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NYU Stern School of Business

Undergraduate College


Spring 2011

Instructor Details

Lee, Samuel


Fridays (by appointment)

KMC 9-71


Course Meetings

MW, 2:00pm to 3:15pm

Tisch T-200


Course Description and Learning Goals

Course overview:

This is an advanced corporate finance course for undergraduates in finance. The purpose of the course is to illustrate the role of incentives and information in corporate finance.

Learning objectives:

Upon completion of this course, students should be able to do the following things.

  • Explain key concepts: moral hazard, adverse selection, bankruptcy, financial distress, debt overhang, risk-shifting, hold-up problem
  • Explain how the above concepts relate to financial transactions, firms’ financial policies, and the design of financial securities
  • Apply these concepts in real-world situations to identify conflicts between various stakeholders in a firm, or counterparties to a deal, and to propose solutions 


Course Pre-Requisites

 Passing grades in C15.0002 Foundations of Financial Markets and C15.0007 Corporate Finance. Students should be familiar with basic valuation methods. 


Course Outline

The course is divided into two parts, each covering about half of the term:

  1. The first part consists of lectures. The lectures cover economic theories that deal with the impact of incentive and information problems on corporate finance and firm value. The material of this part will be tested in the problem-based part of the final exam.
  2. The second part consists of case studies. The case studies illustrate the practical relevance of the abstract concepts discussed in the first part. This part prepares students for the case-based part of the final exam.



Required Course Materials

Lecture notes and case studies will be posted on Blackboard from week to week. 

 There is no required textbook for this course. Students are encouraged to read the relevant chapters in the corporate finance textbooks that they already own. For those, who wish to purchase one for themselves, a standard reference is áBrealey, R. A., Myers, S. C., and F. Allen, 2007, Principles of Corporate Finance, 9th edition, McGraw-Hill ñ. The book should be available at the NYU Bookstore or online. 


Assessment Components

  • Problem sets: Accompanying the lectures, there will be problem sets during Part I of the course. The problem sets will be graded. Although they will count only 10% towards the students’ final grade, they are very important; they prepare students for the problem-based part of the exam, and allow them to monitor their own progress.
  • Case studies: During Part II of the course, there will be case studies. Students will be required to form case study groups (three to four students in each group). With each case, a number of questions will be handed out. A set of answers to these questions must be handed in by each of the case study groups. The hand-ins will be graded. Although they will count only 10% towards the students’ final grade, they are very important; they prepare students for the case-based part of the exam, and allow them to monitor their own progress.
  • Final exam: There will be a final exam towards the end of the term. The exam will consist of two parts, each counting 40% towards the final grade.
    • Problem-based part: The questions in this part of the exam will be similar to those of the problem sets. The exam will be administered during one of the scheduled sessions, either at the end of April or at the beginning or May.
    • Case-based part: This part of the exam will be a case study. Towards the end of the term, students will be given a case study and a set of questions. Each student will be required to hand in his or her own individual set of answers.

The above components will be weighted as follows in the final grade:

  • Problem sets (individual hand-ins): 10%
  • Case studies (group hand-ins): 10%
  • Final exam - problem-based part: 40%
  • Final exam - case-based part: 40% 


Group Projects

Guidelines for Group Projects

Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education.

Every member is expected to carry an equal share of the group’s workload. As such, it is in your interest to be involved in all aspects of the project. Even if you divide the work rather than work on each piece together, you are still responsible for each part. The group project will be graded as a whole:   its different components will not be graded separately. Your exams may contain questions that are based on aspects of your group projects.

It is recommended that each group establish ground rules early in the process to facilitate your joint work including a problem-solving process for handling conflicts. In the infrequent case where you believe that a group member is not carrying out his or her fair share of work, you are urged not to permit problems to develop to a point where they become serious. If you cannot resolve conflicts internally after your best efforts, they should be brought to my attention and I will work with you to find a resolution.

You will be asked to complete a peer evaluation form to evaluate the contribution of each of your group members (including your own contribution) at the conclusion of each project. If there is consensus that a group member did not contribute a fair share of work to the project, I will consider this feedback during grading.



At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter.  In general, students in undergraduate core courses can expect a grading distribution where: 

  • 25-35% of students can expect to receive A’s for excellent work
  • 50-70% of students can expect to receive B’s for good or very good work
  • 5-15% of students can expect to receive C’s or less for adequate or below work 

Note that while the School uses these ranges  as a guide, the actual distribution for this course and your own grade will depend upon how well  you actually perform in this course.



The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.

If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.


Professional Responsibilities For This Course


  • Class attendance is essential to your success in this course and is part of your grade. An excused absence can only be granted in cases of serious illness, grave family emergencies, or religious observance and must be documented. Job interviews and incompatible travel plans are considered unexcused absences. Where possible, please notify me in advance of an excused absence.



In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:

  • Providing strong evidence of having thought through the material.
  • Advancing the discussion by contributing insightful comments and questions.
  • Listening attentively in class.
  • Demonstrating interest in your peers' comments, questions, and presentations.
  • Giving constructive feedback to your peers when appropriate.



  • Late assignments will either not be accepted or will incur a grade penalty unless due to documented serious illness or family emergency. Exceptions to this policy for reasons of religious observance or civic obligation will only be made available when the assignment cannot reasonably be completed prior to the due date and you make arrangements for late submission in advance.


Classroom Norms

  • Arrive to class on time and stay to the end of the class period. Chronically arriving late or leaving class early is unprofessional and disruptive to the entire class.  Repeated tardiness will have an impact on your grade.
  • Turn off all electronic devices prior to the start of class. Laptops, cell phones and other electronic devices are a distraction to everyone.


Stern Policies

General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior.  Students who fail to do so may be asked to leave the classroom. 


Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. 


Course Evaluations
Course evaluations are important to us and to students who come after you.  Please complete them thoughtfully.


Academic Integrity

Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:

  • Exercise integrity in all aspects of one's academic work including, but not limited to, the preparation and completion of exams, papers and all other course requirements by not engaging in any method or means that provides an unfair advantage.
  • Clearly acknowledge the work and efforts of others when submitting written work as one’s own. Ideas, data, direct quotations (which should be designated with quotation marks), paraphrasing, creative expression, or any other incorporation of the work of others should be fully referenced. 
  • Refrain from behaving in ways that knowingly support, assist, or in any way attempt to enable another person to engage in any violation of the Code of Conduct. Our support also includes reporting any observed violations of this Code of Conduct or other School and University policies that are deemed to adversely affect the NYU Stern community.

The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:

Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin.  Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications.  Additionally, your document will become part of the Turnitin database.


Recording of Classes

Your class may be recorded for educational purposes


Students with Disabilities

If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend.  If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.


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