A

Fin ncial nalysis Syllabus

C

Spring

ourse Objectives

1998
Contents

This course is designed to provide you with Instructor's
Role
an opportunity to develop your analytical and decision making skills. The class requires you
Case
to integrate the various areas of finance into a
Procedures
decision framework. As such it is expected that you will be a very active partner in the educaCalendar tional process. Lectures as a vehicle will be minimal. Instead student presentations, student
Presentation Days discussion sessions, and group work will make up the majority of your experience.
Writing
Reports
The course also requires you to grapple with the difficulty of decision making under conditions of uncertainty. It is expected that you How Am I Graded ? will be faced with ambiguous situations which will require you to make numerous judgements.
Enrichment Assignments
These situations will require a combination of financial theory and practice. It is unlikely that these assignments will result in clear and unambiguous solutions. You will be required to draw on your previous experiences from a variety of areas in order to successfully complete the class requirements. A particularly important goal in this class is to obtain an understanding and appreciation of the valuation process in markets, under conditions of risk or uncertainty. The essence of finance, in the final sense, is an understanding of how various decisions influence firm value.
Course Prerequisite
For most of you this class represents the
The specific prerequisite for this class is terminal experience in corporate finance (If the Finance 325. Since the prerequisite for
Finance 325 is Finance 323 all of you phrase terminal experience sounds like you are have also completed the lower division going to die, don't worry no one has yet—it's requirements for business students.
This prerequisite will not be waived. just “educationeze” for the last course in a sequence.) and therefore represents a last opInstructor: portunity to integrate various disciplines.
Pieter Vandenberg

2
2
3-6
7

7
8

8

Finance 423
Department of
Finance
San Diego
State
University

2

Case Procedures

T

he major learning vehicle in this class will be cases. The cases are designed to allow you apply decision making to business situations. The most important element of a case is the process, not the “answer.” Very few cases have an unambiguous solution—If it did I probably would not choose it. You should begin to appreciate that very few problems have neat clean solutions. Your participation in the case process is a critically important part of learning.
You will be individually involved in every case to some degree. Everyone will be assigned to a team responsible for three detailed case analysis.
Every student is expected to read the case and be prepared to discuss it. In order to accomplish this each student must prepare an individual strategy paper for each case that is assigned. It is due on the day the case is scheduled for presentation. Late papers will not be accepted. This paper should be two to three pages, double spaced and printed. It should contain four parts. The first should identify the problem. What is the issue the firm faces? Is there more than one? What are the necessary assumptions in order to solve the problem? The second part should define the options or alternatives that would solve the problem. It is clearly possible that there is more than one, although the usual number is limited. The third part should describe the process of how you would decide which alternative solution is best. Note that this only requires that you describe the methodology, it is not a solution. The last part consists of one question that you would like to ask either team about the case.
I will record at least a check for each paper.

In most cases I will grade your paper in greater detail. Team Assignments. I reserve the right to assign each class member to a team, however, if you wish to form a team it will likely be acceptable to me. The exact team size will depend on class size. Everyone must be a member of a team.
As a member of a team you will share responsibility for a detailed case preparation. Each team will prepare three written cases. In addition every team will be involved in three oral presentations. Each team member must participate in the oral presentations. (See Case Presentation Days below for an explanation.) Every team will provide a written solution for the first case that is assigned (Hopin), no oral report will be due.
The teams will not necessarily all be the same size. Although I don’t expected it, some changes may be necessary during the semester. It is the teams responsibility to organize itself in whatever mode seems most appropriate.
Please appoint one individual as the liaison between me and the team. All communications I send to the team collectively and all official submissions from your team will come through the liaison person. Everyone is of course free to see me, collectively or individually. The purpose of the liaison person is to make sure that if I wished to give the team a handout, or ask a question I have a person I can call specifically. This makes sure that little things don’t fall through cracks.
Be sure to read the first 9 pages of Case
Studies in Financial Decision Making. This covers useful hints in solving the cases. It suggests the way that a case should be approached. Use this as a general guideline for developing both your strategy paper and the
It is useful to clarify my role in the case analysis. The idea behind full case analysis. doing cases is that it gives the student the opportunity to deal with class material in a very active environment. This active involvement allows you to extract the important learning points from the case. This is quite different from a lecture environment. (There will be lectures, particularly at the beginning and during the work periods throughout the semester.)
While you may be somewhat apprehensive, by this time in your
My office is SS
University career you have sufficient background to develop ideas and solutions on your own. What you 3367, the phone probably need is some practice. All of us ultimately have to learn to solve problems without the crutch number is 594-3027 of having a teacher or parent available for obtaining a solution (This is probably a good thing since and is on voice mail. frequently they don’t have an answer anyway). One day, very soon, you will wake up and discover that You can contact me by you are expected to be the expert electronic mail at:
Therefore, I will not be available to provide solutions to the cases. I will be available for discusPieter.Vandenberg@ sion on generally applicable concepts and theory, but you must arrive at a solution on your own. Do not sdsu.edu. My cell phone be surprised if you leave your conversation with me with more question than you had when it started. If is 977-8596. Office you believe that you are here to learn answers you have a static view of the world. We hope that after hours are 1-1:50 pm you leave the University you will be able to solve problems for which we have no current solution, as
Tuesdays and Thurswell as providing solutions for problems that we have not yet even identified. Experience has shown days and 4-4:50 pm that students with your background, if they apply themselves, do very well in the solution of these
Tuesdays and by cases. Good luck and I hope that you will find the experience stimulating. appointment. Instructors
Role

Contacting
Me

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26

27

28

29

30

31

Ethics Lecture/Film/
Discussion

Introduction

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

1

2

3

4

5

Valuation
[BM 4,5,6,10,11]

Valuation
[CKM 1,2,3,4]

6

7

Last day to drop

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8

9

10

11

12

13

14

Modeling [BM 28,29,
Last day to add
CKM 8,9,10]

Valuation
[CKM 5,6,7]

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Jan / Feb

25

15

16

17

Financial Modeling
Continued
Hop-in Food Stores
Inc.
Solution Due
{All Teams}

18

19

20

21

Financial Modeling
Continued

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22

Class Meeting Time
2PM - 3:50PM

1998

24

25

26

Presentation:
Polymold Division
{Teams 1,2}
Enrichment Assignment Due

What's a Work Period?

S

M

T

28

Work Period
JANUARY 1998

The schedule has a number of work periods throughout the semester. These periods are set aside for a variety of activities.
Some of these periods may be devoted to lectures by me or continued discussion on topics related to case material; others may be strictly enrichment material unrelated to a specific case.

27

MARCH 1998

1
4

5

6

7

2

3

1

2

3

8

9

10

8

9

10 11 12 13 14

4

5

6

7

11 12 13 14 15 16 17

15 16 17 18 19 20 21

18 19 20 21 22 23 24

22 23 24 25 26 27 28

25 26 27 28 29 30 31

29 30 31

W

T

F

3

Finance 423
Day Class
Planning
Calendar

23

S

1998

S

M

T

W

T

F

S

26 27 28 29 30

Class Meeting Time
2PM - 3:50PM

15 16 17 18 19 20 21

12 13 14 15 16 17 18

22 23 24 25 26 27 28

Finance 423
Day Class
Planning
Calendar

19 20 21 22 23 24 25

1

2

3

8

Enrichment Assignment Due

9

10 11 12 13 14
4

5

6

5

6

7

1

7

FEBRUARY 1998

2

3

8

9

10 11
4

APRIL 1998

Presentation: United
Telesis
{Teams 6,7}

29

30

31

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Presentation:
Mushroom A&B
{Teams 3,1}

22

23

24

Work Period
[BM 6]

25

26

27

28

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Work Period
Enrichment AssignWe're half way! ment Due

16

17

18

19

20

21

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9

10

Work Period

11

12

13

14

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3

4

5

6

7

4

2

4

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

March

Presentation:
Chausson Body
{Teams 7,8}

15

Presentation:
Jacobs Division
{Teams 5,6}

8

Work Period
[BM 10]

Presentation:
FED of Richmond
A&B {Teams 3,4}

1

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M

T

W

T

F
10 11 12 13 14 15 16

22 23 24 25 26 27 28

17 18 19 20 21 22 23

29 30 31

24 25 26 27 28 29 30

1

2

3

8

9

10 11 12 13 14
4

5

6

3

28

4

5

6

7

1

7

MARCH 1998

27

9

S
2

8

5

1998

31
15 16 17 18 19 20 21

Class Meeting Time
2PM - 3:50PM

Finance 423
Day Class
Planning
Calendar

MAY 1998

Presentation:
Koppers Co
{Teams 2,5}
Enrichment Assignment Due

26

Work Period

29

30

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Work Period
[BM 15, CKM 9,11]

Presentation:
Van Dusen Air Inc
{Teams 8,3}

19

20

21

22

23

24

25

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

Presentation:
Burlington Northern
{Teams 5,4}

12

13

14

Work Period
[BM 20,21,22,23
CKM 12]

15

16

17

18

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

Vacation

6

7

8

9

10

11

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2

3

4

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

April

Vacation

5

Work Period
[BM 17,18,19]

1

1998

S

M

T

W

T

F

12 13 14 15 16 17 18

21 22 23 24 25 26 27

26 27 28 29 30

28 29 30

1

5

31

S

14 15 16 17 18 19 20

19 20 21 22 23 24 25

Class Meeting Time
2PM - 3:50PM

6

7

2

3

8

9

10 11

7

1

4

APRIL 1998

2

3

8

9

10 11 12 13
4

5

6

JUNE 1998

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

Finance 423
Day Class
Planning
Calendar

Holiday

24

25

26

27

28

29

30

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Final Exam
1:00-3:00 pm

17

18

19

20

21

Commencement

22

23

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14

11

12

13

15

Review
Last Day of
Classes

Presentation: Omni
Services
{Teams 2,8}

10

Dead Day

16

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

Presentations:
Gaylord Container
Corp
{Teams 4,7}

4

5

6

7

8

9

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

6

2

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May

Presentations:
Bearings Inc A&B
{Teams 1,6}

3

1

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Case Presentation Days

O

n presentation days there are two teams assigned to present the proposed case solution. The first team listed (see schedule) will be the Alpha Team and the second team listed will be the Beta Team.
The Alpha Team is expected to have a professional presentation ready. You may choose the most effective way to present your solution. I expect that you will limit severely the use of the blackboard for any prepared remarks. You might use it for answering unexpected questions.
However, you should learn to “anticipate unexpected questions.” I would normally expect that you would use professional looking projections to present your solution along with appropriate handouts. At minimum you need to distribute any numerical solutions in the form of handouts. Do not expect the audience to listen to a speech without visual aids. You are free to use other visual aids if you believe that they will be more effective at presenting your solution.
In developing presentations remember to have a beginning, a middle, and an end. First, give the audience some idea of where you are going.
Second, take them there in a logical, straight forward manner. Third, give a brief summary of your conclusion at the end of your presentation.
Remember to use the suggestions in Harrington to help with the presentation. You will have 45 minutes. The Beta Team will also have to have a professional presentation ready, with the same ground rules. Their actual presentation should highlight the differences between the Alpha
Team's solution and theirs. Therefore in preparing their presentation they should realize that the history and general facts of the case will likely already have been given and therefore should not be repeated. The Beta Team will have a few minutes after the Alpha Team finishes to fine tune their presentation. They will then have a maximum of 25 minutes to present their findings.
During this time the team should describe their solution and particularly emphasize any differences between their solution and the Alpha Team's as well as highlighting areas of agreement.
They should also point out any disagreement they may have about the underlying assumptions and facts of the case as presented by the Alpha
Team. It is not their purpose to try and “one up” the Alpha Team. The Alpha Team will have a chance to make a quick rebuttal statement if it appears to be appropriate. It is expected that the rest of the class will also join in the discussion.
This should enhance the opportunity for everyone

to learn from the case. The teams should arrange their presentations so that every member has an opportunity to present orally each time.
Written Solutions. The Beta Team will always be required to turn in a written solution on the presentation day. This written solution is from eight to ten pages in length, plus required supporting appendixes. The main body of the paper is to be written as a consulting report. Given the schedule half of the teams will act as an Alpha teams twice and a Beta Team once and the other half will act as a Beta team twice and an Alpha
Team once. Each team will present two written cases, if your team is an Alpha Team twice a written case will be due with your last Alpha presentation. Once the teams are formed team numbers will be assigned.

Writing Reports

I

n general any material that you turn in should be printed and well written. How well something is written will likely have a direct bearing on the reaction of the reader. No matter how clever you are, if the report is poorly written and has an unprofessional format the reader will likely react negatively. This is true whether it’s a college professor, a potential employer, or your boss! In writing your report remember that a busy executive, the type of individual you will likely be writing reports for, expects you to come to the point quickly and to support your recommendation and analysis. The reader does not expect to have to do the work that you were hired to do. For example do not say, “if you look at the appendix material carefully you will see.....” It is your job in the report to do the analysis and tell the individual what the results are. Thus a report is not a compendium of data. While it is acceptable
(probably required) to attach supporting documents, tables etc. the report should be understandable and definitive even if the supporting documents were removed from the report.
Harrington, Diana R. et al, Case Studies in
Financial Decision Making, Dryden Press, 3rd
Edition. (DH)

Resource
Material

Copeland, Tom, et al, Valuation, Wiley, 2nd ed., 1994 (CKM)
You will probably also want access to at least one standard finance reference book and a computer with appropriate software. The class web page is located at: http://www-rohan.sdsu.edu/faculty/pvberg/ index.html. You should check this page periodically.

8
How
Am
I
Graded?

I

will return grades on each assignment as soon as I finish the grading. If you wish to discuss your grade please come by and see me.
Because some teams will have to go first and some will go last for the first round of cases (i.e. the first 4) I will withhold my grades until after the
4th case. I will then meet with each team to talk about your work and to give you your grade. After this initial grading period teams can obtain their grades from me as soon as I complete the grading process, usually by Monday of the following week.
I will also give you a written report periodically on your strategy paper scores. Feel free to ask me what your grade was on any assignment.
All of the work you submit will be graded by me, not a grader. All exams, cases and other assignments will be kept by me. If you wish to keep a copy be sure and make it before you turn it in (A word to the wise keep a copy!). I will provide a regular grade report.
The following are the assignments for this class along with the weights for each major group:
(The due dates are on the calendar.)
Presentations and class participation
25%
Written Cases (Incl: Hopin 5%) 25%
Final
20%
Enrichment Assignments
5%
Strategy Papers
25%
Total
100%
I will assume that grades on team work will be equally distributed. If the team wishes to unequally distribute points then the next period after a case is presented give me a distribution of points for each team member to be determined by

E

ach individual student is required to turn in three enrichment reports these will be due on the last Tuesday day of the month (See Schedule). Enrichment reports consist of two double spaced printed page. The first half page will be a bibliographic entry and a brief summary of an article you have read during the month from a business periodical. You may read any academic finance journal (e.g.. Journal of Finance,
Financial Management). You may read a more popular business or finance journal (Fortune, Business Week, Forbes). Or finally you may choose an article from a newspaper such as the Wall
Street Journal. In this case do not choose a straight news report, instead choose a longer article that offers some analysis.
The kind frequently found in the first column of the WSJ, or a similar type of article. If you are choosing an academic journal you may choose any issue since 1992, if you choose a more popular journal it must be dated 1996 or later.
The second part of the report should describe what you learned from reading the article in light of the financial theory your already know. Does it seem reasonable? Is it consistent or inconsistent with things you have learned? Why?

Enrichment
Assignments

the team. These points are to assigned based on the teams collective opinion as to the relative overall contribution of each individual during the evaluation period. You can assign a weight for each individual between zero (no credit) and one
(full credit). This decision must be made as a group and everyone must participate, with the final decision made in whatever way you normally make decisions. Whatever you decide is final. I will not participate, change or do anything to alter the judgement of the team. In the grading process those with low scores will have their grade lowered, no one will have their grade raised.
Your final numerical average will be converted into a grade using the follow schedule:
Percent
Mid Point Grade
100 - 90
A
89 - 80
B
79 - 70
C
69 - 60
D
59 F
If you are significantly above or below the mid point you will receive a plus or minus. The above grades are an absolute standard. If you achieve the above percentage on all of your work in total then you are assured of getting that particular grade. You might still receive a higher grade than the above if you are very close to the cutoff line. i.e. you might still get a “B-” if your average was slightly below 80 percent (but close).
Whether you receive the higher grade will depend upon a variety of individual factors. I will pay close attention to your record of participation and the quality of your individual assignments.

As an example do not say you learned (this example is taken from a cover story about Time Warner in a issue of
Business Week) that HBO’s growth (a Time Warner unit) had slowed significantly and as a result profit were down. These are facts, they do not improve your problem solving ability. Instead you might read the article and describe, as well as comment on,
Time Warner’s plan to sell equity with a rights offering in order to retire a large debt obligation. This plan is invoking significant resistance from shareholders. What is unique about the plan?
What does theory tell you about the likely reaction of shareholders to such a plan? Are there other alternatives Time Warner might choose? Remember you only have a page and half. I will be quite liberal in what I will accept. I will consider the quality and difficulty of the effort when grading.
You should begin to develop, if you haven’t already, a method for maintaining and improving your understanding of the business environment. You should read on a regular basis some professional publications related to your field and interests.
Either subscribe to some publications or obtain them in some other way, but read them. It’s not even important that these be ultra current. From a news standpoint yesterday’s WSJ may be old hat, but for the purpose of developing your understanding and expanding your horizons it is more than adequate.