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To make the student capable of valuating companies based on capital structure and risk based on portfolio, investment and option theory. Being able to optimize company capital structure and evaluating long term debt.
Relations to other courses
The course builds on the understanding of : Financial Accounting, Economics, statistic, Investments
Course background:
Optimization of company value through adjustments of capital structure, risk profile and investments are crucial tasks to maintain and increase competitive advantage and create possibilities to acquire or merge at profitable terms. The course makes the student capable of evaluation investment and finance decisions based on the consequences on company value.
THE CENTRAL ISSUES OF THE COURSE:
The introduction is a short description of the financial system - markets, institutions, and functions. This includes the companies' financial information to the market as well as the market's information to companies and investors about interest rates and stock prices.
The first main topic is Company Valuation and the Cost of Capital. The valuation process includes the impact of a firm's growth opportunities - both constant growth and intermediate high growth - as well as its capital structure. This part of the course describes the work of Modigliani and Miller, the founding fathers of Corporate Finance.
The other main topic is risk, return and portfolio theory: How to measure the portfolio risk impact from a specific firm, and how to differentiate the market's general cost of capital between firms, based on how much risk each firm adds to the market portfolio. This part of the course describe the CAPM, a core theory in financial market pricing.
Next topic is the company's external financing short and long term debt, with a focus on mortgage loans
Final topic is futures and options, how to price them and how to use them in a firm's operational risk management. We also analyze how to spot and value the options imbedded in investment opportunities (real options).
AU-IBT's strategic value : Proximity to business.
Proximity to business is ensured through inclusion of real companies and cases in examples and exercises and the use of guest lecturers. Information will acquired from stock exchanges, national banks and other real life sources.
Financial Accounting, Economics courses, Statistics, and Costing theory & Capital Budgeting
Simon Torp
Lectures and exercises
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A 25 page report+ supplements and a well functional excel spreadsheet based on a case in the two courses management accounting and corporate finance. The report is made in groups of 3 - 4 students. Based on the report an individual 20 minutes oral exam in one of the courses is conducted. The examination course is revealed 24 hours before the exam.
Re-exam
A new case rapport in groups and a new oral exam. If less than 5 students attend the re-exam the case rapport and oral exam can be replaced with a 40 minutes oral exam in both courses..
