Class Schedule: Introduction to Finance II. Spring, 2021

Block 3: The cost of equity capital

• Transitioning from FIN 510A
• Overview and Outline
• Accompanying Notes.
• Accompanying Spreadsheet.
• Overview of Block 3.

Problem Set 1:

• What is equity?
• How do we measure the rate of return on a stock?
• Statistical modeling of stock returns.
  • Normal Distribution
    • Mean return
    • Return standard deviation
• Monthly data for Apple -- for in-class work.

• Problem Set
  • Data and Key to Problem Set
• Sample Quiz
  • Key to Sample Quiz
• 2019 Quiz 1
  • Key to 2019 Quiz 1
• 2020 Quiz 1
  • Key to 2020 Quiz 1

Video of class from January 14, 2021.

Spreadsheet from class of January 14, 2021.

Video of class from Tuesday, January 19, 2021.

Spreadsheet from class of January 19, 2021.

Monthly log return data for Apple and 3M -- for in-class work -- Class 3.

Video of class from Thursday, January 21, 2021.

Spreadsheet from class of January 21, 2021.

Problem Set 1 due Saturday, January 23 at 18:00 Tucson time.

Problem Set 2:

• Portfolio expected return and variance.
• Introduction to vectors and matrices.
  • In-Class Example of Diversification
  • Problem Set
    • Data and Key to Problem Set
  • Sample Quiz
    • Key to Sample Quiz
  • 2019 Quiz 2
    • Key to 2019 Quiz 2
  • 2020 Quiz 2
    • Key to 2020 Quiz 2
  • Notes on vectors and matrices for portfolio mean and variance.
  • Spreadsheet to accompany the Notes on vectors and matrices for portfolio mean and variance.
  • Spreadsheet with 10 stock example.

Video of class from Tuesday, January 26, 2021.

Spreadsheet from class of January 26, 2021.

Video of class from Thursday, January 28, 2021.

Spreadsheet from class of January 28, 2021.

Spreadsheet with the mechanics of computing w'Vw.

Problem Set 2 due Saturday, January 30 at 18:00 Tucson time.

Problem Set 3: Expected return on equity under the Capital Asset Pricing Model

• Note the similarity between the cost of equity capital and the cost of debt capital.
• Problem Set
  • Data and Key to Problem Set
• Problem Set
  • Data and Key to Problem Set
• Sample Quiz
  • Key to Sample Quiz
• 2019 Quiz 3
  • Key to 2019 Quiz 3
• A linear regression perspective on systematic risk and the CAPM.
• 2020 Quiz 3
  • Key to 2020 Quiz 3

Apple Inc. news on new debt offering, (from February 1, 2021).

Apple Inc. red herring debt perspectus from February 1, 2021.

Apple Stock return data.

Video of class from Tuesday, February 2, 2021.

Spreadsheet from class of February 2, 2021. --Measuring Apple Inc.'s weighted average cost of capital and motivation for its $14 billion bond offering today.

Video of class from Thursday, February 4, 2021.

Spreadsheet from class of February 4, 2021. -- Discussions added to Tuesday's spreadsheet.

Problem Set 3 due Saturday, February 6 at 18:00 Tucson time.

Block 4 Capital Budgeting

Problem Set 4:

• Project-specific cost of capital.
• Identifying a project's after-tax cash flows and computing its Net Present Value.
  • Accompanying Notes.
  • Capital Budgeting Notes and Make vs. Buy Problem
  • Spreadsheet with the Make vs Buy Problem solved.
  • MACRS Depreciation Tables--Half-year Convention. From Internal Revenue Service Publication 946.
  • Problem Set to prepare for Quiz 4.
    • Key to Quiz 4 problem set.
  • Quiz on Capital Budgeting material from 2018.
    • Key to 2018 Capital Budgeting Quiz.
  • 2019 Quiz 4
    • Key to 2019 Quiz 4
  • 2020 Quiz 4
    • Key to 2020 Quiz 4
  • Slides summarizing the key ideas in capital budgeting.

• Video of class from Tuesday, February 9, 2021.
• Spreadsheet from class of February 9, 2021. --Working through the 3M Make vs buy decision.

• Video of class from Thursday, February 11, 2021.
• Spreadsheet from class of February 11, 2021. -- Discussing spreadheet design / layout issues and showing different ways to identify after-tax cashflows.
• Problem Set 4. Due on Saturday, February 13 at 6:00 pm Tucson time to Professor Lamoureux.
• MACRS tables from IRS Publication 946 (2019)

Problem Set 5:

• Strategic Planning and Valuation: Real Options
  • The abandonment option
    • Example and notes.
      • Accompanying Spreadsheet.
    • Problem Set 1 on real options.
      • Spreadsheet with Problem solved.
    • Sample quiz on real options.
      • Key to sample quiz.
    • 2019 Quiz 5
      • Key to 2019 Quiz 5
    • In Class Case: Foxconn.
      • Spreadsheet built in class on Foxconn case.
    • Sample quiz problem on abandonment option.
    • 2020 Quiz 5
      • Key to 2020 Quiz 5

• Video from Class on Tuesday, February 16, 2021. Video of class from Thursday, February 11, 2021.
• Spreadsheet from class of February 16, 2021. -- Introduction to real options: An abandonment option. (Solution to ``Sample quiz problem on abandonment option,'' above.)
• Video from Class on Thursday, February 18, 2021.
• Spreadsheet from class of February 18, 2021. -- Working through the ``Example and notes'' link above. A decision tree for which is provided in its ``Accompanying Spreadsheet'' link (above).
• Problem Set 5. Due on Saturday, February 20 at 6:00 pm Tucson time to Professor Lamoureux.

Problem Set 6:

• The waiting option
  • Example and notes.
  • Accompanying Spreadsheet.
• Valuing flexibility
  • Electricity generation case.
• Problem Set 2 on real options.
  • Spreadsheet with Problem solved.
• Sample Quiz 6 questions.
  • Spreadsheet with Sample quiz problems solved.
• 2019 Quiz 6
  • Key to 2019 Quiz 6
• 2020 Quiz 6
  • Key to 2020 Quiz 6

Video of class from Tuesday, February 23, 2021.

Spreadsheet from class of February 23, 2021. -- Discussion of the Nortrop-Grumman SAR project and the TECO coal plant project

Video of class from Tuesday, March 2, 2021.

Spreadsheet from class of March 2, 2021. -- Analysis of the Saguaro Properties case and start on the Bicycle exporting case.

Video of class from Thursday, March 4, 2021.

Spreadsheet from class of March 4, 2021. -- Continuation from Tueaday's class of the bicycle exporting case.

Problem Set 6. Due on Monday, March 8 at 2:00 pm Tucson time to Professor Lamoureux.

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Chris Lamoureux
Sun Dec 20 8:21:51 MST 2020