Assessment 3: Financial Engineering to enhance shareholder value

Resources

Risk Management

• Buffett, W. (1984, May 17). The superinvestors of Graham-and-Doddsville. https://www8.gsb.columbia.edu/ articles/columbia-business/superinvestors

• Sumflows. (2013). Warren Buffett: Diversification [Video] | Transcript https://www.youtube.com/watch?v=wbjPiYE- F4Y

• How Warren Buffett thinks about risk [Blog post]. (2016, March 9). Newstex Global Business Blogs.

• Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2021). Corporate finance: Core principles and applications (6th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.

• The following chapters advance the concept of risk by relating it to return. The concepts of risk and return are directly correlated. They affect investment and capital project selection and are incorporated in corporation and investment value. ▪ Chapters 10, "Risk and Return: Lessons from

Market History," pages 287-315. ▪ Chapters 11, "Return and Risk: The Capital

Asset Pricing Model (CAPM)," pages 316-356. • Simon, B. (2013). Finance lecture - risk, return and

CAPM [Video] | Transcript https://www.youtube.com/ watch?v=3BIIiUyr3-w

• View the segment 1:01:00-1:16:00.

• Klontz, B. T., & Horwitz, E. J. (2017). Behavioral finance 2.0: Financial psychology. Journal of Financial Planning, 30(5), 28-29.

• This article describes how behavioral finance is the

application of cognitive psychology to finance. • Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B.

D. (2021). Corporate finance: Core principles and applications (6th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.

• Chapter 13, "Efficient Capital Markets and Behavioral Challenges," pages 390-422. This chapter contrasts two of the primary theories of investing: the efficient market hypothesis (EMH) and the behavioral finance view. They are primarily mutually exclusive concepts and color investors' views of how much they can impact investment returns.

• YaleCourses. (2012). Behavioral finance and the role of psychology [Video] | Transcript https://www.youtube.com/ watch?v=chSHqogx2CI

Finance costs • Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B.

D. (2021). Corporate finance: Core principles and applications (6th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.

• Chapter 12, "Risk, Cost of Capital, and Valuation," pages 357-389. This chapter deals with one of the most well known financial concepts: the cost of capital, or how to figure the threshold rate for investment projects.

• Edspira. (n.d.). Weighted average cost of capital (WACC) [Video] | Transcript https://youtu.be/ 46oLXwClvkw

• Beers, B. (2018, February 9). How is debt "a relatively cheaper form of finance than equity"? https://

www.investopedia.com/ask/answers/05/ debtcheaperthanequity.asp

WACC • Pysh, P. (2012). What is financial risk [Video] |

Transcript https://www.youtube.com/watch? v=-4mXnFK0ecM

• Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2021). Corporate finance: Core principles and applications (6th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.

• These two chapters deal with the capital structure of a firm, that is, how a firm will finance itself, via debt or equity. An examination of the features, benefits, and negatives of financing through both financing types will be discussed in these chapters. ▪ Chapter 14, "Capital Structure: Basic

Concepts," pages 423-450. ▪ Chapter 15, "Capital Structure: Limits to the

Use of Debt," pages 451-479. • Understanding Finance. (2014). James Tompkins: The

capital structure decision and taxes [Video] | Transcript https://www.youtube.com/watch? v=HeWcPUk8rGw

• View the first 15 minutes of the video.