SOUTHERN METHODIST UNIVERSITY

Edwin L. Cox School of Business

FINA 6238
FINANCIAL MODELING
Professor Stacey Jacobsen
Fall 2015
Office: 333 Fincher
Classroom: Maguire 150A (Kitt Center)
E-mail: staceyj@cox.smu.edu
Class Number 6961
Office Hours: Tue 5:00-6:00pm, or by appointment (email to arrange)
Class Meetings: W 6:30-9:20
If you want to meet before class, please email beforehand to arrange
A. COURSE OVERVIEW
Course Description
This is an applied finance course that takes a hands-on approach to implement finance theory at a practical level.
We will apply economic theory to real-world problems by using spreadsheet techniques to analyze financial data.
The course covers advanced firm valuation techniques (i.e., discounted cash flow and leveraged buyout (LBO)
modeling), estimation of a firms cost of capital, and examination of the market response to value-relevant firm
announcements. Students will have significant exposure to financial data and advanced spreadsheet techniques to
transform raw data to meaningful output.
Prerequisite/Other Requirements
The prerequisite for this class is FINA 6211 or currently enrolled in the MSF program. You will need to have a
working knowledge of corporate financial theory (as covered in FINA 6201, FINA 6205, and FINA 6211).
Moreover, we will make extensive use of Excel statistical software. Students are assumed to have experience using
Excel, although more advanced functions will be explained along the way.
Learning Outcomes
This course will focus on learning by doing. Students have been exposed to many financial models in previous
courses. The goal of this course it to understand how to implement these models. Along the way, students should
gain a deeper understanding of these models, their assumptions, and implications. In addition, by completing this
course a student should:
(1) Feel comfortable manipulating raw financial data to solve various problems in finance
(2) Be able to build simple and complicated firm valuation, cost of capital, and event study models
(3) Become an advanced user of Microsoft Excel and be able to apply this knowledge to other
applications/software used in the financial industry
(4) Be able to effectively communicate and present the complicated inputs and outputs of financial models to
colleagues
My Commitments
(1) Make the course an enjoyable and challenging experience
(2) Be open to your comments and suggestions
(3) Respond to emails in a timely manner
(4) Be more accessible before project due dates and exams
B. COURSE MATERIALS
Texts
(1) (Required) Benninga, Financial Modeling, 4th Edition, ISBN 9780262027281
(2) (Required) Berk and DeMarzo, Corporate Finance, 3rd Edition, ISBN 9780132992473. Note: my assumption is
that you already have this book (used in FINA 6201 and FINA 6205). Come see me otherwise.
(3) (Recommended) Holden, Excel Modeling in Corporate Finance, 5th Edition, ISBN 9780205987252
(4) (Required) PowerPoint slides posted on Blackboard
(5) Additional readings posted on Blackboard
(6) If you are looking for additional material, this book is a great resource: Holthausen and Zmijewski, Corporate
Valuation Theory, Evidence and Practice, ISBN 978-1618530363

Course Webpage
Various course materials will, in general, be distributed through Blackboard: https://courses.smu.edu/.
Contact me immediately if you do not have access to this section. PowerPoint slides will be posted at a minimum
of 24 hours prior to the class start time. This material should be printed and read prior to attending class.
Course Structure and Excel Version
This course is structured as a lab class and will be a blend of lecture and hands-on excel applications. The
typical session will entail 50% lecture and 50% working examples in Excel (either demonstration by the professor
or tackling problems individually or in groups). Actively participating in the examples we work in class will be
factored into your participation/citizenship grade. Computers should not be used to check email, complete other
assignments, etc. Computer screens should be OFF during the lecture portion of the class, otherwise the student
will be asked to leave. It is the students responsibility to have models/software downloaded and ready to use
prior to class.
For course work outside of class, students should use Excel for Windows rather than Excel for Mac OS for the
following reasons: 1) Windows-based Excel will be the standard for almost all jobs going forward, and 2) Macbased Excel may have different functionality, which will not be covered in this class. Students should have Excel
2010 or later. If the student does not meet these requirements, it is his/her job to reconcile differences.
C. ASSIGNMENTS, EXAMS, AND GRADING
Student Assessment
The course grade will be based on submitted assignments, two projects, and a final exam. There will also be a
small component for classroom participation and citizenship. This component is met by being physically and
mentally present in the class and generally contributing to an active learning environment. The course grade will
be based on the following:

Cumulative Final Exam

Valuation Project
Event Study Project
Graded Homework (3)
Daily Participation/Attendance
Total

(total: 40 points)
(total: 30 points)
(total: 10 points)
(total: 17 points)
(total: 3 points)
(total: 100 points)

Letter grades will be assigned based on the student distribution of the courses total scores. The grade cutoff
points are at my discretion and will be adjusted based on the classs overall performance. My upward adjustment
will be limited by the Finance Departments guideline on the maximum numbers of As for Finance elective
courses. Typically, the class GPA is around 3.4.
Cumulative Final Exam
The cumulative final exam will be Excel-based. To do well on the exam, you must not only have a good handle
on effective spreadsheet techniques to create financial models, but also the critical assumptions underlying the
model and inferences generated by model outputs. You will be bound by both the SMU and Cox Honor Codes
to keep all other programs (i.e., Internet and email) closed. Any Honor Code violation will be referred to the
Honor Council without exception. If a student is ill on the final exam date, the student must notify me via
email prior to the exam. Moreover, the student must provide a written note from a physician. It is the students
job to arrange a make-up exam in a timely fashion. Failure to meet these requirements will result in a zero on the
exam.
Projects
I will assign two projects this semester. Projects will be completed in groups of 2-3 (I will not allow a group of
four). You may pick your group. Group member requests are due (via email) during the week of October 20th.
Projects are due at the beginning of class (unless specified otherwise); otherwise a grade of zero will be given.
Please submit one write-up per group, and make sure you include all group members names on the first page.

FINA 6238 Fall 2015 Syllabus Page 2 of 5

These projects are expected to be professional work, and presentation is as important as the content. All text
should be typed and presented in a case-like format.
Project grades will be partially determined by the quality of the model, but also by the presentation and discussion
of the results. The spreadsheet analysis should be well-commented and easy to follow. Writing should be clear,
error-free, and should describe assumptions, sensitivities, and interpretation of output. There will not always be
a right answer; it is the students job to convince me why certain assumptions or methods were chosen.
There should be no consultation across different groups. Duplicate work across groups and/or using a
spreadsheet not created by a team member is considered an Honor Code violation.
Assignments
Homework assignments will be posted electronically on the course website. Completed assignments should be
submitted via email. Graded homework should be completed individually. The completion of homework is
imperative to learn the material and to do well on the Final Exam.
Class Participation and Attendance
This is an applied finance class. We will be building models in Excel each class. Students are expected to be
prepared by reading the assigned material and completing the assigned homework. I will assess attendance and
participation on a daily basis. Lectures may often go beyond the scope of the textbook materials, so it is important
that you attend every class and take good notes. I will ask that students have computers off during the lecture
portion of the class; using paper tends to be less distracting for you and those seated around you. Students using
computers for purposes that are not class-related will be asked to leave. If you need to do other things, do not
attend class. Telephone calls, text messages, or e-mails are not permitted while the class is in session.
Preparing for Classes
The material for this course needs to be absorbed consistently. Materials covered during each class build upon
materials covered in previous classes. Therefore, it is imperative to keep up with reading and homework
assignments. Please come see me immediately if you are having trouble with a topic. A successful student will
attend all classes and do the following: 1) read the relevant chapters from the textbook and other assigned readings
before we cover the material in class, 2) make sure you are comfortable with the topics covered in the previous
session: review notes and spreadsheet problems from the previous class before class, 3) download PowerPoint
slides and read slides before class, 4) take good hand-written notes in class (We will cover important content not
included in the text. I typically see a strong positive correlation between good note takers and exam scores), and
5) work all homework assignments immediately after the topic has been covered in class (since this is an applied
course, it is imperative to practice, practice, practice!).
Honor Code
Students are bound by The Honor Codes of the University and the Cox School of Business. Please visit
http://smu.edu/studentlife/studenthandbook/PCL_05_HC.asp for the University Honor Code and
http://www.cox.smu.edu/web/full-time-mba-students/honor-code for the Cox School Honor Code.
D. ACCOMMODATIONS PROVIDED FOR BY UNIVERSITY POLICY
Accommodations for a disability, religious observance and extracurricular activities follow University Policy as
described below. Please meet me at the beginning of the semester to discuss any potential issues.
Disability Accommodations
Students needing academic accommodations for a disability must first register with Disability
Accommodations & Success Strategies (DASS).
Students can call 214-768-1470 or visit
http://www.smu.edu/Provost/ALEC/DASS to begin the process. Once registered, students should
then schedule an appointment with the professor as early in the semester as possible, present a DASS
Accommodation Letter, and make appropriate arrangements. Please note that accommodations are not
retroactive and require advance notice to implement.
Religious Observance
Religiously observant students wishing to be absent on holidays that require missing class should notify
their professors in writing at the beginning of the semester, and should discuss with them, in advance,
acceptable ways of making up any work missed because of the absence. (See University Policy No. 1.9.)

FINA 6238 Fall 2015 Syllabus Page 3 of 5

Excused Absences for University Extracurricular Activities

Students participating in an officially sanctioned, scheduled University extracurricular activity should be
given the opportunity to make up class assignments or other graded assignments missed as a result of
their participation. It is the responsibility of the student to make arrangements with the instructor prior
to any missed scheduled examination or other missed assignment for making up the work. (University
Undergraduate Catalogue)

FINA 6238 Fall 2015 Syllabus Page 4 of 5

E. TENTATIVE COURSE SCHEDULE

The following is the course schedule. Please be aware that this is tentative and subject to change at my discretion
at any point in time. If I make any changes, I will announce this in class and on the course website. You are
responsible for the class announcements, even if you miss class for any reason. The final exam dates are binding,
but all other dates may be amended if I think its appropriate.
Note under Textbook Readings: B refers to the Benninga book, H refers to the Holden book, and BD refers
to the Berk & DeMarzo book.
Date
Oct. 21

Oct. 28

Nov. 4

Nov. 11

Nov. 13
FRIDAY!
Nov. 18
Dec. 2

Topics
Introduction to Course
Financial Modeling in Excel
Financial Data Sources
Preparing Financial Statements for
Analysis
Projecting the Income Statement
Projecting the Balance Sheet
Advanced Issues in Financial Modeling
Relationship Between Financial
Statements
Project I Description
Discounted Cash Flow
Estimating the Terminal Value
Sensitivity, Scenario, Monte Carlo
Analysis
Strength/Weakness of DCF Technique
Modeling Considerations for Comparable
Analysis and Other Valuation Techniques
Advanced Excel Techniques
Project I Group Work
Discussion of Project I
Event Study Analysis
Project II Description
Leveraged Buyout (LBO) Analysis

Textbook Readings
B: 2, 4-6
H: 1-5 (review), 14, 17,
25
BD: 2

Assignments
Group
Requests Due
This Week

B: 2, 4-6

Firm Selection
for Project 1
Due This Week

B: 2, 4-6
B: 31
BD: 8.2, 8.4-8.5, 9.1-9.4

Homework 1
Due This Week

B: 3, 24-25, 33-37
BD: 10.7, 10.8, Ch. 12
(incl. Appendix)

Homework 2
Due This Week

B: 14

Valuation
Project Due

Finish LBO Analysis

Course Evaluation
Discussion of Project II
Review for Final

Dec. 9

FINA 6238 Fall 2015 Syllabus Page 5 of 5

FINAL EXAM (in class)

Event Study
Project Due
This Week
Homework 3
Due This Week