Delivered at:: Department of Finance

Course type:: Elective course

When:: 4 year, 1, 2 module

Instructor

Nazarova, Varvara

Full Syllabus

Abstract

The course aims at understanding of basics of investment process. The students will learn - the principles of investment analysis - methods of calculation of different investment indices - models of formation of portfolio of investments - principles of selection of sources of investments.

Learning Objectives

To provide students with theoretical knowledge in the field of investment, investment activity at the level of the main groups of investors and the investment mechanism in various forms of its implementation as a basis for the subsequent study of specialization disciplines.
In course how industries and companies can be analyzed in a competitive framework will be explained. Further, how corporations can be valued using models based upon projections of earnings and cash flows will be explained. We look “dividend discount models” as well as “free cash flow” models, where future cash flows and enterprise value are modeled on more explicit assumptions about firms’ “value drivers”. We also describe and calculate alternative measures of residual earnings and discuss the use of “residual income” models, including the widely used EVA™ model. Finally, how various valuation techniques can be put to work in merger, acquisition, restructuring or divesture situations will be showed. Topics include valuation techniques and their application, capital markets and cost of capital; and project appraisal methods and their application.

Expected Learning Outcomes

Know the patterns of functioning of a modern economy at the macro and micro levels
To know the essence of the economic, organizational and social changes that occur in domestic companies with a shift of emphasis from production to marketing principles of planning and management
Be able to build a model of financial management, based on a system covering all aspects of the activities of a modern company with the release levels and planning horizon (e.g. using KPI)
Explore the possibilities of software for creating and using the valuation;
Gain knowledge and skills in order to make management decisions in this area
Know and be able to use special terminology of financial strategic management
Gain knowledge and skills in order to make management decisions in this area
Be able to build a model of financial management, based on a system covering all aspects of the activities of a modern company with the release levels and planning horizon (e.g. using KPI)
Know and be able to use special terminology of financial strategic management.

Course Contents

Topic 1. Corporation and the investment process. Corporate investment management system
Corporation and investment environment. Corporate investment system. Corporate investments, their role and functions. Typology of investments, investment activities in the company. Corporate investment management system. Financial models of investment activities. Corporate investment strategies. Strategic investment planning models (SWOT analysis, GAP analysis).
Topic 2. Designing cash flows of an investment project
Economic content and types of project cash flows. Classification of cash flows. Rates (profiles) of streams. Incremental cash flows. Relevant cash flows. Accounting profit and cash flows. Taxes and cash flows. Inflation and cash flows. Cash flow structure of the project. Cash flows from production, investment and financial activities. Cash flow planning. Forecast (report) on profit and loss. Cash flow forecast (statement). Forecast balance (report).
Topic 3. Analysis of the effectiveness of capital investments
Investment project evaluation criteria. Assessment of the financial viability of the project - analysis of the liquidity of the project during its implementation. Assessment of the effectiveness of investments - an analysis of the potential ability of the project to maintain the purchasing value of the invested funds and ensure their growth. The system of indicators used in the international and business practice of the Russian Federation. Capital efficiency indicators. Indicators of the financial assessment of the project. Integral performance indicators.
Topic 4. Investment projects and methods of financing them
The concept of an investment project and their classification. Development phases of an investment project. The content of investment decisions. Criteria for evaluating investment projects. Sensitivity analysis. Methods of financing investment projects. Budget financing, self-financing, corporatization, debt financing, blended financing, project financing, leasing, etc. Self-financing. Essence. The role of tax and depreciation policies in strengthening the principles of self-financing investments.
Topic 5. Evaluation of projects with unequal deadlines.
Optimization of the investment budget Lecture: The concept of projects with unequal duration. Chain repeat method. Endless chain repeat method. Equivalent annuity method. The concept and conditions for the application of temporal and spatial optimization. Determination of the discount rate. Conditions of application of discount rates
Topic 6. The method of real options when evaluating investment projects
Assessment principles Choice of technique and method Analysis of the current market structure Choice of parameters, rates, period Calculation. outputting the final cost report Consideration of the possibility of applying the method Practical calculation example Real options concept. Binomial model. Black-Scholes model. Assessment of management flexibility. Options for creating a new product (technology). Option to terminate the project. Features of the application of methods for assessing the effectiveness of investments in corporations.
Topics 7. Evaluation of the project in conditions of uncertainty and risk
The concept of uncertainty and risk. Features of the evaluation criteria under uncertainty. Investment risk, general concepts. Investment risk assessment. Methods for risk analysis of investment projects. The economic content of the corporate investment portfolio. Typology of corporate portfolios.
Topic 8. Framework for Corporate Valuation
The concept and essence of valuation. Subjects and objects of valuation. Specificity of business as an object of evaluation. Valuation objectives and types of value. Factors affecting the value of business. Principles of business valuation. Approaches and methods used for business valuation. The evaluation process. Features of business valuation in the course of crisis management
Topic 9. Value Creation Company
Target settings and standards. Corporate portfolio management. Study of cost factors. Develop a strategy for creating value for business units. Regulatory control of performance. Forecasting of future cost: parameters, evaluation criteria, methodic shortcomings, evaluation of two-stage models. Determination of the duration and degree of detail of the forecast. Identification of strategic prospects for the company. Development of scenarios. Actual data as a guide for forecasting.
Topic 10. Practice in companies valuation
Principles of evaluation. Choice of methodology and method. Analysis of the current market structure. Choice of parameters, rates, period. Calculation. derivation of the final report at cost. Consideration of the possibility of applying the method. Practical example of calculation

Assessment Elements

current activities (quiz)
Quiz is carried out at the seminar. The text of the work and the rules for performing the work are sent to the corporate mail of each student. The period for performing the work is determined. The student has the opportunity to complete the test in the sent file or print the document, write the solution and send the scanned work. The time for performing the work is assigned before starting work. Work solutions must be laid out in a special folder created in the LMS, no later than the time suggested at the beginning of the test
class work
homework
the final written examination
Exam is carried out at the seminar. The text of the work and the rules for performing the work are sent to the corporate mail of each student. The period for performing the exam is determined. The student has the opportunity to complete the test in the sent file or print the document, write the solution and send the scanned work. The time for performing the work is assigned before starting work. Work solutions must be laid out in a special folder created in the LMS, no later than the time suggested at the beginning of the test.

Interim Assessment

Interim assessment (2 module)
0.1 * class work + 0.2 * current activities (quiz) + 0.2 * homework + 0.5 * the final written examination

Bibliography

Recommended Core Bibliography

Corporate finance: theory and practice, Damodaran, A., 2001
Investment valuation : tools and techniques for determining the value of any asset, Damodaran, A., 2012
Valuation: measuring and managing the value of companies, Copeland, T., 2000
Инвестиционные рычаги максимизации стоимости компании. Практика российских предприятий, Теплова, Т.В., 2007

Recommended Additional Bibliography

Инвестиции : учебник для бакалавров, Теплова Т.В., 2012
Корпоративные финансы: перспективы и реальность. Управление стоимостью компании: Сборник статей, , 2006

Bachelor’s Programme 'Economics'

Study Office

Assets Evaluation and Investment Analyses