Capital Budgeting Decisions 2600-DSFRdz/w3zifOPI
1. The Essence of Investments. Investment Decisions in Financial Management. Long-term, Strategic Consequences of Undertaken Investments. Investment Implementation Formulas. Project Finance, Corporate Finance.
2. Time Value of Money Analysis under Risk Conditions (Monte Carlo Analysis). Fixed and Increasing Annuity Payments. Perpetuities. Continuous Compounding.
3. Simple Methods of Investment Efficiency Assessment – Advantages and Disadvantages. Investment Evaluation vs. Whole Enterprise Evaluation. Bank Methods of Investment Assessment.
4. Criteria for Choosing Long-term Sources of Financing for Enterprises and Investment Projects.
5. Cost of Capital Valuation. Components of Capital Cost. Debt. Common Equity. Cost Calculations Using Statistical Analysis. Outcome Evaluation. Sector-Specific Capital Costs. Weighted Average Cost of Capital. Identification of Significant (Interest-bearing) Capitals. Analysis of Capital Structure in the Valuation of Capital Costs.
6. Valuation of Incremental Cash Flows. Cash Flows for Different Stakeholder Groups: Owners, Lenders, All Capital Suppliers.
7. Project Evaluation Criteria: NPV (Net Present Value), APV (Adjusted Present Value), IRR (Internal Rate of Return), Modified Internal Rate of Return (MIRR), Discounted Payback Period (DPP). Accounting Rate of Return (ARR).
8. Multiple Internal Rates of Return (MIRR). Unusual Distributions of Investment Cash Flows.
9. Project Analysis for Different Operating Periods. Abandonment of Investment Projects. Modification of Cash Flows.
10. Assessment of Investment Decisions Made Under Risk Conditions. Certainty Equivalent. Decision Trees. Scenario Analysis. Simulation Analysis (Monte Carlo Analysis). Investment Project Risk Assessment.
11. Identification of Option Situations in Investment Projects. Strategic Project Analysis. Flexibility Evaluation.
Type of course
Mode
Learning outcomes
After completing the course, the student:
In the scope of knowledge:
• Possesses and understands advanced terminology related to the management of financial institutions in the field of economics and finance, as well as in supplementary disciplines (management and quality sciences, legal sciences). (S2_W01).
• Knows and understands, at an advanced level, the principles, procedures, and practices pertaining to the management of financial institutions. (S2_W02).
• Has an advanced understanding of economic theories and models relevant to the management of financial institutions. (S2_W03).
• Understands, at an advanced level, technological, social, political, legal, economic, and environmental processes and phenomena, and their impact on the management of financial institutions (S2_W05).
In terms of skills:
• Capable of applying the theory of economics and finance, as well as supplementary disciplines (management and quality sciences, legal sciences) to identify, diagnose, and solve problems related to the management of financial institutions, using appropriate source selection and adapting existing methods (S2_U01).
• Able to correctly interpret technological, social, political, legal, economic, and environmental processes and phenomena and their impact on the management of financial institutions, using appropriate source selection (S2_U02).
• Capable of independently and collaboratively preparing analyses, diagnoses, and reports on the management of financial institutions and communicatively presenting them, including in English, using information and communication tools (S2_U03).
• Skilled in planning and organizing individual and team work (S2_U04).
• Possesses the ability for self-education and improving acquired qualifications (S2_U05).
In terms of attitudes
• Prepared to evaluate and critically approach situations and phenomena related to the management of financial institutions (S2_K01).
• Ready to adhere to professional ethical standards in managing financial institutions (S2_K02).
Assessment criteria
• Homework – Excel models - 20%, i.e., 20 points.
• Written final exam (with required attachment of calculations for numerical answers) – in a stationary form - 80%, i.e., 80 points.
Bibliography
Basic literature:
• Cieślik R., Postuła M. (red.) Projekty inwestycyjne. Finansowanie, budżetowanie, ocena efektywności, Difin, Warszawa 2016
Supplementary literature:
• Rogowski W. Rachunek efektywności inwestycji, Wolters Kluwer, 2013
• Rutkowski A. Zarządzanie finansami (wyd. 4 zm.), PWE, Warszawa 2016
• Selected articles from „Journal of Applied Corporate Finance”, “McKinsey on Finance”.
Additional information
Additional information (registration calendar, class conductors, localization and schedules of classes), might be available in the USOSweb system: