-102, MATH 116 or 121, ENG 101-102. The mathematics prerequisite is very important. Students who attempt this class before finishing it generally drop the class within a few weeks.

Goals: This course introduces students to the time value of money. We will develop some of its applications to corporate investment planning, valuation of projects and securities, and to retirement planning. Then we will discuss capital structure (the difference made by the firm’s choice of financing).

Homework: I will assign homework almost every week due Tuesday of the next week. We will spend part, sometimes a large part, of each Tuesday discussing the original homework problems and other problems suggested by the parts already solved. Homework problems will reappear in modified form in the quizzes. Finance is not a spectator sport.

Grades: Grades will be determined by an average of the best three out of the four quiz grades and the retirement planning project. Quizzes will receive the numerical version of letter grades, A = 4.00, A/B = 3.50, B = 3.00 B/C = 2.50, *etc.*

Attendance: I do not take attendance, but see the “Homework” point.

Plagiarism: Please review Roosevelt’s policy on plagiarism www.roosevelt.edu/plagiarism.

Religious Holidays: Roosevelt’s policy is to accommodate students who will be celebrating religious holidays. Talk to me in the first couple of weeks, and we will work something out.

http://www.roosevelt.edu/~/media/Files/pdfs/Policies/HumanResources/ReligiousHoliday.ashx

Student Learning Objectives: Business Discipline Principles, Quantitative Techniques

Notes: My *Notes on Finance* currently consist of:

S1 Retirement Planning

S2 Capital Structure and Leverage

S3 Corporate Governance and Ethics

The following schedule is tentative. lI will revise it as we go through the semester to reflect our actual progress.

SCHEDULE

* As of January 10, 2014*

*Week Chapters Topics*

Jan 14 B9 Introduction, the time value of money

Jan 21 B9, B10 More time value of money, bond valuation

Jan 28 B10 Bond valuation

Feb 4* S1 Retirement planning

Feb 11 S1 Retirement planning

Feb 18 B12 Capital budgeting, the process

Feb 25 B12 Net Present Value and Internal Rate of Return

Mar 4* B12 More NPV and IRR, comparing projects

Mar 11 ///// **Spring Break**

Mar 18 B12, B13 Depreciation and project cash flows

Mar 25 B12, B13 Interdependent projects

Apr 1* S2 More, cost of capital

Apr 8 S2 Leverage and capital structure

Apr 15 S2 The world of Perfect Markets, arbitrage

Apr 22 S2 Investment decisions with different financing

Apr 29* ///// *Last Quiz *

Quizzes will be given on the **Thursdays** of weeks marked with an asterisk (*). This includes the quiz in final exam week. There will be no class Tuesday of finals week.

THE RETIREMENT PROJECT

*First Version*

You are a financial planner. You have clients who are just beginning to think about planning for retirement. They are both thirty five years old and have $80,000 in a company retirement plan which they can roll over into their own plan. They want to retire at 67 but are wondering what effect retiring a year or two earlier or later will have on their retirement. Their combined income is $100,000 per year, and they want to finance the same income in retirement. When they retire they can purchase a two-life annuity with an expected second death at age 87.

They have not taken any finance courses, and their last mathematics course was many years ago. They will not understand equations, formulas, or finance jargon. Large tables will make their eyes glaze over. You must explain your recommendations to them in simple, ordinary language. Prepare a plan with some alternative rates of return and retirement dates and explain what annual contributions they must make to the plan to make their retirement what they want. Make your own assumptions about social security by the time they retire.

*Second Version*

You may use yourself as the client rather than the couple in the first version. This self does not know any more about finance or mathematics than the couple, so you must explain everything.

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