Assessment of company development projects 2600-MFBRz2zfpOPRP
1. Foundation and Key Concepts of Project Investment Analysis
1.1 The nature and Types of Investments
1.2 Investments and Corporate Strategy: Aligning Investment Decisions with Overall Strategy
1.3 Corporate Finance, Project Finance and Public Private Partnerships Fundamentals
1.4 Sustainable Development Concept and its Significance for Budgeting and Evaluation of Development Projects
2. Capital budgeting – Financial Modeling of Investment Projects
2.1 Steps of Capital Budgeting Process
2.2 Inputs for an Investment Project’s Financial Model
2.3 The List of Capital Budgeting Bad Practices - Avoiding Bad Modeling Practices and Creating Effective Auditing Processes
3. Key issues in Appraising Projects
3.1 Classification of Cash Flow and Its Importance in the Investment Decision-Making
3.2 The Time Value of Money and Its Applications in Project Valuation
3.3 Equity and Debt as Long-Term Sources of Corporate Financing – Risk Analysis
3.4 Importance and Use of Weighted Average Cost of Capital (WACC) and Its Applications in Project Valuation
3.5 Modeling Cash Flow with Sustainable Development Principles in Mind
4. Application of Discounted and Traditional (Undiscounted) Methods for the Evaluation of Investment - Commercial vs. Social Cost-Benefit Analysis
4.1 Fixed Costs and their Importance for Investment Decision Making
4.2 The Application of Discounted and Traditional (Undiscounted) Methods for the Evaluation of Investment Projects
4.3 Reinvestment Assumption
4.4 Ranking Mutually Exclusive Projects
4.5 Project Finance Valuation Techniques - The Use of Free Cash Flow to Calculat ‘Cover Ratios’ including: Annual Debt Service Cover Ratio (‘ADSCR’), Loan-Life Cover Ratio (‘LLCR’), The averages of the ADSCR and LLCR over the term of the debt, The project-life Cover Ratio (‘PLCR’).
4.6 Applications of Real Options in Investment Appraisal
5. Identifying and Mitigating Risks in Development Projects, Including Sustainable Development GoalsThe Risk-Adjusted Method
6. The use of real options in assessing the effectiveness of development projects.
7. Evaluation of the Efficiency of Foreign Investments (FDI).
Ris
Type of course
Mode
Learning outcomes
Upon completion of the course, the student
In terms of Knowledge:
• Knows and understands key concepts in investment appraisal, such as a development venture, capital budgeting, free cash flow (FCF), and the weighted average cost of capital (WACC). (S_W01) (K_W01).
• Knows and understands the fundamental differences in financing structure, risk allocation, and project appraisal between ventures implemented under the corporate finance formula versus the project finance formula. (S_W02) (K_W02).
• knows and understands the assumptions, advantages, and disadvantages of both basic investment project appraisal methods (payback period, NPV, IRR, MIRR) and non-conventional methods of investment project evaluation (real options). (S_W03) (K_W03).
• Knows and understands methods for identifying, diagnosing, and solving problems related to project implementation and efficiency assessment, including risk factors (S1_W05) (K_W05).
In terms of Skills:
• Is able , based on provided assumptions, to build a financial model for a project, forecasting its free cash flows (FCF) and calculating the weighted average cost of capital (WACC). (S_U01) (K_U01).
• is able to calculate and interpret key profitability metrics (NPV, IRR, MIRR, payback period) and, based on them, formulate a clear recommendation regarding project acceptance or rejection, including in the case of mutually exclusive projects. (S_U02) (K_U02).
• is able to conduct a sensitivity analysis to identify a project's key risk drivers and assess their impact on its profitability (NPV). (S1_U03) (K_U03).
• is able to apply project finance-specific metrics for assessing debt service capacity (e.g., DSCR, LLCR) to analyze a project's credit risk. (S1_U03) (K_U03).
• is able, as part of a team, to prepare a comprehensive appraisal report for a development venture, including financial analysis, risk assessment (including ESG risks), and a justified decision recommendation. (S1_U04) (K_U05).
• is able to assess the risk and profitability of development projects under market uncertainty. (S1_U05)
• is able to integrate financial data for strategic business decision-making. (S1_U06)
• is able to synthesize analytical results to recommend optimal investment alternatives. (S1_U07)
• is able to design non-standard tools for valuing and controlling business ventures. (S1_U08)
In terms of Attitudes:
• is ready to critically evaluate the assumptions underlying a financial analysis and to defend their own recommendations based on substantive arguments, considering both financial and non-financial (sustainable development) perspectives. (S_K01) (K_K01).
• The student is ready for active and responsible cooperation within a team to solve a complex decision-making problem, communicating effectively and sharing tasks. (S_K02) (K_K02).
• is ready to think and act in an entrepreneurial manner, which is demonstrated by proactively seeking value creation opportunities and identifying and assessing risks associated with new ventures. (S_K04) (K_K02).
Assessment criteria
The final grade will be based on:
a multiple-choice test, and
a project – group work (3–4 students).
The contribution of each component to the final grade will be as follows:
test – 80%
project – 20%
Bibliography
Basic Literature:
1. Anna Chmielewska, Rafał Cieślik ,Mariusz Lipski, Marta Postuła (2023), Projekty inwestycyjne. Jak nie wpaść w pułapkę (nie)zrównoważonego rozwoju, Difin.
2. Rafał Cieślik, Marta Postuła (red. nauk), (2016). Projekty inwestycyjne. Finansowanie, budżetowanie, ocena efektywności, Wydawnictwo: DIFIN
Supplementary Literature:
3. Paolo Taticchi, Melissa Demartini (2020) Corporate Sustainability in Practice: A Guide for Strategy Development and Implementation. Springer Nature.
4. Rogowski W. (2013). Rachunek efektywności inwestycji - Wyzwania teorii i potrzeby praktyki, Wydawnictwo: Wolters Kluwer
5. Gatti s. (2013), Project Finance in Theory and Practice: Designing, Structuring, and Financing Private and Public Projects, Academic Press
6. Bodmer E. (2014). Corporate and Project Finance Modeling: Theory and Practice, Wiley
7. Baker H.K (editor)., English P. (editor), (2012). Capital Budgeting Valuation: Financial Analysis for Today's Investment Projects, Wiley
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