Corporate Finance

Training Objectives

To effectively manage financial resources, students will learn how discounting and capital budgeting techniques help managers decide which projects should receive funding. We will also consider the limitations of NPV analysis and ways to adjust decisions to accommodate these pitfalls. Given the importance of options in the financial sector and the prevalence of stock options in executive compensation, we discuss how to value these
instruments and the important role they play in risktaking. Students will integrate the above perspectives in making resource decisions. To make such decisions, students will apply analytical skills drawing on finance to assess the profitability of projects, while weaving into their decisions a consideration of power and influence.

Deliverables

The course will begin with a review of basic financial concepts and enterprise valuation. We will then move on to apply these tools in a case context. The core of the course will revolve around applications in DCF valuation and real options. The course will cover the famous Black-Scholes option pricing model and use it in the context of valuation. Understanding the DCF valuation techniques and option pricing methods is essential but of most importance is understanding the context in which these methods are to be applied.
Graduates of this seminar will be able to:

  • Participate in discussions and decision making with finance professionals
  • Different capital budgeting techniques and their pitfalls and problems
  • Making decisions with NPV and capital budgeting
  • Basic understanding of the concept of the law of one price
  • Limitations of and problems with NPV: Sensitivity and scenario analysis
  • Review of diversification and portfolio variance calculations
  • Basic introduction to the efficient set and the CAPM
  • Calculating WACC
  • Measuring and estimating betas
  • Learning the basics of financial options and stock options

Key Concepts

Time value of Money / Stocks and Bonds

  • Compounding / discounting
  • Net Present Value
  • Perpetuities, Annuities
  • NPV and capital budgeting
  • Limitations of NPV
  • Other valuation methods: payback period,
  • Internal Rate of Return, Pros and Cons

Capital Budgeting

  • Incremental cashflows
  • Opportunity costs, Sunk costs
  • Depreciation, Salvage value
  • Net working Capital
  • Inflation, time horizons
  • Risk Analysis

Risk & Returns

  • Return on equity
  • Risk, diversification and portfolios
  • CAPM: Weight Average Cost of Capital (WACC)
  • Scenario analysis and sensitivity analysis

Adjusted Present Value

  • Alternate valuation methods: multiples, etc.
  • Weaknesses with standard valuation methods
  • APV Valuation

Options/Real Options

  • Call and put options
  • Pricing options
  • Using options in capital budget decision making
Globalinx Corp