Major Field Meeting

1
Major Field Meeting

• Finance Department
• Fall 2005

2
Agenda

• Two Branches of Finance
• Capital Markets / Investments
• Corporate Finance
• Careers Within Each Branch
• Finance_at_Kellogg
• Finance I
• Finance Major
• Analytical Finance Major
• Classes

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Capital Markets/Investments

• Perspective The investors portfolio
• Key issues
• Expected rates of return
• Beta and the Capital Asset Pricing Model
• Multi-factor models
• Measuring risk
• Variances and covariances
• Short-run risk, long-run risk
• Security Pricing (stock, bonds, derivatives)

4
Corporate Finance

• Perspective The firm
• Which projects to pick?
• Capital Budgeting Valuing investment projects
• Net present value, real options
• How to finance them?
• Capital structure Debt versus equity
• Risk Management
• What to do with the profits?
• Dividend policy Dividends/share
  repurchases/retained earnings

5
Careers

• Capital Markets
• Money Management (buy side)
• Pension funds
• Mutual funds
• Hedge funds
• Research, Sales and Trading (sell side)
• Security analysis
• Design securities to manage risks
• Market making

• Corporate Finance
• Management
• Finance Department
• General Management
• Investment/commercial banking
• Raising Capital
• Mergers and Acquisitions
• Corporate Clients
• Consulting
• Strategic
• Valuation
• Managerial performance evaluation/compensation

FINANCE WEB SITE LISTS COURSE RECOMMENDATIONS BY
CAREER
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• Use the Alumni Network to find Kellogg grads
• http//kelloggalumni.northwestern.edu/Directory/
• BasicSearch.asp
• 160 at Merrill Lynch
• 118 at Morgan Stanley
• 94 at Lehman Brothers
• 73 at Citigroup
• 63 at Goldman, Sachs Co.
• 59 at JP Morgan Chase
• 45 at HSBC
• 38 at Deutsche Bank

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Finance Our Market Share at Kellogg

• 19 of Graduates last year took jobs in finance
• 26 of Interns last year took jobs in finance
• Finance is one of the most popular majors at
  Kellogg (about tied with marketing and management
  and strategy).
• And, were growing!

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Finance _at_ Kellogg
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Finance I (FINC430)

• Which projects to pick?
• Optimal investment decisions by firms
• What cash flows does the project generate?
• How to adjust for timing and uncertainty of cash
  flows?
• Also a lot of useful techniques applicable to
  personal finance
• We deal first with time...
• basic discounting techniques, application to
  stock and bond valuation
• capital budgeting under certainty
• ...then with uncertainty
• asset pricing models
• capital budgeting under uncertainty
• market efficiency

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Major Requirements

• Finance Major
• Analytical Finance Major
• Both majors build on knowledge from FINC 430 (FIN
  I) and FINC 441 (FIN II)

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Finance II (FINC 441)
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Options for First Years

• Option 1 Take Required Classes
• Finance I and Finance II
• or Finance I/II (Turbo) (combines Fin I and Fin
  II in one class)
• Option 2
• Waive Finance I. Take Finance II.
• Option 3
• Waive Finance I and Finance II

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Finance Major

• Finance I Finance II (or FIN 440 (Turbo))
• One capital market course from list F
• 2 additional courses

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Analytical Finance Major

• Finance I Finance II (or FIN 440 (Turbo))
• 3 courses from List A
• Derivative Markets I
• Practicum

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Classes

• Capital Markets
• Derivative Markets I F (A)
• Derivative Markets II F A
• Investments F A
• Fixed Income Securities F A
• International Finance F
• Money Markets the Fed F
• Emerging Markets
• Securitization

• Corporate Finance
• Financial Decisions A
• Fin. Strategy Taxes A
• Entrepreneurial Finance
• Venture Capital and Private Equity Investing
• Real Options
• Investment Banking
• Corporate Restructuring
• Mergers and Acquisitions
• Security Analysis
• Case Studies in Venture Investment and Management

NOTE 1You can target your courses to your career
plans NOTE 2 It is not all math! Many courses
use cases and analytical frameworks.
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Practicum in Analytical Finance FINC-925

• The focus of the course this year will be Value
  Investing.
• First half (a) formal lectures, (b) in class
  valuation discussions, (c) presentations by
  leading value investors.
• Second half Students will (i) design strategies
  for efficiently searching for value investing
  strategies, and (ii) identify an interesting
  value investing opportunity, in groups.
• The course uses large data bases of returns
  data. You will learn to use STATA to analyze
  strategies.
• Each group will make a final presentation on (i)
  and (ii). A couple of leading value investors to
  be present during the final presentation.
• http//www.kellogg.northwestern.edu/faculty/jagan
  nathan/ teaching/practicum/2005/index.htm

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New Courses This Year

• Investment Banking (Stowell, Winter 2006)
• Focus on securities industry, Wall Street, LBO
  funds and hedge funds, various functions of
  I-banking
• Sarbanes Oxley and the regulatory environment,
  exchanges
• MA strategies, valuation and defense
• Corporate financing IPOs, SEOs, debt and
  convertibles
• Cases in Venture Investment and Management
  (Hochberg, Winter 2006)
• Focus on evaluating early stage business
  opportunities and assessing VC investments
• Learn how to make decisions in uncertain
  environments
• Based on a series of cases
• Will revolve around in-class case analysis with
  the venture capitalists and entrepreneurs
  involved in the cases
• 5/5 ratings when taught at Cornell

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More InformationFinance Department Web
Pagehttp//www.kellogg.northwestern.edu/finance/i
ndex.htm

• Course recommendations by career
• Course offerings, descriptions
• Some course page links (see also Professors own
  web pages for links)
• Professors
• Email addresses
• Biographical information
• Research interests

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Questions ?
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Financial Decisions FINC-442

• Uses case studies to enhance the student's
  understanding of managerial financial decision
  making, specifically investment and financing
  decisions.
• Topics include short- and long-term financing,
  capital structure and dividend decisions, cost of
  capital, capital budgeting, firm valuation,
  financial and operational restructuring, and
  mergers and acquisitions.
• The course is sufficiently general so as to be
  of interest to all students. It provides students
  with the opportunity to apply the concepts and
  theories developed in other finance courses.
• At its most fundamental level, the course
  attempts to improve problem-solving skills
  problem definition, gathering and organizing the
  relevant information, developing feasible
  alternative courses of action, evaluating
  alternative choices, and recommending and
  defending the best course of action.

21
Entrepreneurial Finance FINC-446

• This course teaches students how to become an
  entrepreneur by focusing on financial aspects.
• Topics include pro forma development and review,
  business valuation models, cash flow analysis and
  raising capital from private investors, venture
  capitalists and banks.
• The course is taught using the case method
  process ("real life" case studies). Periodically,
  technical notes will be used and guests invited
  to augment subjects addressed. This is not a
  quantitative analysis course. Rather, it focuses
  on marketing, sales, management and strategic
  planning.

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Venture Capital and Private Equity Investing
FINC-445

• This course teaches students about the venture
  capital and private equity industry from the
  primary perspective of the investor.
• Topics include the structure of VC funds, the
  contracts between VCs and their investors, the
  contracts between VCs and entrepreneurs,
  valuation of deals, monitoring of investments,
  and exit strategies such as IPO / MA
• The course is taught using a combination of
  lectures, class discussions, and the case method
  process ("real life" case studies). Periodically,
  technical notes will be used and guests invited
  to augment subjects addressed. This is not a
  quantitative analysis course, though frameworks
  for thinking about valuation are provided.

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International Finance INTL-470

• Managing an international business or one
  exposed to global competition requires an
  understanding of international financial
  instruments, markets and institutions. This
  course seeks to provide students with a working
  knowledge of these issues.
• Topics include the nature of foreign exchange
  risk the determination of exchange rates and
  interest rates the management of foreign
  exchange risk with forwards, options and swaps
  exchange rate forecasting the anatomy of
  currency speculative attacks and the dynamics of
  the balance of payments with a focus on
  understanding international capital flows,
  country debt and exchange rate fluctuations.

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Investments FINC-460

• This course is a comprehensive study of
  investment theory from the perspective of plan
  sponsors and portfolio managers.
• Emphasis is on optimal portfolio construction
  and portfolio performance evaluation using modern
  portfolio theory and asset-pricing models.
• Topics include equity valuation, benchmark
  tracking, transactions costs, term structure of
  interest rates and bonds, use of derivatives in
  index fund management and hedge fund strategies.

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Money Markets and the Fed FINC-451

• This course covers two aspects of money markets
  financial institutions, and financial
  instruments.
• In the first half of the course, the linkages
  between the financial system and the
  macro-economy are studied including interest rate
  determination, the role of the Federal Reserve
  and the conduct of monetary policy.
• The second half of the course provides an
  overview of the instruments of the money market
  Federal Funds, Commercial Paper, Treasury Bills,
  etc. Basic valuation and hedging techniques in
  short term futures and swaps are also covered.

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Derivatives Markets I, FINC-465

• This course covers the use and pricing of
  forwards and futures, swaps and options.
• Specific topics include strategies for
  speculation and risk management, no-arbitrage
  pricing for forward contracts, the binomial and
  Black-Scholes option pricing models and
  applications of pricing models in other contexts.