Learning outcome

The students should be able to:

• find the decision relevant cash flow for typical projects, including investments and leasing
• find the decision relevant cash flow for typical financing projects
• perform all basic interest calculations, e.g. present value, future value, annuities, amortization of loans etc.
• find the effective annual interest rate for various financing alternatives
• compute the net present value (NPV) and the internal rate of return (IRR) for projects, and know how the NPV and IRR can be used as decision criteria
• find the relevant required rate of return for investments with various risk profiles
• understand basic financial theory, including the relationship between leverage, risk and required rate of return

Course Description

The following topics will be covered:

• Basic principles of investment and finance
• Calculation of decision-relevant cash flow, including the impact of working capital
• Correct value assessment methods
• Compound interest, present and future value, annuities and other issues in basic financial mathematics
• Tax and inflation – effect on cash flows
• Risk assessment, portfolio theory and the capital value model
• Sources of finance for the firm

Assessment Methods

Written examination, 4 hours.

Minor adjustments may occur during the academic year, subject to the decision of the Dean