Course Learning Objectives
The objective of the Finance Pre-Program is to introduce participants to the basic principles of modern corporate finance. The content is mainly theoretical although numerous practical applications will be pointed out and illustrated.
The course contents follow:
Macroeconomics and Financial Markets: Macroeconomic Variables. Growth and Recessions. Central Bank and Interest Rates. Fiscal and Monetary Policies. Public Deficit and Public Debt.
Financial Instruments: Main financial instruments. Direct and indirect investments. Government and private instruments. Money market. Bonds. Stocks. Derivatives. Pension funds. Mutual funds. Alternative investments: Real estate. Private equity. Hedge funds and others.
Time Value of Money: Basic concepts of investment selection. Present and Future Values. Net Present Value. Internal Rate of Return. Annuities and Perpetuities. Simple and compound Interest. Continuous compounding.
Valuation Techniques: Alternative methods of investment selection. Payback, Average Return on Book Value. Internal Rate of Return. Profitability Index. Contrast with the Net Present Value rule.
Topics on Valuation: Special cases of valuation. Capital rationing. Projects with different horizon. Replacement Decisions.
Risk and Return: Return and Risk Statistics. Diversification. Capital allocation between the risky asset and the risk-free asset. The Markowitz portfolio selection model. The Capital Market Line and the Capital Asset Pricing Model.
Cost of Capital: Theory of Capital Structure and WACC. Combination of WACC and the Capital Asset Pricing Model. Capital Structure and WACC in practice.
Firm Valuation: Introduction. Reasons for performing a valuation. How value is created. Different approaches to value a firm. Static valuation. Multiple valuation. Dividend discounting. Discounted cash flows. Contrast and complementarity between multiple valuation and discounted cash flows. Cash flow extraction from the pro-forma financial statements. Horizon and terminal value. The value of flexibility: decision trees and the concept of real options.
Bibliography
The reference textbooks will be:
Krugman P., Wells, R. 2012, "Macroeconomics?, 3rd Edition, Worth Publishers.
Ross S., Westerfield R., Jaffe J., Jordan B. D. 2008, "Modern Financial Management?, 8th Edition, McGraw-Hill.
Brealey R., Myers S., Allen F. 2008, "Principles of Corporate Finance?, 9th Edition, McGraw-Hill.
Bodie Z., Kane A., Marcus A. 2009, "Investments?, 8th Edition, McGraw Hill.
Several copies of these books are available at ESADE's library.
Besides these books the students will count with class slides and exercises. This material together with announcements and general course information will be available in the Moodle platform.
