DISCIPLINE SPECIFICCORE COURSE - 9 (DSC-9): CORPORATE FINANCE
CREDIT DISTRIBUTION, ELIGIBILITY AND PRE-REQUISITES OF THE COURSE
Course title & Code Credits Credit distribution of the course EligibilityPre-requisite of
Lecture Tutorial Practical/ criteria the course
Practice (if any)
Corporate Finance (DSC 9) 3 1 Class 12 None
Learning Objectives
This course aims to
introduce the basic concepts of financial management and its objectives.
provide an understanding of investment decisions and of working capital.
introduce and discuss the issues in the cost of capital.
examine the theories and analysis involved in financing decisions and dividend
distribution.
Learning outcomes
By studying this course, students will be able to:
To learn the role and objectives of financial management in business corporations.
To acquire skills to analyse corporate behaviour during procurement and
development of resources.
To understand capital structure and discuss the factors that financial managers
consider while determining a company's financing strategy
To critically discuss the theories relating to dividends policies and cost of capital
SYLLABUS OF DSC-9
UNIT - : Introduction (6 hours)
Nature and Scope of Financial Management. Traditional and Modern Approach to the
concept of financial management. Functions of finance - Finance Decision, Investment
Decision, Dividend Decision. Objectives of Financial Management - Profit Maximisation
and Wealth Maximisation. Concept of Time Value of Money.
UNIT - II: Investment Decision (15 hours)
Capital Budgeting- Nature and meaning of capital budgeting; Types of decisions: - Accept
Reject, Replacement, Mutually Exclusive. Estimation of Relevant cash flows. Evaluation
techniques - Accounting Rate of Return, Pay Back, Net Present Value, Internal Rate of
Return, Profitability Index Method.
Concepts and Definition of working capital. Determining Financing Mix; Permanent and
temporary working capital; Deternminants of working capital; Computation of Working
Capital.
UNIT -III: Cost of Capital (? hours)
Concept and Measurement of Cost of Capital: Measurement of sp cific costs - Cost of
debt:- perpetual debt and Redeemable debt; Cost of Pre'erence Share; Cot of Equity
Capital - Dividend valuation model and CAPM; Cost of Retained 'arnings. (.omputation
of Overall Cost of Capital based on book value weights aid market value weghts.
UNIT - IV: Financing Decision (15 hours)
Leverage Analysis - Operating, Financial, and Combined Leverage, Farning Before
Interest and Tax (EBIT) - Earning Per Share (PS) analysis, Indifferenc: point. Capital
structures theories -Net income approach; Net operating income approach; Modigliani
Miller (MM) approach. Factors affecting capital Structure.
Dividend Decision: Relevance and irrelevance of dividends. Residual theory of dividends;
Modigliani and Miller hypothesis; Walter's model; Gordon's model. Factors affecting
Dividend Policy.
Essential/recommended readings
1. Khan, M.Y., & Jain, P.K. Basic Financial Management. Tata McGraw Hill Education
Private Limited.
2 Pandey,I.M. Financial Management. Vikas Publishing House Pvt. Ltd. New Delhi
3 Rustagi, R. P. Fundamentals of Financial Management, Taxmann publication(Pvt)
Ltd,New Delhi.
Suggestive readings
1 Van Horne, J.C. Financial Management and Policy. Prentice Hall of India.
2 Levy, H. and Sarnat, M. Principles of Financial Management. Prentice Hall.
3 Brealey, Richard, A., &Myers, Stewart, C. Principles of Corporate Finance. Tata
McGraw Hill Publishing Company Limited.
4 Chandra, Prasanna. Financial Management-Theory and Practice. Tata McGrawHill.
Note: Examination scheme and mode shall be as prescribed by the Examination Branch,
University of Delhi, from time to time.
