BØA204 Corporate Finance

Contents and structure

The aim of this course is to give students insights into issues and methods related to a company’s investments and financing decisions. The course describes how relevant cash flows for investment projects and loans are set up and valued in a consistent manner. Analysis of uncertainty and risk in a projects are key issues in this course. The course will also develop students' skills in the use of spreadsheets with a focus on financial models and analysis.

Contents

• budgeting of decision-relevant cash flows

• discounting and interest calculation• profitability calculations of investment projects

• tax and inflation's impact on cash flow and required rate of return

• cost calculations of financing alternatives: financing sources, borrowing costs and loan types

• handling project uncertainty

• risk assessment, portfolio theory, capital asset pricing model

• structuring of economic models in spreadsheets

• financial analysis using Excel

Learning Outcome

Knowledge

After completing the course, the student should

• understand key concepts related to investment and financing decisions

• understand the basis of the time value of money

• understand the basis for assessing risk in investment projects and portfolios

• have an overall understanding of the value of flexibility in investment projects

Skills

After completing the course, the student should be able to:

• budget relevant cash flow for investment and financing projects

• perform profitability calculations based on net present value taking into account inflation, debt financing and risk with associated required rate of return

• calculate internal rate of return

• apply various methods to calculate profitability of investment projects and economic life of fixed assets

• Calculate the effective interest rate on loans and value bonds

• analyze project risk and portfolio risk

• provide risk-adjusted return requirements to estimate the opportunity cost of capital

• use the capital asset pricing model to calculate risk premium and risk-adjusted required rate of return (cost of capital) • analyze the risk in investment projects when the total risk is relevant

• structure financial models in Excel spreadsheets and use Excel for financial analysis and reporting

General competence

After completing the course, the student should

• be able to reflect critically on key issues and assumptions related to investment and financing projects

• understand the impact of investments and borrowing

Entry requirements

None

Recommended previous knowledge

BØA111 Mathematics for economists, BØA113 Introduction to business economics and accounting, BØA115 Statistics for economists

Teaching methods

Lectures and independent work with exercises, including the use of Excel spreadsheets on PC.

Compulsory learning activities

2 assignments must be approved before the exam can be taken.

Assessment

Written school exam, 4 hours. Exams can be held on a digital exam system. Grade scale A - F

Examination support material

Formula collection attached to the exam assignments.

All calculator models are allowed, with the following exceptions:

• the calculator should not have the possibility of reception / transmission
• the calculator should not be able to process symbolic mathematical expressions
• the calculator should not be connected to the electricity nettwork
• the calculator must not make any noise

More about examination support material