Bu393 Outline Fall 20171 651871

Course Syllabus Business 393 Financial Management II Department of Business, School of Business and Economics, Waterloo Campus Fall 2017

Table of Contents 1 Instructor Info............................................................................................................. 2 2

Prerequisites............................................................................................................................. 2

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Textbook .................................................................................................................................. 2

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Course Description .................................................................................................................. 2

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Course Goals............................................................................................................................ 3

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Student Responsibilities .......................................................................................................... 3

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Instructor Responsibilities ....................................................................................................... 4

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How to Learn Finance ............................................................................................................. 4

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Grading Scheme ...................................................................................................................... 5

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Participation ......................................................................................................................... 5

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Online Homework ................................................................................................................ 6

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Online Homework Schedule ...............................................Error! Bookmark not defined.

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MyFinanceLab Format Sensitivities .................................................................................... 9

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Quiz and Exams ................................................................................................................... 9

15

Announcements and s........................................................................................ 10

16

Academic Help................................................................................................................... 10

17

MFL/CFO Technical ............................................................................................ 11

18

Calculators and Computers ................................................................................................ 11

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Schedule and Readings ...................................................................................................... 12

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Pearson Registration Instructions ...................................................................................... 13

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University and Course Policies .......................................................................................... 14

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Instructor Info

1 Name

Office

Phone

Email

M. Brolley

LH4071

4836

[email protected]

E. Cosgrove

LH4069

3525

[email protected]

B. Everitt

LH2050

4939

[email protected]

P. Freire

LH4082

2581

[email protected]

J. Wang

LH4047

2660

[email protected]

Prerequisites

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BU383 Financial Management I

Textbook

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Required 

Stanley Eakins and William McNally. Corporate Finance Online – Canadian Edition (Ontario: Pearson Canada, ©2015). ISBN-13: 978013275893. o http://pearsonmylabandmastering.com/ o Course ID: freire99654. CFO access instructions are provided at the end of this document.

Recommended 

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William McNally. Student Workbook for Corporate Finance Online 1ce (Ontario: Pearson Canada, ©2015). ISBN: 0134174836. o The CFO Workbook is a supplement to the e-text Corporate Finance Online (CFO). The chapter sequencing and the content of each chapter in the workbook matches CFO. Each chapter in the workbook contains a series of questions: some quantitative and some qualitative. The questions guide the reader through the material and highlight the key intuition behind the ideas. Students who are serious about the course but have a weaker quantitative background might find that the workbook is a useful supplement to the e-text.

Course Description

BU393 presents the foundational tools and ideas of corporate finance. It is the second of two prerequisites to all other finance courses. If you plan to major in finance or ing, this course is central to your program of study. If you don’t plan to major in finance or ing, then this course is still very important. The first third of the course shows students how to evaluate new project ideas. This is critical for getting others to accept and adopt your ideas. It isn’t enough to have a good project idea, you

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must show that the idea will make money for the company. The tools presented in capital budgeting will give you the ability to formalize the financial impact of a project. The second topic in the course is corporate valuation. This topic is important for two reasons. First, all managers need to understand how the market arrives at its valuation of a company so they can anticipate the market’s response to corporate initiatives and so that they can successfully maximize the market value. Second, valuation is important because the last three topics in the course explore how certain corporate actions impact value. The final third of the course explores three very common corporate activities: 1) borrowing (leverage); 2) cash distributions (dividends and repurchases); and 3) mergers and acquisitions.

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Course Goals

Our (the teaching team’s) overall goals are: 1. That you learn the foundational ideas and techniques of finance: 1) capital budgeting; 2) corporate valuation using the discounted cash flow methodology; 3) capital structure theory; 4) distributions; and 5) mergers and acquisitions. 2. That you develop and/or improve your critical thinking and problem solving skills by practicing when and how to apply concepts to newly encountered problems in finance. 3. That you develop as a self-directed (self-regulated) learner. That is, that you become better at learning. For a good summary of self-directed learning go here: https://uwaterloo.ca/centre-for-teaching-excellence/teaching-resources/teaching-tips/tipsstudents/self-directed-learning/self-directed-learning-four-step-process 4. That you develop professional capacity. In particular, the ability to follow instructions. This will be particularly important with the computerized homework and exams. This learning objective is consistent with level 6 “Professional Capacity” in the OCAV guidelines for undergraduate learning expectations. One dimension of professional capacity in finance is the ability to follow instructions.

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Student Responsibilities

Students will be treated as (and be expected to behave as) adult learners. Adult learners have four main characteristics: 1) they are self-directed; 2) they are experienced learners; 3) they are ready to learn; and 4) they are self-motivated to learn. Self-directed means the learner can plan and allocate their time to suit their learning needs. In the context of this course, that means working steadily—doing a little finance every day and not procrastinating, reading the textbook before class sessions, completing the weekly homework on schedule (starting homework early so last minute issues do not interfere), and being prepared to write exams when they are regularly scheduled. It is critically important that students read the textbook before class. This course is designed so that information transmission happens outside of class (through the online textbook) and idea assimilation happens in class through the process of working on problems. Students must come prepared to work on problems by reading the online textbook before class.

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Being ready to learn means having the right tools (i.e., a spreadsheet) and a quiet work space. Being ready also means that a student regularly checks the course announcement page and is aware of course news and policies. Self-motivated means that students are genuinely interested in the course content and not solely motivated by grades. Self-motivated students have a positive attitude about the course and the instructor. They don’t grumble and complain. They read the financial news to find current examples of the ideas presented in the course.

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Instructor Responsibilities

We will help you learn by providing the following: ♦ A rich on-line learning environment with explanations of course concepts, video lectures, able excel templates, interactive activities, and lots of practice problems with detailed solutions. ♦ A list of clear and reasonable learning tasks and outcomes, with in-class activities appropriate for achieving these tasks and outcomes; ♦ Assessment tools that treat all students equally, have academic integrity, clearly assess the stated learning tasks and outcomes, and provide useful and timely so that you can learn from mistakes and move forward; ♦ Sufficient time with the instructor and TAs through email, “Ask My Instructor” and TA office hours (see “Academic Help” section, below). ♦ A well-organized course that provides you with the best possible opportunity to learn finance.

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How to Learn Finance

Finance is a problem-based discipline. That is, the majority of learning occurs while students work on problems. This has a number of implications for the way that you should organize your time. To get the most out of this course you should approach each week as follows. At the beginning of the week you should do the assigned readings. To learn more about how to read a finance textbook, watch this video: https://youtu.be/3V-t7XFkoOE On your first of a chapter your goal is to understand the basic learning objectives and the big ideas within each objective. Get comfortable with the basic terminology. To motivate you to do this, there is an introductory (online) homework scheduled for Sunday of every week. Next, read each of the learning objectives through one at a time. Go through each of the examples and watch the appropriate videos if you do not understand the written description. Play with all Explore Its and answer all of the self-test problems. After you are finished reading the learning objective, you should attempt some “homework” problems for that learning objective. (See the ‘Homework’ section, below.) When you are stuck, look back through the text for help.

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There might be a worked example on a similar problem. A subset of the homework problems are graded and must be completed (usually by Friday, but check the homework schedule below). A recent study of student performance in introductory finance found that a student’s grade improves with the number of questions attempted and with the number completed correctly.1 So, try to do as many of the CFO problems as possible. (Do them all if you can.) The average student should expect to spend six or seven hours outside of class reading, watching videos and working on problems. Students with weaker quantitative skills may need to spend more time. Since this is a relatively large amount of time, students should do a little every day. When working on problems, we strongly recommend that you DO NOT look at the MyFinanceLab (MFL) solution tools until you have worked through the problem and have your own answer. Peaking at the learning tools can create the illusion of learning when none has occurred.

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Grading Scheme

Students must choose the extent of their involvement with the course and, as a result, which grading scheme will apply to them. Students who choose to participate in class will have 10% of their grade based on classroom participation. (The participation mark is described below.) Students who choose not to participate will not be graded on participation but may still come to class. By default all students are in the “Participate” category and must choose to not to participate by Sunday September 17th. The choice can be made using the “Class Participation” homework under “Do Homework” in the Assignments menu. Participation Homework In-Class Quiz Midterm Final Exam

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Participate 10% 15% 15% 25% 35%

Don’t Participate 0% 15% 15% 30% 40%

Participation

Most class sessions will be based around 5-10 problems (total will vary by instructor). The instructor may provide brief lecture to introduce a topic, elucidate a complicated idea or to explain a solution technique. The in-class questions will be served through the Pearson Learning Catalytics web site.

“Determinants of Performance in a Hybrid Finance Course” with Brian F. Smith. 2010. Advances in Financial Education. Vol. 8, Issues 1&2, pp. 22-34. 1

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https://learningcatalytics.com/sign_in?=true Students will have automatic access to the learning catalytics site with their online textbook subscription. Participation Mark The participation mark is based on answering questions in class through the Learning Catalytics classroom response system. Each question is worth 1 point. Half of the point is earned by responding and the other half is earned if the response is correct. There will be at least 100 questions asked along the term. Not all classes involve Learning Catalytics questions (e.g., classes 1, 12, and 21). The participation mark will be constructed as follows: 𝑃𝑎𝑟𝑡𝑖𝑐𝑖𝑝𝑎𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑘 =

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑃𝑜𝑖𝑛𝑡𝑠 100

You do not need to provide an excuse for missed classes or appeal for the reduced denominator.

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Online Homework

Most weeks there will be online homework on CFO. The graded homework can be found under “Do Homework” which is under the Assignments menu on the left-hand navigation bar of the main MyFinanceLab page. The graded homework assignments are just a subset of the problems in the ‘Topic’ and ‘Chapter’ homework which appear below the graded assignments. Those homework problems are the equivalent of the end-of-chapter problems that you would see in a printed textbook. Those same problems are accessible through the e-text at the links on the pages with ‘stop’ signs. If you miss a graded homework assignment, then you should work on the ‘Topic’ and ‘Chapter’ homework for that chapter instead. The homework can be started and stopped as desired and answers will be saved. The homework can be completed on any computer. The numeric homework questions are algorithmic. Each student’s homework assignment has the same questions but the questions have different numbers. Each time a question is regenerated it will have different numbers. Numeric questions can be repeated until answered correctly. Qualitative homework questions can only be answered once. Homework Mark Each student’s homework mark will be constructed as follows: 𝐻𝑜𝑚𝑒𝑤𝑜𝑟𝑘 𝑀𝑎𝑟𝑘 =

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐶𝑜𝑟𝑟𝑒𝑐𝑡 𝐴𝑛𝑠𝑤𝑒𝑟𝑠 𝑁 − 20

Where N = the total number of questions. If there are 250 questions and you answer 150 correctly, then your homework mark is 150/(250-20) = 65.2%. The 20 subtracted questions (in the denominator) are ‘gimmee’ marks. You can miss up to twenty questions without penalty.

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With so many homework deadlines, there are many events that might cause you to miss a deadline. For example, your home internet connection might fail, your computer might break, you might sustain a sports injury, you might have a health problem or you might have a family emergency. Regardless of the reason, no extensions will be given to students who cannot complete a homework on time. The 20 ‘gimmee’ marks (described above) are provided to mitigate the loss associated with one of these events. No additional gimmee marks will be provided. To reduce the risk that a problem interferes with completing online homework, you should start your homework well before the deadlines.

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Online Homework Schedule

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START SEP 07 Sep 07 Sep 07 Sep 07 Sep 09 Sep 09 Sep 16 Sep 16 Sep 16

PREPARATORY HOMEWORK DUE TITLE Sep 13 Sep 17 Sep 24

Oct 1

SUMMATIVE HOMEWORK DUE TITLE Sep 15 Course Introduction

Intro: 11 Sep 15

WACC

Sep 22

CB Techniques

Sep 29

Expansion & Replacement Projects

Oct 6

CB Refinements, Project with unequal lives

Intro: Ch. 9, 10.1, 10.2 Intro: Ch. 10.3

Intro: Ch. 10.4

Sep 30 Oct 15 Intro: Ch. 14.1, 14.3 & 17.1 Oct 07 Oct 20 Sales & F/S Forecasting Oct 14 Oct 22 Intro: Ch. 17.2, 17.3 & 17.4 Oct 14 Oct 27 Free Cash Flow & DCF Oct 21 Oct 29 Intro: Ch. 13.1, 13.2 & 13.3 Oct 21 Nov 03 Dividends & Repurchases Oct 28 Nov 5 Intro: Ch. 13.4 Oct 28 Nov 10 Splits Nov 04 Nov 13 Intro: Ch. 12.1 & 12.2 &12.3 Nov 04 Nov 17 Capital Structure I Nov 12 Nov 19 Intro: Ch. 18.1, 18.2 & 18.3 Nov 12 Nov 24 Capital Structure II Nov 18 Nov 26 Intro: Ch. 20 Nov 18 Dec 1 M&A IN CASE OF DISCREPANCIES, THE DATES AND TIMES ON CFO ARE OFFICIAL.

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You can view start and end dates for homework on the calendar on the course home page.

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MyFinanceLab Format Sensitivities

The fill-in-the-blank questions on MyFinanceLab are VERY sensitive as to the format and accuracy of your answers. Please read the instructions for each question, because they tell you how to format your answer. Please be careful with rounding. If your answer is wrong due to the fact that it is not formatted as the question requests, then you will not get a mark for that answer. Do not include any symbols in your answers (i.e., $ or %). If you include a symbol you will not get a mark.

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Quiz and Exams

Name Midterm Quiz Final

Location Exam In-class through MFL Exam

Date Nov 12 Oct 4-6 TBA

Time TBA In Class TBA

Duration (mins) 120 80 150

Students, who miss the midterm and/or the in class quiz and have a valid medical note, will have the weight of their exam(s) moved to a cumulative final exam. The only other valid excuse for an absence is a death in the immediate family (i.e., parents, spouses, siblings and children). There is no deferred midterm exam. The quiz, midterm and final exam will all be conducted with/on laptops so students can use Excel. The exams will be open book. Students may review the online text or visit any website. Students may not communicate with anyone with any software (i.e., Facebook or Google Chat.) While the exams are open book, you should not rely on being able to look-up facts or techniques. The exams will have more questions than can reasonably be answered in the time allotted. Thus, the more you look up the fewer questions you can complete. Students who are better prepared and do less referencing will answer more questions and score higher. This is intentional. This design is intended to encourage deeper studying/learning and to discourage students from cheating. The downside is that it will yield a low average score. The quiz and exam scores will all be adjusted to a common mean such that the overall course mean is a B. Thus, you should not focus on your absolute exam score, but rather on your position in the distribution. Students who score the average on the quiz, midterm and final exams will earn a grade of B or better.

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Announcements and s

Major and minor course announcements will be posted on the CFO/MFL Course Home page under the “Announcements” heading. It is your responsibility to check the announcements every few days. Supplementary readings, old exams, formula sheets, the course outline and exam information can be ed from the “Document Sharing” area on the CFO/MFL web site.

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Academic Help

If you are stuck on a problem (or idea), then you can get assistance in a number of ways. Ask My Instructor The best way to pose a question is to use the “Ask my Instructor” button in MFL. Every homework question in MFL has an “Ask My Instructor” button. Click on that and the Pearson system will send an email to the TAs with your question and a link to the problem you are stuck on. The TAs will attempt to answer your question within one day. If you aren’t satisfied with the answer, then forward the email correspondence to your instructor. If a TA doesn’t feel comfortable answering a question, then he/she may escalate the question to an instructor. Email If you can’t use the ‘Ask My Instructor’ button, then you can send an email directly to the TAs by using the gmail : [email protected]. TA Office Hours Drop-in TA will be offered occasionally. The schedule will available in the “TA” Folder under Document Sharing on the MFL/CFO web site. How to Ask a Question A question needs three parts and won’t be answered unless you include all three. First, the original text of the question you are working on. (This is especially important if you are asking via email and not using the ‘Ask my Instructor’ button.) Second, your description of what you don’t understand (or think is incorrect). Finally, your work. In order to understand an explanation you need to have attempted an answer yourself. Don’t just ask to have the answer explained. If you ask that, then you will be referred back to the textbook. Your work must show the equations that you are using to solve the problem, a description of your solution approach (if necessary) and the values that you are plugging into the equation(s).

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MFL/CFO Technical

CFO technical is available at: http://247pearsoned.custhelp.com. There you can submit a request or chat online. You may have to create a in order to ask a question. To create an click on the 'Sign In' link in the upper right-hand corner. Telephone is also available at 1-800-677-6337.

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Calculators and Computers

Students must have access to a spreadsheet program on a laptop computer. Spreadsheets are the tool of choice for finance and ing professionals. Laptops will be allowed for the exams so that students can use spreadsheets on the exams. Students should consider purchasing an external monitor for their laptop. CFO is much easier to use with two monitors. With two monitors, the e-text, MyFinanceLab and a spreadsheet can be open and visible simultaneously.

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Schedule and Readings

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Topic Outline Introduction COC CB

Learning Objective For classes that start on R or F Intro, Cost of Debt and Equity (Review) Weighted Average Cost of Capital CB Techniques

Readings

0 1 2 3

Week S7-8 S 11-15 S 11-15 S 18-22

4 5

S 18-22 S 25-29

CB CB

Depreciation & Expansion Projects Depreciation & Expansion Projects

6 7

S 25-29 O 2– 6

CB CB

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O2–6

CB

Replacement Projects CB Refinements Projects with Unequal Lives In-Class Quiz: Capital Budgeting

Ch. 10.1 & 10.2 Ch.10.1 Ch.10.2 Ch. 10.3 Ch. 10.4

O 9 – 13

Ch. 1, Ch.6 &7 Ch. 11 Ch.9

Reading Week

9

O 16 – 20

Valuation

10

O 16 – 20

Valuation

11 12

O 23 – 27 O 23 – 27

Valuation Valuation

13

O 30 – N 3

Distributions

14

O 30 – N 3

Distributions

15

N 6 – 10

Distributions

16

N 6 – 10 November 12

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N 13 – 17

Capital Structure

18

N 13 – 17

19

N 20 – 24

20

N 20 – 24

Capital Structure Capital Structure Capital Structure

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N 27 – D 1

M&A

22 23 24*

N 27 – D 1 D4–D5 D6

M&A Review -------

Sales Forecasting and Basic F/S Forecasting Adv. F/S Forecasting Free Cash Flow DCF Valuation In-Class Activity: Value Whistler Blackcomb Holdings Inc. Dividends Dividends & Repurchases Repurchases & Splits Midterm Review Midterm Exam Measures of Leverage Effect of Leverage M&M Mechanics M&M (no tax), M&M Arbitrage Proof & M&M (with tax) M&M with a fixed D/V Leverage and Systematic Risk Static Trade-off Model Asset Substitution Debt Overhang M&A Lecture/Video: “The Anatomy of a Hostile Takeover” M&A : Valuation, Pricing & NPV Review Sessions for Final Class cancelled

Ch. 14.1 Ch. 14.3 Ch. 17.1 Ch. 17.2 Ch. 17.3 Ch. 17.4 Ch. 13.1 Ch. 13.2 Ch. 13.3 Ch. 13.3 Ch. 13.4

Ch. 12.1 Ch. 12.2 Ch. 12.3 Ch. 18.1 Ch. 18.2 Ch. 18.3

Ch. 20 Ch. 20

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Pearson Registration Instructions

To for BU 393 Fall 2017: 1. 2. 3. 4. 5.

Go to www.pearsonmylabandmastering.com. Under , select Student. Confirm you have the information needed, then select OK! now. Enter your instructor’s course ID: freire99654, and Continue. Enter your existing Pearson name and to Sign In.  You have an if you have used a Pearson product, for example: MyMathLab, MyITLab, MyPsychLab, MySpanishLab or Mastering, such as MasteringBiology.  If you don’t have an , select Create and complete the required fields.

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Select an access option.  Use the access code that came with your textbook or that you purchased separately from the bookstore.  Buy access using a credit card or PayPal .  If available, get 14 days temporary access. (The link is near the bottom of the screen.) From the confirmation page, select Go To My Courses. On the My Courses page, select the course titled BU 393 Fall 2017 to start your work.

7. 8.

To sign in later: 1. 2. 3. 4.

Go to www.pearsonmylabandmastering.com. Select Sign In. Enter your Pearson name and , and Sign In. Select the course tile BU 393 Fall 2017 to start your work.

To upgrade temporary access to full access: 5. 6. 7. 8. 9.

Go to www.pearsonmylabandmastering.com. Select Sign In. Enter your Pearson name and , and Sign In. Select Upgrade access from the course titled BU 393 Fall 2017. Enter an access code or purchase access with a credit card or PayPal .

For a registration overview, go to www.pearsonmylabandmastering.com/students/geted. Scroll down to Need a little help? and select a video.

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University and Course Policies 1. Academic Integrity/Misconduct (cheating): Laurier is committed to a culture of integrity within and beyond the classroom. This culture values trustworthiness (i.e., honesty, integrity, reliability), fairness, caring, respect, responsibility and citizenship. Together, we have a shared responsibility to uphold this culture in our academic and nonacademic behaviour. The University has a defined policy with respect to academic misconduct. As a Laurier student you are responsible for familiarizing yourself with this policy and the accompanying penalty guidelines, some of which may appear on your transcript if there is a finding of misconduct. The relevant policy can be found at Laurier's academic integrity website along with resources to educate and you in upholding a culture of integrity. Ignorance is not a defense. See: www.wlu.ca/academicintegrity 2. Special Needs: Students with disabilities or special needs are advised to Laurier’s Accessible Learning Centre for information regarding its services and resources. Students are encouraged to review the Academic Calendar. See: www.wlu.ca/page.php?grp_id=1365&p=5123 for information regarding all services available on campus. 3. Final Examinations – Students are strongly urged not to make any commitments (i.e., vacation) during the examination period. Students are required to be available for examinations during the examination periods of all in which they (See Academic Regulations – “Examinations” in the academic calendars) 4. Intellectual Property: The educational materials developed for this course, including, but not limited to, lecture notes and slides, handout materials, examinations and assignments, and any materials posted to MyLearningSpace, are the intellectual property of the course instructor. These materials have been developed for student use only and they are not intended for wider dissemination and/or communication outside of a given course. Posting or providing unauthorized audio, video, or textual material of lecture content to third-party websites violates an instructor’s intellectual property rights, and the Canadian Copyright Act. Recording lectures in any way is prohibited in this course unless specific permission has been granted by the instructor. Failure to follow these instructions may be in contravention of the university’s Code of Student Conduct and/or Code of Academic Conduct, and will result in appropriate penalties. Participation in this course constitutes an agreement by all parties to abide by the relevant University Policies, and to respect the intellectual property of others during and after their association with Wilfrid Laurier University. Student Food Bank | www.wlusu.com/food-bank/ All students are eligible to use this service to ensure they’re eating healthy when overwhelmed, stressed or financially strained. Anonymously request a package online 24-7. All dietary restrictions accommodated. Foot Patrol | 519.886.FOOT (3668) A volunteer operated safe-walk program, available Fall and Winter, daily from 6:30pm to 3am. Teams of two are assigned to escort students to and from campus by foot or by van. http://www.wlusu.com/foot-patrol/ Peer Connect | 1.866.281.PEER (7337)

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A confidential listening, referral, and information line available during evening hours to provide and resources. Sunday to Thursday, 12pm – 2am | Friday to Saturday 12pm – 3am http://www.wlusu.com/peer-help-line/ The Wellness Centre | 519-884-0710, x3146 The Wellness Centre s students’ physical, emotional and mental health needs. Located on the 2nd floor of the Student Services building, booked and same-day appointments are available Monday to Wednesday 8:30 am – 7:30 pm, Thursday to Friday 8:30 am-4:15 pm. : x3146, [email protected] or @LaurierWellness. After hours crisis available 24/7 - “Good 2 Talk” 1-866-925-5454.

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