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CF Emails

 


I confess. I send out a lot of emails and I am sure that you don't read some of them. Since they sometimes contain important information as well as clues to my thinking (deranged though it might be), I will try to put all of the emails into this file. They are in chronological order, starting with the earliest one. They are in chronological order, starting with the earliest one. So, scroll down to your desired email and read on, or if the scrolling will take you too long, click on the link below to go the emails, by month.

Date
Email content
1/15/19
Happy new year! I hope you have a wonderful break (good news: it is still break..) and that you will come back tanned, rested and ready to go. This is the first of many, many emails that you will get for me. You can view that either as a promise or a threat.  I am delighted that you have decided to take the corporate finance class this spring with me and especially so if you are not a finance major and have never worked in finance. I am an evangelist when it comes to the centrality of corporate finance and I will try very hard to convert you to my faith. I also know that some of you may be worried about the class and the tool set that you will bring to it.  I cannot alleviate all your fears now, but here are a few things that you can do to get an early jump:
a. Get a financial calculator and do not throw away the manual. I know that you feel more comfortable using Excel, but you will need a calculator for your quizzes/exams.
b. The only prior knowledge that I will draw on will be in basic accounting, statistics and present value. If you feel insecure about any of these areas, I have short primers on my web site that you can download by going to
Having got these thoughts out of the way, let me get down to business. You can find out all you need to know about the class (for the moment) by going to the web page for the class:
This page has everything connected to the class, including webcast links, lecture notes and project links. The syllabus has been updated:
You will be getting a hard copy of it on the first day of class but the the quiz dates are specified online. If you click on the calendar link, you will be taken to a Google calendar of everything related to this class. 

https://bit.ly/2SNtSjj

You will note references to a project which will be consuming your lives for the next four months. This project will essentially require you to do a full corporate financial analysis of a company. While there is nothing you need to do at the moment for the project, you can start thinking about a company you would like to analyze and a group that you want to be part of.  

I will also be posting the contents of the site (webcasts, lectures, posts) on iTunes U. If you have never used it, here is what you need: an Apple device (iPhone or iPad), the iTunes U app on the device and you need to use this enroll code: EZZ-PFA-KHF . Alternatively, try this link:
Like all things Apple, the set up iis very well done and it is neat, being able to catch up on a lecture you missed on your iPad, while browsing through the lecture notes on it too. I know that you are feeling overwhelmed by now, but for those of you with devices and slower broadband, I also have a YouTube Playlist for the class:
Please check it out.

Now for the material for the class. The lecture notes for the class are available as a pdf file that you can download and print. I have both a standard version (one slide per page) and an environmentally friendly version (two slides per page) to download. You can also save paper entirely and download the file to your iPad or Kindle. Make your choice.
If you prefer a copied package, the first part (of two) should be in the bookstore next week.  There is a book for the class, Applied Corporate Finance, but please make sure that you get the fourth edition. It is exorbitantly over priced but you can buy, rent or download it at Amazon.com or the NYU bookstore
While I have no qualms about wasting your money, I know that some of you are budget constrained (a nice way of saying "poor") . If you really, really cannot afford the book, you should be able to live without it. 

One final point. I know that the last few years have led you to question the reach of finance (and your own career paths). I must confess that I have gone through my own share of soul searching, trying to make sense of what is going on. I will try to incorporate what I think the lessons learned, unlearned and relearned over this period are for corporate finance. There are assumptions that we have made for decades that need to be challenged and foundations that have to be reinforced. In other words, the time for cookbook and me-too finance (which is what too many firms, investment banks and consultants have indulged in) is over.  To close, I will leave you with a YouTube video that introduces you (in about 2 minutes) to the class. 
I hope you enjoy it.  That is about it. I am looking forward to this class. It has always been my favorite class to teach (though I love teaching valuation) and I have a singular objective. I would like to make it the best class you have ever taken, period. I know that this is going to be tough to pull off but I will really try. I hope to see you on February 4th, in class. Until next time!
1/28/19
As the long winter break winds down, I first hope that you are far away from the gray weather in New York, some place warm and sunny. I also hope that you are ready to get started on classes and that you got my really long email a weeks ago. If you did not, you can find it here:
This one, hopefully, will not be as long and has only a few items

1. Website: In case you completely missed this part of the last email, all of the material for the class (as well as the class calendar) is on the website for the class:
http://www.stern.nyu.edu/~adamodar/New_Home_Page/corpfin.html
Please do try to download the first lecture note packet by Monday. The direct link to the lecture note packet is below:
You can print it off or just keep it on your tablet (as long you can make notes on the pages). You can also buy the packet at the bookstore, at their usual nosebleed prices, if you prefer a bound packet. 
2. Pre-class prep: Are you kidding me? What kind of twisted mind comes up with a pre-class prep for the very first class? Just relax, have fun this weekend and try to be in class. If you cannot make it, never fear! The webcast for the class will be up a little while after the class, but it just won't be the same as being there in person.
3. iTunes U and YouTube links: I had sent these out in my previous email but no harm repeating:
A. iTunes U. If you have an Apple device (iPhone or iPad), the iTunes U app on the device and you need to use this enroll code: EZZ-PFA-KHF . Alternatively, try this link:

For those of you who have not got around to checking, class is scheduled from 10.30-11.50 in Paulson Auditorium on February 4. See you there! Until next time!

2/4/19
I promised you with a ton of emails and I always deliver on my promises... Here is the first of many, many missives that you will receive for me….. First, a quick review of what we did in today's class.  I laid out the structure for the class and an agenda of what I hope to accomplish during the next 15 weeks. In addition to describing the logistical details, I presented my view that corporate finance is the ultimate big picture class because everything falls under its purview. The “big picture” of corporate finance covers the three basic decisions that every business has to make: how to allocate scarce funds across competing uses (the investment decision), how to raise funds to finance these investments (the financing decision) and how much cash to take out of the business (the dividend decision). The singular objective in corporate finance is to maximize the value of the business to its owners. This big picture was then used to emphasize five themes: that corporate finance is common sense, that it is focused, that the focus shifts over the life cycle and that you cannot break first principles with immunity.

On to housekeeping details. 
1. Project Group: I have not described the project yet, but you don’t have until Wednesday to get started. For the moment, try to at least find a group that you can work with for the rest of the semester. Find people you like/trust/can get along with/ will not kill before the end of the semester. The group should be at least 4 and can be up to 8 (if you can handle the logistics). Each person will be picking a company and having a larger group will not mean less work. This group will do both a case and the project, both of which I will talk about next class.
2. Webcasts: The webcasts should be up a few hours after the class ends. Please use the webcasts as a back-up, in case you cannot make it to class or have to review something that you did not get during class, rather than as replacement for coming to class. I would really, really like to see you in class.  The web cast for the first class is up now and you can get it at
Try it out and let me know what you think. I have been told that it come through best if you have a 50 inch flat panel TV and surround sound. You will also find the syllabus and project description in pdf format to download and print on this page. The lecture note packet is also on this page. If you were not able to come to class today, because of weather issues (or anything else), here are the links to the syllabus and project that were handed out:
3. Drop by:  I know this is a large class but I would really like to meet you at some point in time personally. So, drop by when you get chance... I don't bite…. One of my regrets with Paulson is that there is no place for you to put a name plate in front of you. I will try to learn names but if I mangle yours or don’t know it yet, I apologize in advance.
4. Lecture note packet 1: Please bring the first lecture note packet to class on Wednesday. If you want to buy it at the bookstore and the bookstore does not have it, just print off the first 15 pages for Wednesday’s class. Here is the link to lecture note packet 1.
5. Past emails: If you have registered late for this class and did not get the previous emails, you can see all past emails under email chronicles
on my web site
6. Post class test & solution: Each class, I will be sending out a post class test and solution for each class. This is just meant to reinforce what we did in class  that day and there are no grades or prizes involved.  I am attaching the ones for today's class.

That is about it, for this email. 

Attachments: Post-class test and solution

2/5/19 Hi folks,
It is me again, but then again I promised you a deluge and it has to start sometime. Yesterday, in class, I said that Tuesdays would be our “weekly puzzle” days, where I would post a topic, with questions, for discussion. I had originally planned to reuse a puzzle on the Tata Family Group from a prior year, but an op ed from yesterday’s New York Times on buybacks is too good to pass by, because it cuts to heart of everything that we will be talking about in the next few weeks. You can find the details of the puzzle on the webcast page for the class, but I have also reproduced it in this email.

Buybacks have been at the center of a heated debate in the United States, with some arguing that they are the reason for companies not reinvesting in new factories, widening income inequalities and a variety of other social ills. In an op-ed in the New York Times on February 4, 2019, Senators Schumer and Sanders make their case for why buybacks should be restricted. You can find the link below:
Implicit in the opinion piece are three assumptions, and without any prejudgment, here they are:
  1. It is better for an economy in terms of job and growth, if all companies in that economy reinvest their money back into their businesses rather than return them to shareholders.
  2. When cash is returned to shareholders, in buybacks or dividends, it leaves the productive economy and is consumed or disappears.
  3. Income inequality and low wages for those at the bottom of the scale are central problems that we would all like to solve, and it makes sense to tie whether a company can return cash to shareholders to behavior that will contribute to making these problems smaller.
I know that we live in political times, and that our red or blue predispositions can affect how we react, but please try to set your political priors to the side and think through each of these assumptions as objectively as you can. 

  1. Is it true that an economy is better in terms of jobs and growth, if all companies have to reinvest their money back into the businesses instead of returning cash to shareholders? If yes, explain. If not, why not?
  2. What happens to the cash retutrned to shareholders in the form of buybacks? In 2018 alone, companies returned almost $600 billion in cash to shareholders. Where did it go?
  3. Assume that we all accept inequality and low wages as problems, and want to solve them. 
    1. Would forcing companies to pay higher wages and protect jobs, before they can return cash to shareholders accomplish this objective?
    2. What are the possible side costs? (Think about how companies might get around this constraint and what it will mean)
I know that I run the risk of creating biases, but here are two blog posts of mine (one old and one from this year) that you are welcome to read, rip apart or use:
I considered opening a Facebook page for the forum, but social media may be a little too open for this process. Instead, I have used NYU Classes to create a forum with this topic. You will finds it on the NYU class page for this class. So, I hope that you will go on to the forum and present your views and show, in the process, that we can disagree without being disagreeable. 
2/6/19
In today's class, we started on what the objective in running a business should be. While corporate finance states it to be maximizing firm value, it is often practiced as maximizing stock price. To make the world safe for stock price maximization, we do have to make key assumptions: that managers act in the best interests of stockholders, that lenders are fully protected, that information flows to rational investors and that there are no social costs.  We started on why one of these assumptions, that stockholders have power over managers, fails and we will continue ripping the Utopian world apart next class. 

1. Administrative Stuff: I went through the structure for the class and mentioned the quiz dates. As noted in class, if you are going to miss a quiz, the 10% from that quiz will be moved to the rest of the exam grade for the class and if you take all three, your worst quiz will get marked up to the average on your remaining exams. Here are a few other details:
2. Other People's Money: Just a few added notes relating to the class that I want to bring to your attention. The first is the movie Other People's Money, which is one of my favorites for illustrating the straw men that people like to set up and knock down. You can find out more about the movie here:
But I found the best part on YouTube. It is Danny DeVito's "Larry the Liquidator" speech: 
Watch it when you get a chance. Not only is it entertaining but it is a learning experience (though I am not sure what you learn). Incidentally, it is much, much better than Michael Douglas's "Greed is good" speech in the first "Wall Street " which was a blatant rip-off of Ivan Boesky's graduation address to the UC Berkeley MBAs in 1986 (which I happened to be at, since I was teaching there that year). 
3. DisneyWar: In next week’s session, I will be talking about the dysfunctional state of Disney in the 1990s. If you want to review these on your own, try this book written by James Stewart. It is in paperback,  on Amazon:
If you are budget-constrained, you can borrow my copy and return in when you are done. (I have only one copy. First come, first served)
4. Company Choice: On the question of picking companies for your group, some (unsolicited) advice: 
(1) Define your theme broadly: In other words, don't pick five airlines as your group. Pick United Airlines, Southwest, Singapore Airlines, Travelocity and Embraer.... Three  very different airline firms, a travel service and a company that sells aircraft to the airlines.
(2) Do not worry about making a mistake: If you pick a company that you regret picking later, you can go back and change your pick.... If you do it in the first 5 weeks, it will not be the end of the world.
(3) If you are leery about picking a foreign company, pick one that has ADRs (these are Depository Receipts that are traded in US dollars) listed in the US. It will make your life a little easier. You should still use the information related to the local listing (rather than the ADR).
(4) If you want to sound me out on your picks, go ahead. I have to tell you up front that I think that there is some aspect that will be interesting no matter what company you pick. So, do not avoid a company simply because it pays no dividends or has no debt.
(5) If you want to kill two birds with one stone, pick a company that you already own stock in or plan to work for or with.
(6) Avoid money losing companies, unless the loss was a one-time deal, and financial service firms, which are so constrained that they are no fun to work with.
As a final reminder. Please pick your company soon... As you can see from today's class, we are getting started on assessing your company…

If you want to print off the financial statements for your company, I would recommend that you start with the annual report for the most recent year. You should be able to pull it off the website for the company, under investor relations. If you want to keep going, and it is a US company, go to o the SEC site (http://www.sec.gov). If it is a non-US company, you will have to find the equivalent regulatory body in your country. For some of your companies, you will find less data than on others. Don’t fret. It is what it is. Finally, I am attaching the post class test and solution for today’s session. Until next time!

Attachments: Post-class test and solution


2/7/19
It is never too early to start nagging you about the project. So, let me get started with a checklist (which is short for this week but will get longer each week. Here is the list of things that would be nice to get behind you:
  1. Project hub: To find out pretty much anything you need to about the project, get questions answered or look at past project reports, here is where you should go: http://people.stern.nyu.edu/adamodar/New_Home_Page/cfproj.html 
  2. Find a group: If you have trouble finding one, try the orphan spreadsheet for the class (https://docs.google.com/spreadsheets/d/1GNGx9ZF34iDXi3f2Q5zOTaMX832-b3y-gFTk4RGJP6o/edit?usp=sharing ). If you have a group and need an orphan to adopt, try the spreadsheet as well. 
  3. Pick a company/theme: This will require some coordination across the group but pick a company and find a theme that works for the group. Each person in the group picks a company and the companies form the theme.
  4. Annual Report: Find the most recent annual report for your company. If it is a US company, also download the 10K from the SEC website.
  5. Updated information: If your company has quarterly reports or filings pull them up as well.
  6. Board of Directors: Get a listing of the board of directors for your company & start your preliminary assessment.
In doing all of this, you will need data and Stern subscribes to one of the two industry standards: S&P Capital IQ (the other is Factset). It is truly a remarkable dataset with hundreds of items on tens of thousands of public companies listed globally, including corporate governance measures. I believe that you have automatic access to Capital IQ and you should find it in your Stern Life Dashboard. You will not regret it and it will not only save you lots of time in the future but will give you another weapon you can use in analysis. That’s about it, for now. Until next time!

2/8/19
As promised, here is the first of the weekly in-practice webcasts. These are 10-15 minute webcasts designed to work on practical issues in corporate finance. This week’s issue is a timely one, if you are working on picking companies for your project (as you should be..). It is about the process of collecting data for companies, the first step in understanding and analyzing them. The webcast link is below:
http://www.stern.nyu.edu/~adamodar/podcasts/Webcasts/gettingdata.mp4
I don’t think it is too painful to watch and you may even find it useful. I have also put the link up on the webcast page for the class:
http://www.stern.nyu.edu/~adamodar/New_Home_Page/webcastcfspr17.htm 
The webcasts for the first two classes should be on there, if you missed (physically, metaphysically or mentally) and the links to the project and syllabus that I handed out in the class. At the risk of nagging, please do get the lecture note packet 1 printed off or bought before Monday’s class. It is now available (or was at least yesterday) in the bookstore.  One final note. I had mentioned that you had access to S&P Cap IQ yesterday but It turns out that you have to go to self-register to be able to access it.Until next time!
2/8/19
I know that this is the weekly puzzle and I really want you to come to your own conclusions. That is why I am sending this link reluctantly:
https://aswathdamodaran.blogspot.com/2019/02/january-2019-data-update-8-dividends.html
It is my blog post on buybacks. Read it, if you get a chance. You don’t have to agree with all or even any of it. Just hope it gets you thinking! Until next time!
2/9/19
As you start the weekend, I decided to butt in with the first of my newsletters. As you browse through it (and I hope you do), you will realize that this is not really news or even fake news. It is more akin to a GPS for the class telling you where we’ve been and where we plan to go. It is a good way to get a sense of whether you are falling behind on either the class or the project, especially as we get deeper into the class. So, enjoy your weekend and I will see you on Monday! Until next time!

Attachment: Issue 1 (February 9)

2/10/19
I’ll keep this short. This week, we will complete our discussion of the objective function in corporate finance, continuing with stock price maximization tomorrow and alternatives to that objective thereafter. Along the way, we will look at shareholder wealth maximization and corporate sustainability and I may kill a few sacred cows along the way. In the meantime, please do pick a company, and if you have picked a company, take a look at the board of directors and corporate governance. Until next time!
2/11/19
Today's class extended the discussion of everything that can wrong in the real world. Lenders, left unprotected, will be exploited. Information can be noisy and markets can be irrational. Social costs can be large.  Relating back to class, I have a couple of items on the agenda and neither requires extensive reading or research. I would like you to think about market efficiency without any preconceptions. You may believe that markets are short term, volatile and over react, but I would like you to consider the basis of these beliefs. Is it because you have anecdotal evidence or because you have been told it is so or is it based upon something more concrete? We closed the class by talking about social costs and benefits and how difficult it is to incorporate them into decision making and we will continue on that theme in the next class. Again, plenty to think about while you are sitting in your CSR class!  We have spent a couple of sessions being negative - managers are craven, markets are noisy and bondholders get ripped off. In the next class, we will take a more prescriptive look at what we should be doing in this very imperfect world. As always, reading ahead in chapter 2, if you have the book, will be helpful.

I hope that your search for a group has ended well and that you are thinking about the companies that you would like to analyze. Better still, perhaps you have a company picked out already. If you do, try to find a Bloomberg terminal  (there is one in the MBA lounge and there used to be one in the basement)... If you do find one vacant, jump on it and try the following:
1. Press the EQUITY button
2. Choose FIND YOUR SECURITY
3. Type the name of your company
4. You might get multiple listings for your company, especially if it is a large company with multiple listings and securities. Try to find your local listing. For a US company, this will usually be the one with your stock symbol followed by US. For a non-US company, it will have the exchange symbol for your country (GR: Germany, FP: France, LN: UK etc...) It may take some trial and error to find the listing....
5. Type in HDS
6. Print off the first page of the HDS (it should have the top 17 investors in your company).

If you cannot find a Bloomberg terminal or don't have access to one, try going on Yahoo! Finance and type in the name or symbol for your company. Once you find your company, find the tab that says Holders and click on it. You should get a listing of the top stockholders in your company. In fact, while you are on that page, take note of the percent of your company's stock held by insiders and by institutions.  I have also attached the post class test and solution for today's class. Until next time!

Attachments: Post-class test and solution

2/12/19
For the second weekly challenge, I decided on a throw back to a challenge I used two years ago, because it brings home issues of corporate governance at founder and family controlled publicly traded companies that are still relevant  . It is about corporate governance at one of India’s oldest and best regarded family groups, the Tatas. The group which has been around since 1868, has more than a hundred companies under it, and has had only seven heads over its 150-year life, most of whom came from the Tata family. In 2012, Ratan Tata stepped down and Cyrus Mistry was named the new head. While not an immediate Tata family member, he is related by marriage to the family and he himself comes from a family with deep connections to the group going back in time. It is perhaps because of the group’s history that people were shocked when Cyrus was fired on October 24, 2016, and Ratan Tata reinstated as the head. You can start with the blog post that I had on the group in November:
http://aswathdamodaran.blogspot.com/2016/11/the-4c-tradeoff-promise-and-peril-of.html
That lays out my views not just on the Tata group but on family groups in general. Once you have that read, you can then look at the specifics of this week’s puzzle, where I bring the story up to date.
http://people.stern.nyu.edu/adamodar/New_Home_Page/cfpuzzles/cfspr19puzzle2.htm 
Once you have read these pieces (and other links), there are four questions that I would like you to answer:
  1. What do you see as the pluses and minuses of family group control of publicly traded companies?
  2. Can you use that trade off to explain why family group companies grew to dominate Asian and Latin American markets? Can you use it to look at the challenges that family groups will face in the future?
  3. Given the Tata Group's current standing and the evolution of the Indian economy/market, do you think that the pluses still outweigh the minuses?
  4. Do you believe the governance problem was resolved with the appointment of Mr. Chandrasekaran as the new CEO of Tata Sons? Why or why not? If no, what would you like to see done at the company to make you feel more comfortable with your investment in a Tata company?
As you can see, these are open ended questions where there is no right answer. To be clear, there is no grade attached to answering these weekly puzzles but I believe that there is a payoff in understanding. I have created a forum on NYU classes (this may be one of the few things that I use NYU classes for) where, if you feel the urge to share, you should. 

2/13/19
The objective function matters, and there are no perfect objectives. That is the message of the last two classes. Once you have absorbed that, I am willing to accept the fact that you still don't quite buy into the "maximize value" objective. That is fine and I would like you to keep thinking about a better alternative with three caveats. First, you cannot cop out and give me multiple objectives - I too would like to maximize stockholder wealth, maximize customer satisfaction, maximize social welfare and employee benefits at the same time but it is just not doable. Second, your objective function has to be measurable. In other words, if you define your objective as maximizing the social good, how would you measure social good?  Third, take your objective (and the measurement device you have developed) and ask yourself a cynical question: How might managers game this system for maximum benefit, while hurting you as an owner? In the long term, you may almost guarantee that this will happen. 
Building on the theme of social good and stockholder wealth a little more, there are a number of fascinating moral and ethical issues that arise when you are the manager in a publicly traded firm. Is your first duty to society (to which we all belong) or to the stockholders (who are your ultimate employers)? If you have to pick between the two and you choose the former, do you have an obligation to be honest and let the latter know?  What if you believed that the market was overvaluing your stock? Should you sit back and let it happen, since it is good for your stockholders, or should you try to talk the stock price down? On the question of socially responsibility, there are groups out there that rank companies based upon social responsibility. I have listed a few below, but they are a few of many:
Dow Jones Sustainability Index: http://www.sustainability-indices.com 
And this is just the tip of the iceberg. Environmental organizations, labor unions and other groups all have their own corporate rankings. In other words, whatever your key social issue is, there is a way to stay true (as a consumer and investor). Notice how the rankings vary even across the ethics sphere. No surprise that no one has a monopoly on virtue.
While it may seem like we are paying far too much attention to these minor issues, I think that understanding who has the power to make decisions in a company will have significant consequences for how the company approaches every aspect of corporate finance - which projects it takes, how it funds them and how much it pays in dividends. So, give it your best shot... On a different note, we will be continue with our discussion of risk on Wednesday (no class on Monday). As part of that discussion, we will confront the question of who the marginal investor in your company is. If you have already printed off the list of the top stockholders in your company (HDS page in Bloomberg or the Major Holders page from Yahoo! Finance), bring it with you again. If you have not, please do so before the next class. Also, watch for the in-practice webcast day after tomorrow, because I will go through how to break down the HDS page. Finally, I mentioned a paper that related stock prices to corporate governance scores in class today. You can find the link to the paper below:
In closing, though, I know that the sheer size of the class and the setting make it intimidating for participation. I understand but I hope that (a) you will feel comfortable enough to make your views heard, even if they are at odds with mine and (b) that you talk to me in person or by email about specific issues that we are covering in class that you may not understand or have a different perspective. 

This email has gone on way too long already, but one final note. A few years ago, I took a look at Petrobras, just as a cautionary note on what happens to a company when its objective function becomes muddled (with national interest constraints). You can read it here.

I am also attaching the post-class test & solution for this session. Until next time!

Attachments: Post-class test and solution