JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD

22MBA25F5: STRATEGIC FINANCIAL MANAGEMENT

MBA (R22)

Course Objective:

To orient on various aspects in strategic financial management.
To elaborate on the role of finance manager for making better investment decisions.
To impart knowledge of various aspects in Strategic Investment Decisions.
To discuss in detail the aspects pertaining to Strategic Financing Decisions.
To elucidate the practical aspects of Mergers, Acquisitions and Value Based Management.

Course Outcome

Students will be able to:

Understand financial strategy and control of a company.
Learn the relevance of risk and uncertainty in making strategic decisions.
Learn various aspects of capital budgeting.
Understand the capital structure, dividend policy, financial distress, restructuring.
Identify the different diversification strategies and mergers and acquisitions.

UNIT - I: Financial Strategy and Planning

Strategic approach to Financial Management, Definition,

Characteristics, Scope and Importance of Strategic Financial Management. Success Factors and Constraints to Strategic Financial Management. Financial Forecasting, Techniques, Financial Planning Process, Decision-making and Problem-solving process. Agency Theory, Agency Costs, Constituents and Criticism of Agency Theory.

UNIT - II: Investment Decisions under Risk and Uncertainty

Concepts of Risk and Uncertainty. Risk

Analysis in Investment Decisions, Risk Adjusted Rate of Return, Certainty Equivalents, Probability Distributions of Cash Flows, Decision Trees, Sensitivity Analysis and Monte Carlo Approach to Simulation, Investment Decisions under Capital Constraints and Capital Rationing. Corporate Cost of Capital - Divisional Cost of Capital, Pure Play Technique, Accounting Beta.

UNIT - III: Strategic Investment Decisions

Real Options, the Timing of Options, Project Abandonment

Decisions. IRR - Multiple IRR, Modified IRR, Pure, Simple and Mixed investments. Adjusted NPV and Impact of Inflation on Capital Budgeting Decisions. Discounted Pay back, Post Pay Back, Surplus Life and Surplus Pay Back, Bail Out Pay Back, Return on Investment, Terminal Value, Single Period Constraints, Multi Period Capital Constraint and an Unresolved Problem, NPV Mean Variance analysis, Hertz Simulation and Hillier Approaches.

UNIT - IV: Strategic Financing Decisions

Capital Structure and Value Creation. Signaling Theory

Tools for developing an Effective Capital Structure. Financial Flexibility and Financial Discipline. Capital Structure Puzzle. Dividend Policy and Firm Value. Linter’s Dividend Model, its Salient features, Dividend Puzzle. Buy Back of Shares and its Characteristics, Modes and Methods of Buy Back of Shares. Reasons, Benefits and Constraints to Buy Back of Shares. Impacts of Share Buybacks. SEBI Regulations. Financial Distress and Restructuring. Characteristics and Causes of Financial Distress. Costs of Financial Distress. Impacts of Financial Distress. Financial Distress Restructuring. The Insolvency and Bankruptcy Code 2016, Corporate Insolvency Resolution Process, Liquidation Process.

UNIT - V: Mergers, Acquisitions and Value Based Management

Mergers and Acquisitions, Need,

Strategy, Diversification and Mergers and Acquisitions, Value Creation in Mergers and Acquisitions. Theories of Mergers, Types of Mergers, Cost of Mergers, Government guidelines for Takeover, Problems on Mergers and Acquisitions and Cases. Value-based Management: Introduction, Elements and Importance of Value-based Management. Approaches to Value-based Management: Marakon, Alcar, McKinsey, BCG, Economic Value Added, Market Value Added and Cash Value Added.