This course introduces students to the subject of finance and is a continuation of the Business Finance A module. The course will cover the specific areas relevant to the financial management and valuation. The course is designed to introduce students to portfolio management and risk management areas with a view to providing students with knowledge that can be developed further to degree level.
Debt and Equity Valuation
What is the share price? What is the bond price? Introduction to the discount cash flow models for the ordinary share and bond valuation.
Investment Appraisal Methods.
The main investment appraisal techniques. The payback method. The return on capital employed method. The net present value method. The internal rate of return method. Profitability index and capital rationing.
Cost of capital and its importance.
Cost of different sources of finance. The weighted average cost of capital and its application. Limitations with use of the weighted average cost of capital.
Introduction to Portfolio Theory
The measurement of risk. The concept of diversification. Investor attitudes to risk. Main aspects of the portfolio theory.
Introduction to Risk management
Interest and exchange rate risk. Internal risk management. External risk management. Introduction to the derivatives (forwards, futures, and options). Introduction to the forward and money market hedging strategies.
The module will be assessed by a group project where students model finance topics using spreadsheet. This could be in the area of Fixed Income. Also students will be asked to acquaint themselves with a relevant literature. This accounts for 20% of the overall grade. The end of year exam accounts for 80% of the student’s total mark and students will have to be able to appraise financial theory, examine, and prove practical problems.
| Module Content & Assessment | |
|---|---|
| Assessment Breakdown | % |
| Formal Examination | 80 |
| Other Assessment(s) | 20 |