Principles of Finance (FIN 311)
PRINCIPLES OF FINANCE
Instructor: Donald W. Swanton
Contact Information: office Wabash 1112z, telephone (312) 281-3278, fax (312) 281-3290, email firstname.lastname@example.org, 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 14th 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.
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.
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
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.
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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