Course Details

Course Information Package

Course Unit CodeAFIN102
Course Unit Details
Number of ECTS credits allocated5
Learning Outcomes of the course unitBy the end of the course, the students should be able to:
  1. Calculate detailed cash flow statements for net present value analysis and apply present value analysis in various contexts
  2. Calculate financial ratios of firms and critically analyze a company’s leverage, liquidity, efficiency, profitability and market value of the firm
  3. Apply DuPont analysis for understanding the sources of differences between firms’ profitability
  4. Explain the use of Capital Asset Pricing Model for capital budgeting problems and the calculation of required investment returns
  5. Explain how the tax benefits of debt exist and describe theories of capital structure
  6. Calculate the present value of a firm using the weighted average cost of capital
  7. Relate firm valuation using weighted average cost of capital with valuation of the firm using the adjusted present value approach
  8. Enumerate the issues involved in working capital management and apply simple-practical models for inventory and credit management
Mode of DeliveryFace-to-face
Recommended optional program componentsNONE
Course Contents

Calculation of cash flows: Income and taxes calculation, cash flow statement, depreciation and working capital adjustments, book value of assets and taxes on sale of asset, and opportunity cost adjustments in cash flow statement

Applications of present value: Choice of assets with different economic lives using the equivalent annual cost approach, choice of optimal timing of investment in the present value context

Financial Analysis and Planning: Categories of financial performance ratios (leverage, liquidity, efficiency, profitability, market based),calculation of different ratios, DuPont analysis of profitability, financial planning using ratio analysis, sustainable growth and dividend discount model with growth

Risk and return: Expected return and risk of a portfolio and diversification benefits, the Capital Asset Pricing Model (CAPM) and beta risk, applications of CAPM for project evaluation using discounted present value

Financing and the cost of capital: Miller-Modigliani theory and the value of the levered firm with debt tax shields, the weighted average cost of capital, the value of equity and debt, the impact of debt increase/decrease on the required returns of equity holders, and the adjusted present value approach

Other issues in financing: International patterns in corporate financing, types of equity and debt, convertible and callable debt and their use as opposed to traditional debentures, rights issues versus new share issues

Working capital management: Issues involved in working capital management, inventory management using the Economic Order Quantity model, credit quality and terms of sale (duration, discount), the decision to prepay or delay credit payment, factoring approach for collecting receivables

Recommended and/or required reading:
  • Brealey, R., Myers, S., and A. Marcus, Principles of Corporate Finance, McGraw Hill, 2010
  • Copeland, T., F. Weston , K. Shastri Financial Theory and Corporate Policy, Addison-Wesley, 2004
Planned learning activities and teaching methodsThe taught part course is delivered to the students by means of lecturers, conducted with the help of computer presentations and the use of the board. Lecture notes and other course material like spreadsheet examples are available to students through the web.
Assessment methods and criteria
Final Exam60%
Language of instructionEnglish
Work placement(s)NO

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