Sloan School of Management
Massachusetts Institute of Technology
15.402 – Section A – Fall 2009
T TH 10:00 a.m. to 11:30 a.m. – E51-151
Craig A. Stephenson, Ph.D.
15.402 Finance Theory II
Introduction to Corporate Finance
Finance Theory II introduces corporate finance, and focuses on the role of the Chief Financial
Officer (CFO) in a firm.
We assume in this course that the CFO’s job is to maximize firm value,
and we will study three types of decisions: how to manage the cash flows of the firm, how to
finance the operations and investments of the firm, and which projects the firm should invest in.
This is an applied tools course that will primarily use case studies to introduce and use financial
tools to make corporate finance decisions.
Course Structure – the course consists of three modules:
Cash Flow Management: The course begins with the tools of cash flow management.
flow management is necessary to forecast future cash flows from operations, investing activities,
and financing needs.
Important tools in this module include financial ratio analysis, pro forma
financial statements, working capital management, and cash budgets.
Capital Structure and Financing: The course continues by analyzing the factors which
determine a firm’s need for external financing.
We will also consider the optimal mix of debt
and equity financing.
Project and Company Valuation: In the third module we will develop the tools required for
valuing investment projects, including determination of the relevant cash flows and the
appropriate discount rate.
We will use these tools to value investment projects and companies.
• Course assistant: Charles Wohr,
, E52-430, 617-253-8318.
• Teaching Assistant: Antonio Carlos de Azevedo Sodre,
, E52-458, 617-252-
Prerequisites: Finance Theory I (15.401) and Accounting (15.515/501)
Readings and Books:
• R. Brealey, S. Myers, and F. Allen, Principles of Corporate Finance