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Unit outline_

FINC6021: Corporate Valuation

Semester 1, 2022 [Normal day] - Camperdown/Darlington, Sydney

This unit applies all aspects of finance theory to the general problem of valuing companies and other financial assets. This requires a synthesis of the fundamental concepts of present value, cost of capital, security valuation, asset pricing models, optimal capital structures, derivative pricing and some related accounting concepts. The unit aims to reach a level of practical application that allows students to understand both the theoretical frameworks and institutional conventions of real-world corporate valuations. Basic valuation concepts from accounting are reconciled with the finance theory on which firm value ultimately stands. Students are asked to make extensive use of Excel or similar software in valuation exercises.

Unit details and rules

Academic unit Finance
Credit points 6
Prerequisites
? 
FINC5001
Corequisites
? 
None
Prohibitions
? 
None
Assumed knowledge
? 

None

Available to study abroad and exchange students

Yes

Teaching staff

Coordinator Jing Yu, jing.yu@sydney.edu.au
Type Description Weight Due Length
Final exam (Record+) Type B final exam Final exam
Written exam
50% Formal exam period 2 hours
Outcomes assessed: LO2 LO6 LO9 LO1 LO4 LO7 LO10
In-semester test (Record+) Type B in-semester exam Mid-semester exam
Written exam
30% Week 07
Due date: 07 Apr 2022 at 14:00
1 hour
Outcomes assessed: LO10 LO2 LO1 LO4 LO7
Assignment group assignment Assignment
Written Report
20% Week 10
Due date: 04 May 2022 at 17:00

Closing date: 11 May 2022
4 pages Font 12
Outcomes assessed: LO8 LO12 LO3 LO5 LO11 LO13 LO14
group assignment = group assignment ?
Type B final exam = Type B final exam ?
Type B in-semester exam = Type B in-semester exam ?

Assessment summary

  • Mid-semester exam: The exam will cover all material relating to weeks 1-5 inclusive. This assessment will provide students with an opportunity to review initial principles. You are expected to be competent in discounted cash flow analysis and to understand basic capital budgeting and capital structure theory. You will be required to analyse valuations using techniques introduced in the unit.
  • Assignment: The task will involve the analysis and valuation of an Exchange-listed Company from a given industry. The assignment will be completed in three parts. Work will be assessed based on the application of the tools and methods learnt in the subject. Further details will be posted on Canvas.
  • Final exam: The final exam will assess the material discussed between weeks 6-13. It is a closed book exam and consists of a combination of theoretical and practical exercises. It will assess a student's theoretical understanding of the models covered in the unit and the ability to think critically about the models and solve problems related to financial valuation. 

Detailed information for each assessment can be found on Canvas.

Assessment criteria

The University awards common result grades, set out in the Coursework Policy 2014 (Schedule 1).

As a general guide, a high distinction indicates work of an exceptional standard, a distinction a very high standard, a credit a good standard, and a pass an acceptable standard.

Result name

Mark range

Description

High distinction

85 - 100

Awarded when you demonstrate the learning outcomes for the unit at an exceptional standard, as defined by grade descriptors or exemplars outlined by your faculty or school. 

Distinction

75 - 84

Awarded when you demonstrate the learning outcomes for the unit at a very high standard, as defined by grade descriptors or exemplars outlined by your faculty or school.

Credit

65 - 74

Awarded when you demonstrate the learning outcomes for the unit at a good standard, as defined by grade descriptors or exemplars outlined by your faculty or school.

Pass

50 - 64

Awarded when you demonstrate the learning outcomes for the unit at an acceptable standard, as defined by grade descriptors or exemplars outlined by your faculty or school. 

Fail

0 - 49

When you don’t meet the learning outcomes of the unit to a satisfactory standard.

For more information see guide to grades.

Late submission

In accordance with University policy, these penalties apply when written work is submitted after 11:59pm on the due date:

  • Deduction of 5% of the maximum mark for each calendar day after the due date.
  • After ten calendar days late, a mark of zero will be awarded.

This unit has an exception to the standard University policy or supplementary information has been provided by the unit coordinator. This information is displayed below:

Without special considerations, assignment submissions later than the deadline will attract late penalties. Every day post the deadline incurs a 5% mark reduction. For example, suppose the actual mark on the assessment is 20 and the submission is late by two days. Then the final mark on this assessment will be 20*(1-2*5%) = 18. No mark will be given for any assignment submitted after the closing date.

Academic integrity

The Current Student website provides information on academic integrity and the resources available to all students. The University expects students and staff to act ethically and honestly and will treat all allegations of academic integrity breaches seriously.

We use similarity detection software to detect potential instances of plagiarism or other forms of academic integrity breach. If such matches indicate evidence of plagiarism or other forms of academic integrity breaches, your teacher is required to report your work for further investigation.

Use of generative artificial intelligence (AI) and automated writing tools

You may only use generative AI and automated writing tools in assessment tasks if you are permitted to by your unit coordinator. If you do use these tools, you must acknowledge this in your work, either in a footnote or an acknowledgement section. The assessment instructions or unit outline will give guidance of the types of tools that are permitted and how the tools should be used.

Your final submitted work must be your own, original work. You must acknowledge any use of generative AI tools that have been used in the assessment, and any material that forms part of your submission must be appropriately referenced. For guidance on how to acknowledge the use of AI, please refer to the AI in Education Canvas site.

The unapproved use of these tools or unacknowledged use will be considered a breach of the Academic Integrity Policy and penalties may apply.

Studiosity is permitted unless otherwise indicated by the unit coordinator. The use of this service must be acknowledged in your submission as detailed on the Learning Hub’s Canvas page.

Outside assessment tasks, generative AI tools may be used to support your learning. The AI in Education Canvas site contains a number of productive ways that students are using AI to improve their learning.

Simple extensions

If you encounter a problem submitting your work on time, you may be able to apply for an extension of five calendar days through a simple extension.  The application process will be different depending on the type of assessment and extensions cannot be granted for some assessment types like exams.

Special consideration

If exceptional circumstances mean you can’t complete an assessment, you need consideration for a longer period of time, or if you have essential commitments which impact your performance in an assessment, you may be eligible for special consideration or special arrangements.

Special consideration applications will not be affected by a simple extension application.

Using AI responsibly

Co-created with students, AI in Education includes lots of helpful examples of how students use generative AI tools to support their learning. It explains how generative AI works, the different tools available and how to use them responsibly and productively.

WK Topic Learning activity Learning outcomes
Week 01 Introduction to Valuation; Forecasting and Valuing Cash Flows Lecture and tutorial (2 hr) LO1 LO2 LO3 LO6
Week 02 Project Risk Analysis Lecture and tutorial (3 hr) LO1 LO2 LO14
Week 03 Estimating a Firm's Cost of Capital Lecture and tutorial (3 hr) LO1 LO2 LO4 LO14
Week 04 Estimating Required Rates of Return for Projects Lecture and tutorial (3 hr) LO1 LO2 LO4 LO14
Week 05 Forecasting Financial Performance Lecture and tutorial (3 hr) LO1 LO2 LO3 LO5 LO7
Week 06 Earnings Dilution, Incentive Compensation, and Project Selection Lecture and tutorial (3 hr) LO2 LO3 LO6 LO14
Week 07 Mid Semester Exam Lecture (3 hr)  
Week 08 Relative Valuation Using Market Comparables Lecture and tutorial (3 hr) LO4 LO6 LO12 LO14
Week 09 Enterprise Valuation Lecture and tutorial (3 hr) LO1 LO2 LO3 LO4 LO11
Week 10 Valuation in a Private Equity Setting Lecture and tutorial (3 hr) LO2 LO6 LO12 LO13
Week 11 Using Futures and Options to Value Real Investments Lecture and tutorial (3 hr) LO6 LO7 LO9 LO14
Week 12 Managerial Flexibility and Project Valuation: Real Options Lecture and tutorial (3 hr) LO2 LO3 LO5 LO9
Week 13 Case Study: Corporate Valuation ; Exam Review Lecture and tutorial (3 hr) LO1 LO2 LO10 LO11 LO14

Attendance and class requirements

Lecture recordings: Two lectures will be recorded and will be available on Canvas for student use. The first lecture each week and the lecture of the unit coordinator will be recorded each week. Please note the Business School does not own the system and cannot guarantee that the system will operate or that every class will be recorded. Students should ensure they attend and participate in all classes.

Study commitment

Typically, there is a minimum expectation of 1.5-2 hours of student effort per week per credit point for units of study offered over a full semester. For a 6 credit point unit, this equates to roughly 120-150 hours of student effort in total.

Required readings

Sheridan Titman, John D. Martin (2020). Valuation: The Art and Science of Corporate Investment Decisions, (3rd ed), Pearson. [ISBN  9780133479522]

Learning outcomes are what students know, understand and are able to do on completion of a unit of study. They are aligned with the University's graduate qualities and are assessed as part of the curriculum.

At the completion of this unit, you should be able to:

  • LO1. demonstrate an understanding of the various approaches to valuation analysis
  • LO2. solve practical financial problems using a range of valuation techniques
  • LO3. understand and create pro-forma financial statements for a variety of business structures
  • LO4. estimate a firm's cost of capital
  • LO5. generate an estimate of firm value and an appropriate recommendation based on an assessment of relevant quantitative and qualitative information
  • LO6. analyse critically the models covered in the unit and be able to discuss their appropriateness under various scenarios
  • LO7. interpret the financial implications of valuation results
  • LO8. ascertain the relevance of information sources for different valuation models
  • LO9. test the reasonableness of financial valuation results
  • LO10. solve for value estimates using a range of developed methods
  • LO11. use the functionality of Microsoft excel to create pro-formas financial statements, undertake cost of capital calculations, and perform scenario based analyses
  • LO12. identify firm structural issues and be able to assess the value of changes in investment and operational policies
  • LO13. effectively communicate valuation results through a range of quantitative and qualitative outputs
  • LO14. express key assumptions and forecasts for which valuation hinges on.

Graduate qualities

The graduate qualities are the qualities and skills that all University of Sydney graduates must demonstrate on successful completion of an award course. As a future Sydney graduate, the set of qualities have been designed to equip you for the contemporary world.

GQ1 Depth of disciplinary expertise

Deep disciplinary expertise is the ability to integrate and rigorously apply knowledge, understanding and skills of a recognised discipline defined by scholarly activity, as well as familiarity with evolving practice of the discipline.

GQ2 Critical thinking and problem solving

Critical thinking and problem solving are the questioning of ideas, evidence and assumptions in order to propose and evaluate hypotheses or alternative arguments before formulating a conclusion or a solution to an identified problem.

GQ3 Oral and written communication

Effective communication, in both oral and written form, is the clear exchange of meaning in a manner that is appropriate to audience and context.

GQ4 Information and digital literacy

Information and digital literacy is the ability to locate, interpret, evaluate, manage, adapt, integrate, create and convey information using appropriate resources, tools and strategies.

GQ5 Inventiveness

Generating novel ideas and solutions.

GQ6 Cultural competence

Cultural Competence is the ability to actively, ethically, respectfully, and successfully engage across and between cultures. In the Australian context, this includes and celebrates Aboriginal and Torres Strait Islander cultures, knowledge systems, and a mature understanding of contemporary issues.

GQ7 Interdisciplinary effectiveness

Interdisciplinary effectiveness is the integration and synthesis of multiple viewpoints and practices, working effectively across disciplinary boundaries.

GQ8 Integrated professional, ethical, and personal identity

An integrated professional, ethical and personal identity is understanding the interaction between one’s personal and professional selves in an ethical context.

GQ9 Influence

Engaging others in a process, idea or vision.

Outcome map

Learning outcomes Graduate qualities
GQ1 GQ2 GQ3 GQ4 GQ5 GQ6 GQ7 GQ8 GQ9

This section outlines changes made to this unit following staff and student reviews.

Previous Week 13 Topic on strategic options has been changed with case study to better align with students' understanding of option pricing and to reduce overlap with the advanced derivatives unit of study.

Disclaimer

The University reserves the right to amend units of study or no longer offer certain units, including where there are low enrolment numbers.

To help you understand common terms that we use at the University, we offer an online glossary.