DUKE UNIVERSITY SCHOOL OF LAW

SPRING 2016
de Fontenay

CORPORATE FINANCE (325)

ADMINISTRATIVE MATTERS
CLASS MEETINGS
Lectures: M/W 1:45 - 3:05 PM, Room 3041
CONTACT INFO
Prof. de Fontenay: Room 3022; (919) 613-7038; defontenay@law.duke.edu
Briana
Brake
(Assistant):
briana.brake@law.duke.edu

Room

4009;

(919)

613-8522;

Course website: https://sakai.duke.edu/portal/site/LAW.325.01.Sp16

OFFICE HOURS
Thurs. 2:30 - 4 PM, Room 3022 (drop-in format; no appointment necessary)
FINAL EXAM
Three-hour in-class exam, consisting of a combination of multiple-choice
questions, short-answer questions, and numerical problems. The exam is
entirely closed-book: you are not permitted to bring the textbook, the course
slides, an outline, or any other written materials with you to the exam. You
are permitted to use a calculator on the exam (not a smartphone), and you
will be provided with a handout of useful formulas. Your course grade will be
determined solely by your performance on the final exam, which will be
graded anonymously and is subject to the law schools mandatory curve.
PROBLEM SETS
I plan to assign 1-3 problem sets over the course of the semester. These will
be ungraded, and you are permitted to work on them in groups.
CLASSROOM LOGISTICS
Laptops, recording devices, and all other electronic devices are prohibited in
class, unless you have received a special dispensation from the Office of
Student Affairs.

EMAIL POLICY
Feel free to email me at any time with administrative questions. For
substantive questions, please come to office hours or, if you have a class
that conflicts with my office hours, make a separate appointment to meet
with me.
SLIDES
Slides used in classother than those marked with a red square in the
bottom right cornerwill be posted on Sakai after weve completed the
relevant topic.
You may print a hard copy of any course materials posted on Sakai. You may
not download, reproduce, or distribute anything posted on our Sakai site or
distributed in class, unless it's taken from a publicly available source.

MATERIALS
TEXTBOOK
Brealey, Myers & Allen, Principles of Corporate Finance (11th ed. 2014)
(BMA)
The textbook is optional, but recommended.
All of the BMA readings in the syllabus refer to the 11th edition (2014)
of the textbook. However, earlier versions of BMA may be considerably
less expensive, and they include almost identical material. You are
more than welcome to purchase an earlier version,
but you will have to work out the corresponding page numbers for the
readings.
Appendix A provides answers to select end-of-chapter problems. The
back cover lists several useful formulas.
SCHEDULE AND ASSIGNMENTS
KEY DATES
Mon. 1/11 First class
Mon. 1/18 Martin Luther King, Jr. holiday NO CLASS
Mon. 3/14 - Fri. 3/18 Spring Break NO CLASSES
Thurs. 4/18 Last class
Thurs. 5/5 Final Exam @ 1:30 p.m. (subject to change by Registrar)
de Fontenay: Corporate Finance (Spring 2016)Page 2

TOPICS & READING ASSIGNMENTS

The list of topics and reading assignments below is subject to change based
on our progress in class and will be updated throughout the course of the
semester. All assigned readings other than BMA will be posted on Sakai.
PART I: INTRODUCTION
1. Introduction to Corporate Finance
BMA, chapter 1 (pp. 1-14)
BMA, chapter 14 (pp. 348-368)
BMA, chapter 15 (pp. 371-391)
PART II: VALUATION
2. Discounting and Net Present Value
2.1 Present Value, Future Value, and Net Present Value
BMA, chapter 2 (pp. 18-25)
In the Matter of Oil Spill By the Amoco Cadiz (excerpt)
BMA, chapter 2 (cont.) (pp. 26-39) (Note: just skim pp.33-39, and
you can skip the discussion of Excel functions on pp.37-38 entirely if you
want)
2.2 Valuing Bonds
BMA, chapter 3 (pp. 45-51; 63-68)
2.3 Valuing Common Stock
BMA, chapter 4 (pp. 75-84)
2.4 Valuing a Business (Going Concern)
BMA, chapter 4 (cont.) (pp. 93-94)
Sample fairness opinion (PEPCO)
3. Valuation under Uncertainty
3.1 Risk and Diversification
BMA, chapter 7 (pp. 160-183) (skim)
3.2 Pricing Risk: CAPM and Alternatives
BMA, chapter 8 (pp. 190-200) (skim)
BMA, chapter 9 (pp. 218-221 bottom) (skim)
3.3 Valuation in the Courts
Cede & Co. v. JRC Acquisition Corp.

de Fontenay: Corporate Finance (Spring 2016)Page 3

DE opinion excerpts on use of valuation experts in appraisal

proceedings
4. Market Efficiency and its Limits
BMA, chapter 13 (pp. 319-342)
PART III: CAPITAL STRUCTURE
6. Payout Policy
BMA, chapter 16 (pp. 400-406 bottom of page; 411-414 top of page)
7. Debt vs. Equity
7.1 Modigliani & Miller; WACC
BMA, chapter 17 (pp. 427-431 very top of page; 435-436 (Example
17.1 only))
7.2 Benefits and Costs of Debt
BMA, chapter 18 (pp. 448-450 (middle of the page); 455-459 (very
bottom of page); 465(starting with "The Trade-Off Theory of Capital
Structure")-470(near top of page))
8. Legal Aspects of Debt
8.1 Types of Debt
BMA, chapter 24 (pp. 605-617; 624-630)
8.2 Contractual Protection: the Role of Covenants
Macy's 10-K excerpt
PLC - Loan Agreement (Note: You do not need to read this
agreement -- just print it and bring to class)
8.3 Statutory Protection; Judicial Protection
Trust Indenture Act (excerpts) (Read Secs. 302; 315(a)-(d); 316(b);
318)
MetLife v. RJR Nabisco (excerpts)
PART IV: DERIVATIVES
9. Options
BMA, chapter 20 (pp. 512-517; 523-529)
10. Other Derivatives (+ Introduction to Structured
Finance/Securitization)
SEC v. Goldman Sachs & Co. and Fabrice Tourre (complaint)
de Fontenay: Corporate Finance (Spring 2016)Page 4

Financial Crisis Inquiry Report (excerpt)

[PART V: FUNDAMENTAL TRANSACTIONS & CORPORATE GOVERNANCE]

[11. Mergers & Acquisitions; Defensive Tactics]
BMA, chapter 31 (pp. 806-830)
[12. Leveraged Buyouts]
BMA, chapter 32 (pp. 836-840; 845-850)
[13. Bankruptcy]
BMA, chapter 32 (pp. 850-856)
[14. Agency Costs & Executive Compensation]
BMA, chapter 12 (pp. 295-304)

de Fontenay: Corporate Finance (Spring 2016)Page 5