ECON 454Economics of Corporations

Catalog

Prerequisites: Grades of C or better in ECON 360; also grades of C or better in college level statistics and calculus. Description: Corporate economics is concerned with market signals, contracting and transaction costs, with the primary goal being to examine how managers make decisions aimed at creating economic value for shareholders and other stakeholders. This course emphasizes the economic foundations and practice of financial decision-making and valuation, as practiced within contemporary corporations, under conditions of imperfect markets and uncertainty. Major themes include (1) introduction to the law of one price and arbitrage, (2) application of cost-benefit analysis by corporations to the study of cost of capital, evaluation of capital investment projects, and decision about capital structure and payout options, (3) basic analysis of corporate financial and business performance, and (4) fundamentals of corporate valuation. Excel spreadsheet will be used for the modeling of some basic economic relationships applied to corporate decision-making and valuation. Format: Grading is based on participation in class activities, homework assignments, a term project, midterm tests, and a final examination.