PUBPOL 5620

Health Care Managerial Finance I

Course Description

Course information provided by the Courses of Study 2023-2024.

The purpose of this course is to provide a framework for evaluating how firms should make investment and financing decisions to create value for their shareholders or stakeholders. For most of the course we will focus on profit-maximizing firms, although we will discuss whether and how the investment and financing decisions are different for nonprofit firms that are prevalent in the health care industry. Therefore, this is primarily a course on general corporate finance. Specifically, we will discuss why the net present value (NPV) of discounted cash flows is the best investment criterion; calculate NPVs; derive appropriate discount rates; estimate the value of bonds, stocks, and options; and determine the optimal amount a firm should borrow. In order to understand how firms make investment and financing decisions, we will also consider how financial markets function and how investors in those markets should make decisions.

When Offered Spring.

Comments Required prerequisite: an accounting course, either general or specific to health care.

• Use the concepts of time value of money and discounted cash flow analysis to evaluate corporate securities including bonds, common stocks, and preferred stocks.
• Critically evaluate the relevant cash flows of a project and their timing, including both positive and negative side effects of the project.
• Critically evaluate the risk of projects and understand why it is critical to only invest in projects that yield a positive net present value. Understand that the appropriate discount rate should be higher for riskier projects.
• Understand the impact of portfolio diversification and the systematic risk principal and apply this understanding to analyze risk-return trade-offs using the Security Market Line and the Capital Asset Pricing Model.
• Evaluate a firm's weighted average cost of capital and how it is influenced by the firm's debt and equity financing.

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