Theory and practice of business finance with emphasis on asset valuation, the relationship between risk and return, and capital budgeting. MBA 506 recommended.
(1) To develop basic skills for evaluating financial performance of non-financial firms.
(2) To introduce the process of financial forecasting.
(3) To acquire valuation skills to price financial assets.
(4) To provide students with an understanding of the relationship between risk and return and to determine the appropriate required rate of return.
(5) To provide students with tools to perform capital budgeting analysis, including analysis and estimation of cash flows and application of different capital budgeting methods.
I. Financial Statement Analysis (1 week)
· Review of accounting statements: Balance Sheet, Income Statement and Statement of Cash Flows
· Financial ratios: Accounting-based and market-based ratios
II. Financial Planning and Growth (1 week)
· External funds needed
· Sustainable growth rate
III. Principles of Valuation (2 weeks)
· Time value of money
· Loan amortization
IV. Valuation of Financial Assets (2 weeks)
· Fixed-income securities: Straight and option-embedded bonds
· Equity securities: Preferred and common stocks
V. Risk and Return (2 weeks)
· Risk: Systematic and unsystematic
· Portfolio diversification
· Capital Asset Pricing Model
· Cost of Capital
VI. Capital Budgeting (2 weeks)
· Alternative capital budgeting methods: payback period, discounted payback period, net present value, profitability index, internal rate of return
· Incremental cash flows
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