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The Finance Function
Nature and Scope; Evolution of Finance Function – Its New Role in the Contemporary Scenario – Goals of Finance
Function – Maximizing vs. Satisfying; Profit vs. Wealth vs. Welfare; The Agency Relationship and Costs; Risk-Return
Trade off; Concept of Time Value of Money – Future Value and Present Value.
The Investment Decision
Investment Decision Process- Project Generation, Project Evaluation, Project Selection and Project
Implementation. Developing Cash Flow; Data for New Projects; Using Evaluation Techniques –Traditional and
DCF Methods. The NPV vs. IRR Debate; Approaches for Reconciliation. Capital Budgeting Decision under
Conditions of Risk and Uncertainty; Measurement of Risk – Risk Adjusted Discount Rate, Certainty Equivalents
and Beta Coefficient, Probability Tree Approach, Sensitivity Analysis.
The Financing Decision
Sources of Finance – A Brief Survey of Financial Instruments; Capital Structure Theories, Concept and Financial
Effects of Leverage; The Capital Structure Decision in Practice: EBIT – EPS Analysis. Cost of Capital: The
Concept – Average vs. Marginal Cost of Capital; Measurement of Cost of Capital – Component Costs and
Weighted Average Cost of Capital
Current Assets Management and Dividend Decision
Concept of Current Assets, Characteristics of Working Capital. Factors Determining Working Capital. Estimating
Working Capital Requirements. Working Capital Policy. Management of Current Assets: Cash Management,
Receivables Management and Inventory Management. Bank Norms for Working Capital Financing. The Dividend
Decision: Major Forms of Dividends – Cash and Bonus Shares. The Theoretical Backdrop – Dividends and
Valuation; Major Theories Centered on the Works of Gordon, Walter and Linter. A brief Discussion on Dividend
Policies of Indian Companies.
Corporate Restructuring and Corporate Governance
Corporate Mergers, Acquisitions and Takeovers: Types of Mergers, Economic Rationale of Mergers, Motives
for Mergers; Financial Evaluation of Mergers; Approaches for Valuation: DCF Approach and Comparable
Company Approach (No Practical Exercises). Corporate Value Based Management Systems. Approaches:
Marakon Approach and McKinsey Approach; Principles of Good Corporate Governance.
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