Part 1: Financial markets are places where suppliers of capital (‘investors’) and consumers of capital (‘firms’) meet and trade. The first part of this course examines the techniques which both investors and firms use to deal with cash flows that occur at different points in time; we will apply these skills by examining valuation problems across various types of capital markets. We will then go on to introduce the concept of risk and uncertainty, which is central to an understanding of finance. We introduce a measure of risk, and develop a model of how this risk measure corresponds to a level of expected return on an asset or project. We discuss the integration of this model of the risk-return trade-off with our valuation techniques.
Part 2: In the second part of the course we build directly on the tools developed in the first part and we focus on the decision-making process within firms. Specifically, we focus on the value creation process inside firms and the value drivers for modern corporations. We discuss how to assess financial needs, profitability, and the value implications of the investment decision of firms. This will lead us to identify and forecast cash flows for individual projects and to calculate the cost of capital for specific projects and for a firm as a whole. At the end the course, we will have developed a tool flexible enough to be used for valuation in the context of capital budgeting, but also for general corporate valuations, such as complex M&A transactions.
Watch the below video for a brief introduction to the Finance course: