Introduction2016
- 1. Principles of Finance Fall 2016
- 2. raik381h.com
- 3. financial decision making financial value creation
- 4. risk, return, and value uncertainty rate of return valuation
- 7. Topics Securities bonds equity derivatives portfolios Capital return to capital cash flow to capital cost of capital capital structure Models rates and prices risk markets
- 8. Financial decision making 8 Assets Liabilities & Equities Return rate Rate cost of on assets capital Capital Accounts Loans Bonds Equity Non-Capital Accounts Markets & Investors Corporate Balance Sheet
- 10. 10 A Company’s Financial Flow Assets Revenue generating economic resources ‘Invest’ capital in assets Capital Debt Equity Raise capital Return capital Income to retained earnings Operating income Interest expense to banks and bondholders Income tax expense Dividends to shareholders 10
- 11. The Great Ideas in Finance 11 Nobel Prize winner and former Univ. of Chicago professor, Merton Miller, published a paper called the “The History of Finance” Miller identified five “pillars on which the field of finance rests” 1. Miller-Modigliani Propositions • Merton Miller 1990 and Franco Modigliani (1985) 2. Capital Asset Pricing Model • William Sharpe (1990) 3. Efficient Market Hypothesis • Eugene Fama (2013) 4. Modern Portfolio Theory • Harry Markowitz (1990) 5. Options • Myron Scholes and Robert Merton (1997)
- 12. 12 12 From what perspective will we study finance? Board of Directors COO CIOCFO Division / Subsidiary A President Vice-President of Finance Treasurer & Controller Division / Subsidiary B President Vice- Presidents Treasurer & Controller Division / Subsidiary C President Vice- Presidents Treasurer & Controller CEO Treasurer Controller
- 13. Perspectives For This Course individual investor enteprenuer project manager treasurer cfo president ceo
- 14. Value Add • Learn by programming and visualizing – Computation – Data and models • Venture capital • ‘Current events’
- 15. What’s happening finance today ? Bloomberg What do you want to learn this semester ?
- 16. Instructor David Keck, PhD Professor of Practice 145 Kauffman Center dkeck@unl.edu 472-5901 Office hours T TH1:00 – 2:00
- 17. Textbook • There is no required textbook • Suggested textbook Financial Management: Theory & Practice, Eugene Brigham & Michael Ehrhardt, • 15th ed, 2016 • Notes posted to RAIK381H.com
- 18. Attendance • Attendance is required • Please inform me in advance of an unavoidable absence
- 19. Academic Integrity If you submit any work that is not your own without citation you will receive a zero on the assignment This course has no group assignments You are encouraged to discuss topics and assignments with your classmates
- 20. Assignment Weighting Weekly assignments 30% Project 25% Mid Term Exam 20% Final Exam 25%
- 21. Grading Grade Total Point Range A+ 99 100 A 92 98 A- 90 91 B+ 89 89 B 82 88 B- 80 81 C+ 79 79 C 72 78 C- 70 71 D 60 69
- 22. Calendar Week DateTopic DateTopic 1 23-AugIntroduction 25-AugVenture Capital 2 30-AugVenture Capital 1-SepVenture Capital 3 6-SepRates 8-SepRates 4 13-SepBonds 15-SepBonds 5 20-SepBonds 22-SepCapital 6 27-SepCapital 29-SepCapital 7 4-OctCapital 6-OctCapital 8 11-OctEquity valuation 13-OctGuest Lecture 9 18-OctFall break 20-OctMid term exam
- 23. Calendar Week DateTopic DateTopic 10 25-OctEquity valuation 27-OctEquity valuation 11 1-NovCost of equity 3-NovCost of equity 12 8-NovCost of equity 10-NovCost of equity 13 15-NovPortfolio theory 17-NovPortfolio theory 14 22-NovPortfolio theory 24-NovMarket models 15 29-NovMarket models 1-DecMarket models 16 6-DecGuest Lecture 8-DecReview 14-DecFinal Exam
- 24. Weekly Assignments • Assignments will be given each week that will usually be prepared in R markdown. – Markdown pdf’s must handed in – Markdown files must be submitted – Explore a series of structured questions requiring descriptive, graphic, and coding responses • However, files and documents may be created in – Python/Numpy/Pandas/Notebook or – Matlab/Markup – With environments like Tableau or Azure Machine Learning
- 25. Weekly Assignments • Markdown descriptions must completely explore the assignment • Graph content must be well identified – Base graphics or ggplot may be used – Label both axes – Include plot title and legend – Use colors, plot characters, and axes limits for clarity – Histograms should have bin width for clarity • Use table output not raw data frames - perhaps kable() • All code must be echoed • Label all output and use a number of significant figures balancing accuracy and clarity e.g., a rate of return might be output as 9.372%
- 26. Exams • Mid term and final • Focus will be on principles of finance, whereas assignments will generally be computational • Short answer, short calculation, fill in blank, true / false, multiple choice
- 27. Project • Part 1 – Asset prices, risk, and rates of return – Due Sept 29 • Part 2 – Capital asset pricing model – Due Oct 27 • Part 3 – Asset portfolios – Due Nov 29
- 28. Download Stock Prices • Yahoo Finance • St Louis Federal Reserve • Quandl