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BSNS114 Financial Decision Making

Introduction to some basic characteristics of financial markets. The time value of money, calculations of fair value for bonds and stocks, criteria for financing a business, risk-return trade-offs, regulatory frameworks and ethical considerations are included.

This paper introduces students to business finance, with a primary devotion to making financial decisions in a business setting. We will first discuss the concept of the time value of money in extensive mathematical details together with looking at how we can apply these valuation techniques to real-world examples. We then apply these principles to valuing business projects and financial securities (stocks and bonds).

Since decision making with investments virtually always involves risk and uncertainty, we will then introduce the concepts of risk, followed by the cost of financing in doing business. We close the paper by looking at the relevance of capital structure and dividend policy in corporate performance.

Along the course of the paper, we will examine different regulatory processes that are essential to the principles of corporate governance and ethical trading practices in New Zealand.

Paper title Financial Decision Making
Paper code BSNS114
Subject Business Studies
EFTS 0.1500
Points 18 points
Teaching period(s) First Semester, Second Semester
Domestic Tuition Fees (NZD) $813.45
International Tuition Fees Tuition Fees for international students are elsewhere on this website.

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Restriction
BSNS 108
Schedule C
Commerce
Notes
This is a required paper for BCom from 2017 (to be taken in place of BSNS 108 by students completing under earlier regulations).
Course outline
View the course outline for BSNS 114
Eligibility
High-school level understanding in the subjects of accounting, economics and statistics
Contact
olena.onishchenko@otago.ac.nz
Teaching staff
Olena Onishchenko
Paper Structure
Topics:
  • Introduction to Business Environment and Financial Markets
  • Time Value of Money
  • Bonds and Interest Rates
  • Shares and Equity Valuations
  • Business Ethics
  • Capital Investments - Decision Rules
  • Capital Investments - Free Cash Flow Estimation
  • Investment Market History
  • Risk and Return
  • Capital Investments - Cost of Capital
  • Capital Structure and Dividend Policy
Textbooks
To be advised
Graduate Attributes Emphasised
Critical Thinking, Research, Interdisciplinary Perspective, Scholarship, Self-Motivation, Teamwork, Lifelong Learning, Ethics.
View more information about Otago's graduate attributes.
Learning Outcomes
Students who successfully complete the paper will
  • Be financially literate
  • Understand the basic characteristics of companies and capital markets
  • Understand the time value of money and how it affects financial decisions at the personal and organisational level
  • Understand bonds and stocks, including the calculation of their fair value
  • Understand the trade-off between risk and return for investors
  • Understand the factors affecting a company's decision to borrow from debt holders versus raising money from shareholders
  • Appreciate the different regulatory processes essential to the principles of corporate governance and ethical trading practices in NZ

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Timetable

First Semester

Location
Dunedin
Teaching method
This paper is taught On Campus
Learning management system
Blackboard

Lecture

Stream Days Times Weeks
Attend
A1 Monday 10:00-10:50 9-15, 17-22
Tuesday 12:00-12:50 9-15, 18-22
Thursday 12:00-12:50 9-15, 17-22

Tutorial

Stream Days Times Weeks
Attend one stream from
A1 Monday 09:00-09:50 10-15, 17-22
A2 Monday 12:00-12:50 10-15, 17-22
A3 Monday 13:00-13:50 10-15, 17-22
A4 Monday 16:00-16:50 10-15, 17-22
A5 Monday 17:00-17:50 10-15, 17-22
A6 Tuesday 17:00-17:50 10-15, 18-22
A7 Wednesday 13:00-13:50 10-15, 17-22
A8 Wednesday 17:00-17:50 10-15, 17-22
A9 Thursday 17:00-17:50 10-15, 17-22
A10 Thursday 17:00-17:50 10-15, 17-22
A11 Friday 09:00-09:50 10-14, 17-22
A12 Friday 10:00-10:50 10-14, 17-22
A13 Friday 12:00-12:50 10-14, 17-22
A14 Friday 13:00-13:50 10-14, 17-22
A15 Friday 14:00-14:50 10-14, 17-22
A16 Friday 15:00-15:50 10-14, 17-22
A17 Friday 16:00-16:50 10-14, 17-22

Second Semester

Location
Dunedin
Teaching method
This paper is taught On Campus
Learning management system
Blackboard

Lecture

Stream Days Times Weeks
Attend
A1 Tuesday 13:00-13:50 28-34, 36-41
Wednesday 10:00-10:50 28-34, 36-41
Thursday 14:00-14:50 28-34, 36-41

Tutorial

Stream Days Times Weeks
Attend one stream from
A1 Monday 13:00-13:50 29-34, 36-41
A2 Wednesday 15:00-15:50 29-34, 36-41
A3 Monday 15:00-15:50 29-34, 36-41
A4 Monday 16:00-16:50 29-34, 36-41
A5 Monday 17:00-17:50 29-34, 36-41
A6 Tuesday 14:00-14:50 29-34, 36-41
A7 Tuesday 15:00-15:50 29-34, 36-41
A8 Tuesday 16:00-16:50 29-34, 36-41
A10 Wednesday 09:00-09:50 29-34, 36-41
A11 Wednesday 16:00-16:50 29-34, 36-41
A13 Thursday 09:00-09:50 29-34, 36-41
A14 Thursday 16:00-16:50 29-34, 36-41
A16 Friday 09:00-09:50 29-34, 36-41
A17 Friday 10:00-10:50 29-34, 36-41
A18 Friday 12:00-12:50 29-34, 36-41
A19 Friday 13:00-13:50 29-34, 36-41
A20 Friday 14:00-14:50 29-34, 36-41

Introduction to some basic characteristics of financial markets. The time value of money, calculations of fair value for bonds and stocks, criteria for financing a business, risk-return trade-offs, regulatory frameworks and ethical considerations are included.

This paper introduces students to business finance with a primary focus on the principles of financial valuation. We first discuss the concept of time value of money together with looking at how we can apply these valuation techniques to making personal investment decisions. Since decision making with investments virtually always involves risk (uncertainty), we will then introduce the concept of risk and the relation between risk and return. This is followed by a discussion of the cost of financing and how that, as integrated with cash flows, will impact on the valuation outcome and decision making at a corporate level. We close the paper looking at the relevance of capital structure and dividend policy in corporate performance.

Paper title Financial Decision Making
Paper code BSNS114
Subject Business Studies
EFTS 0.1500
Points 18 points
Teaching period(s) First Semester, Second Semester
Domestic Tuition Fees Tuition Fees for 2018 have not yet been set
International Tuition Fees Tuition Fees for international students are elsewhere on this website.

^ Top of page

Restriction
BSNS 108
Schedule C
Commerce
Notes
This is a required paper for BCom from 2017 (to be taken in place of BSNS 108 by students completing under earlier regulations).
Course outline
View the course outline for BSNS 114
Teaching Arrangements
3 hours of lectures and a 50-minute tutorial per week
Eligibility
Prior knowledge in secondary-school-level economics, algebra, statistics and accounting would be beneficial but is not compulsory.
Contact
olena.onishchenko@otago.ac.nz
Teaching staff
Olena Onishchenko
Paper Structure
  • Quiz 1, Quiz 2, Quiz 3 and Quiz 4 - 2.5% each
  • Midterm Exam - 35%
  • Final Exam - 55%
Textbooks
Required:
Ross, Trayler, Bird, Westerfiled and Jordan. Essentials of Corporate Finance, 4th edition. Available at the library.

Recommended:
Timothy Crack. How to ace your business finance class. Available at the library.
Graduate Attributes Emphasised
Critical thinking, Self-motivation.
View more information about Otago's graduate attributes.
Learning Outcomes
Upon successful completion of this paper, you should be able:
  • To be financially literate.
  • To understand the basic characteristics of companies and capital markets.
  • To understand time value of money and how it affects financial decisions at the personal and organisational level.
  • To understand bonds and stocks, including the calculation of their fair value.
  • To understand concepts and calculation of the simple models for free cash flows for a business project.
  • To critically analyse business investment decisions.
  • To understand the trade-off between risk and return for investors.
  • To understand the factors affecting a company's decision to borrow from debtholders versus raising money from shareholders

^ Top of page

Timetable

First Semester

Location
Dunedin
Teaching method
This paper is taught On Campus
Learning management system
Blackboard

Lecture

Stream Days Times Weeks
Attend
A1 Tuesday 12:00-13:50 9-13, 15-22
Thursday 12:00-12:50 9-13, 15-22

Tutorial

Stream Days Times Weeks
Attend one stream from
A1 Monday 09:00-09:50 10-13, 15-22
A2 Monday 12:00-12:50 10-13, 15-22
A3 Monday 13:00-13:50 10-13, 15-22
A4 Monday 16:00-16:50 10-13, 15-22
A5 Tuesday 09:00-09:50 10-13, 15-22
A6 Tuesday 15:00-15:50 10-13, 15-22
A7 Wednesday 09:00-09:50 9-13, 15-16, 18-22
A8 Wednesday 13:00-13:50 9-13, 15-16, 18-22
A9 Thursday 15:00-15:50 10-13, 15-22
A10 Thursday 16:00-16:50 10-13, 15-22
A11 Friday 09:00-09:50 10-12, 15-22
A12 Friday 10:00-10:50 10-12, 15-22
A13 Friday 12:00-12:50 10-12, 15-22
A14 Friday 13:00-13:50 10-12, 15-22
A15 Friday 14:00-14:50 10-12, 15-22
A16 Friday 15:00-15:50 10-12, 15-22
A17 Friday 16:00-16:50 10-12, 15-22

Second Semester

Location
Dunedin
Teaching method
This paper is taught On Campus
Learning management system
Blackboard

Lecture

Stream Days Times Weeks
Attend
A1 Tuesday 12:00-13:50 28-34, 36-41
Thursday 14:00-14:50 28-34, 36-41

Tutorial

Stream Days Times Weeks
Attend one stream from
A1 Monday 09:00-09:50 29-34, 36-41
A2 Monday 13:00-13:50 29-34, 36-41
A3 Monday 14:00-14:50 29-34, 36-41
A4 Monday 15:00-15:50 29-34, 36-41
A5 Monday 16:00-16:50 29-34, 36-41
A6 Tuesday 09:00-09:50 29-34, 36-41
A7 Tuesday 11:00-11:50 29-34, 36-41
A8 Tuesday 15:00-15:50 29-34, 36-41
A9 Tuesday 16:00-16:50 29-34, 36-41
A10 Wednesday 09:00-09:50 29-34, 36-41
A11 Wednesday 12:00-12:50 29-34, 36-41
A12 Wednesday 16:00-16:50 29-34, 36-41
A13 Thursday 09:00-09:50 29-34, 36-41
A14 Thursday 13:00-13:50 29-34, 36-41
A15 Thursday 16:00-16:50 29-34, 36-41
A16 Friday 09:00-09:50 29-34, 36-41
A17 Friday 10:00-10:50 29-34, 36-41
A18 Friday 12:00-12:50 29-34, 36-41
A19 Friday 13:00-13:50 29-34, 36-41
A20 Friday 14:00-14:50 29-34, 36-41
A21 Friday 15:00-15:50 29-34, 36-41
A22 Friday 16:00-16:50 29-34, 36-41