DISCIPLINE SPECIFIC ELECTIVE COURSE
DSE I- FINANCE
DSE I: MDF 503: STRATEGIC CORPORATE FINANCE
Course Objective:
The objective of this paper is to know the details of corporate finance and the strategies
involved in the corporate decisions. It will enable the students to steer the corporate issues and
challenges in better manner.
Learning Outcomes:
x To enable the student to identify the key themes in corporate finance
x To understand the principal role of finance in an organization and the implication of
overarching strategic application of its efficient use on the bottom line of the
organization
x To facilitate the understanding on the impact of risk and cost of capital on investment
appraisal besides their cumulative impact on the value of a capital project
x To enable students to employ risk and sensitivity analysis on real time basis on varied
projects.
x To developed skills in group work, including communication, collaboration, and
presentation.
Course Contents:
Unit I (3 Weeks)
Introduction to strategic corporate finance: Strategy Vs Planning, significance of strategy in
financial decisions, Different types of financial strategy for Shareholders Wealth
Maximization, overall corporate value addition and Economic Value Addition. Strategic Cost
Management: Traditional costing Vs Strategic Costing, Relevant costs Vs Irrelevant costs,
Different types of strategic costing and their relevance- Target Costing, Activity based
Costing, Life Cycle Costing, Quality Costing, Zero Based Budgeting, Strategic cost reduction
techniques and value chain analysis. Alternative sources of financing – alternative sources of
financing, Different approach to
Infrastructure projects financing- Public Private Partnership (PPP) and its relevance.
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References:
Aswath Damodaran: Corporate finance theory and practice, second edition (Chapter 1, 2 and
16, 17)
Jakhotia: Strategic Financial Management second editon (Chapter 1)
Unit II (3 Weeks)
Management Buy-outs: Establishing feasibility of the buy-out, Negotiating the main terms of
the transaction with the vendor including price and structure, Developing the business plan
and financial forecasts in conjunction with the buy-out team for submission to potential
funders, negotiations with potential funders so that the most appropriate funding offers are
selected.
Management Buy-ins: Management Buy-in/Buy-outs (“BIMBOs”), Vendor-initiated buy-
outs/buy-ins. Valuing Real assets in the presence of risk: tracking portfolios and Real Asset
valuation, Different Approaches of Valuing Real Assets, Capital Budgeting and Strategic
policy
Real options: Financial and real options compared, various types of real options, the Black-
Scholes model, Decision tree analysis, application of Real options, Drawbacks of Real
options
References:
Aswath Damodaran: Damodran on Valuation, second edition (Chapter 15)
Aswath Damodaran: Corporate finance theory and practice, second edition (Chapter 27)
Unit III (3 Weeks)
Financial Distress and restructuring: Meaning of Bankruptcy, Factors leading to bankruptcy,
symptoms and predictions of bankruptcy, reorganization of distressed firms, liquidation of
firms. Company disposals: retirement sale or the sale of a non-core subsidiary, planned exit,
forceful retirement and other disposals. Exit strategy- most appropriate exit route, valuation,
timing of sale and tax planning opportunities, identification of potential purchasers,
approaching the potential purchaser, negotiate with potential acquirers and selection of a
preferred purchaser, calculation of the various tax implications.
Fundraising: identification of different sources of development capital, determination of
capital structure and factors affecting the capital structure, cost of capital and cost saving
strategy, production of a business plan and financial forecasts to enable potential funders to
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assess the proposition. Due Diligence: financial due diligence for both purchasers and
financial institutions, good quality “added value” due diligence advice.
References:
Aswath Damodaran: Corporate finance theory and practice, second edition (Chapter 17, 18
and 26)
Unit IV (3 Weeks)
Company Valuation: an overview of valuation, valuation principles and practices more, the
impact of “what if” scenarios, the key financial and commercial factors affecting the business.
Value enhancement tools & techniques, the link between valuation and corporate finance.
Other strategic issues: managing credit ratings, and setting dividend and share repurchase
policy, problem of too much cash. The issues of stock liquidity and illiquidity, Strategic risk
management, the substitutability of capital structure and risk management choices, such as
process control efforts, financial, physical, and operational hedging, value-based
management.
References:
Aswath Damodaran: Corporate finance theory and practice, second edition (Chapter 24 and
25)
Justin Pettit: Strategic Corporate Finance Applications in Valuation and Capital Structure
(Chapter 10)
Text Books:
1. Justin Pettit: Strategic Corporate Finance Applications in Valuation and Capital
Structure; John Wiley & sons, Inc
2. Aswath Damodaran: Corporate finance theory and practice; John Wiley & sons, Inc
Additional readings:
1. Jakhotia: Strategic Financial Management (Vikas Publication)
Teaching Learning Process:
Class room lecture; Case study discussion; Numerical Problem solving; Class presentation on
the assigned topic by students individually or in group; Workshop; Tutorials; Role play
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Assessment Method:
1. Internal evaluation of 25% marks
a. Attendance 5% marks
b. Two internal evaluations by the teacher with 10% marks each out of which one
must be a class test and other may be another test or home assignment or
presentation. Faculty may take more than two assignments and (or) tests but
total will be only 20% marks.
2. End term University Exam of 75% marks
Key words:
Financial strategy; Shareholders Wealth Maximization; Bankruptcy; Due Diligence; Value-
based management
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