Corporate Finance Essentials

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Course Date: 29 September 2014 to 10 November 2014 (6 weeks)

Price: free

Course Summary

Corporate Finance Essentials will enable you to understand key financial issues related to companies, investors, and the interaction between them in the capital markets. By the end of this course you should be able to understand most of what you read in the financial press and use the essential financial vocabulary of companies and finance professionals.

Estimated Workload: 2-3 hours/week

Course Instructors

Javier Estrada

Javier Estrada is a Professor at the Finance Department of IESE Business School, in Barcelona, Spain. He holds a B.A. in Economics from the National University of La Plata (Buenos Aires, Argentina), and both an M.S. in Finance and a Ph.D. in Economics from the University of Illinois at Urbana-Champaign (USA).

His areas of specialization are wealth management, portfolio management, investments, equity markets, emerging markets, and law & economics.

Javier held positions at both the Economics Department and the Business Department of the Carlos III University (Madrid, Spain). He is also a regular visiting professor at HANKEN (Helsinki, Finland), IPADE (Mexico City, Mexico), Torcuato Di Tella University (Buenos Aires, Argentina), and the University of Montevideo (Montevideo, Uruguay), and has lectured to executives, graduates, and undergraduates around the world.

Javier is the author of Finance in a Nutshell (FT Prentice Hall, 2005), originally written in English and subsequently translated into Spanish, Italian, and Chinese; a second edition of this book was published in 2011, is entitled The FT Guide to Understanding Finance, and was translated into Korean. He is also the author of The Essential Financial Toolkit – Everything You Always Wanted To Know About Finance But Were Afraid To Ask (Palgrave Macmillan, 2011).

Javier has done extensive research in the areas of portfolio management, investment strategies, and risk with a special focus on downside risk. He has also done research on emerging markets and insider trading. His articles have appeared in the Journal of Portfolio Management, the Journal of Wealth Management, the Journal of Asset Management, the Journal of Investing, and the Journal of Applied Corporate Finance, among other journals.

Javier is the founding editor of the Emerging Markets Review, the leading journal on emerging markets, was editor of the journal between inception in 2000 and the end of 2006, and remains an associate editor. He is also in the advisory board of several other journals.

Javier is Director of the SEP (Senior Executive Program) that takes place between New York and Miami, and the open-enrollment programs on ‘Managing Your Own Portfolio’ and ‘Corporate Finance.’

Javier is a partner and financial advisor at Sports Global Consulting Investments, a company that specializes in providing wealth management advise to professional athletes; is a member of the CFA Institute’s Speaker Retainer Program; and was a tennis instructor.

Course Description

This course explores several key issues related to companies, investors, and the interaction between them in the capital markets. As an illustration of the questions we will raise (and hopefully answer) during the course, consider the following:

  • What are mean returns, volatility, and beta? These essential concepts, widely used in the financial press, are the very first step in your journey into the financial world. We will discuss them in our first session, Risk and Return.
  • What is a correlation? How is correlation related to diversification? Why is diversification at the heart of portfolio construction? This is a critical issue for investors and portfolio managers, and you simply cannot build a proper portfolio if you ignore them. We will discuss these and related issues in our second session, Correlation and Diversification.

  • How does a company estimate the required return on its debt? And the required return on its equity? And, ultimately, its cost of capital? What is the usefulness of these concepts? We will discuss these and related issues in our third session, The CAPM and the Cost of Capital.
  • Understanding the cost of capital and its components is essential, but can you put theory into practice? Can you estimate the cost of capital for a specific company? You can and we will discuss how in our fourth session, Estimating the Cost of Capital – An Application.
  • How do companies separate the projects on which they should invest from those on which they should not? What are the essential tools for this task? We will discuss them, and apply them to a specific project, in our fifth session, Project Evaluation.
  • How does a company assess whether it is creating or destroying shareholder value? What is the relationship between tools to measure value creation and managerial compensation? We will discuss these and related issues in our sixth and last session, Corporate Value Creation.


  • Will I get a Statement of Accomplishment after completing this class?

    Yes. Students who successfully complete the class will receive a Statement of Accomplishment signed by the instructor.

  • What resources will I need for this class?

    In addition to the optional readings listed, all you need for this course is an Internet connection, interest in the subject and the time to read, write, participate in the forums and complete the quizzes.


1. Risk and Return

In this session we will discuss some basic but essential financial concepts such as mean return, volatility, and beta. We will also apply them to assess the performance of some equity markets over the last few years.

2. Diversification and Correlation

In this session we will discuss correlation, another essential financial tool, and its relationship to diversification, one of the bedrocks of modern finance. We will also apply them and assess the benefits of combining two specific equity markets into a portfolio.

3. The CAPM and the Cost of Capital

In this session we will discuss how companies assess their cost of debt, their cost of equity, and ultimately their cost of capital. We will also discuss why this last concept is at the heart of many of the most important corporate decisions.

4. Estimating the Cost of Capital – An Application

In this session we will put to work all the concepts discussed in the previous session by estimating the cost of capital of a company. As usual, when putting theory into practice a few complications arise and we will discuss how to deal with them.

5. Project Evaluation

In this session we will discuss how companies routinely decide whether or not to engage in investment opportunities. We will discuss the two tools most widely used for this purpose, NPV and IRR, and apply them to the evaluation of a specific project.

6. Corporate Value Creation

In this session we will discuss EVA, a tool widely used to assess whether a company is creating or destroying shareholder value. We will also put this tool into practice by estimating the EVA of two companies.


The course consists of six sessions. Each session is self-contained, requiring no previous knowledge or preparation. Each session will consist of video lectures totaling 45-60 minutes, and will be complemented by one or two recommended readings.

Performance in the course will be evaluated on the basis of three quizzes, to be released after the second, fourth, and sixth sessions. These quizzes will ask you to apply the concepts and issues discussed and help you to assess your understanding of them. Those participants that complete all the required work and score an 85% or above in all three quizzes will receive a Statement of Accomplishment with Distinction.

Finally, please note that there will be a teaching assistant monitoring the forums and answering some of the questions you may have during the course. Note, also, that the due to the size of the expected audience, the TA may not be able to answer all the questions asked.

Suggested Reading

All the issues to be discussed in this course are discussed in two of my books, listed below. The first is more basic, easier to read, and written as dialogues between a professor and the students in his class; the second is very applied and practical but also more technical and comprehensive.

  • The Essential Financial Toolkit – Everything You Always Wanted to Know About Finance But Were Afraid to Ask. Palgrave Macmillan, 2011.
  • The FT Guide to Understanding Finance – A No-Nonsense Companion to Financial Tools and Techniques. FT Prentice Hall, 2011.
These books are not required for the course. However, they are recommended for those wanting more depth and examples related to the course topics. The books can be purchased online and doing so is the responsibility of each student.

Course Workload

2-3 hours/week

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