Examine the finer points of investing, financing and capital budgeting.
Duration: 8 weeks
In FINA 6101 Techniques in Financial Decision Making, it will become apparent that company-level financial decisions are usually about either investing or financing. The goal driving either type of decision is to maximize value. You will learn how to analyze primary financial statements and use tools such as Market Value Added (MVA), Economic Value Added (EVA) and Return on Capital (ROC) to determine the underlying health of a company. Time-Value-of-Money (TVM) helps translate cash flows from one period to another. You will analyze the use of TVM in making dollar-value comparisons across time, such as present values of lump sum amounts, perpetuities, annuities, growing perpetuities, growing annuities and unequal cash flows. You will then see how this technique applies to bond valuation and explore the relationship between bond prices and interest rates.
Your exploration of interest rates will include their term structure and the role that Yield to Maturity (YTM) and other factors play in determining rates. You will explore equities and learn how valuing stocks differs from valuing bonds. Investors need to be induced to hold risk with the promise (or possibility) of earning higher returns. You will analyze the concept of risk and build a theory that relates risk to a required return for holding such risk, such as the risk premium — an inducement to invest in stocks and bonds instead of risk-free U.S. government debt instruments. Portfolio diversification can help mitigate risk and you will learn to use the concept of beta, a measurement of a stock’s risk in relation to the market as a whole. You will examine the application of the Capital Asset Pricing Model (CAPM) and other tools for pricing risky assets.
What You Will Learn in FINA 6101
Capital budgeting is, in essence, deciding which long term activities (or projects) to undertake. You will examine the rules and tools that facilitate capital budgeting, such as the Net Present Value (NPV), payback period, book rate of return, and Internal Rate of Return (IRR) methods. You will also consider capital rationing for projects with limited capital. Cash flow for a capital budgeting project will be considered as you also look at complex capital budgeting problems based on varied timing of alternatives and inflation. Cost overruns, missed revenue targets and changing markets can affect any budget and you will see how to incorporate change into a capital budget, using tools such as sensitivity analysis and break-even analysis. In considering the link between corporate strategy and finance, you will evaluate the interaction of economic rent, market prices, competitive advantages and the NPV analysis in relation to capital budgeting.
You will choose a public company to thoroughly research. Applying concepts learned throughout this course, you will prepare a detailed paper that will include a company overview, competitive overview, financial overview, and performance outlook.
Not all value-creation comes from a company's operations. Corporations can finance with debt and/or equity. The amount of each of these funding sources is known as the company’s capital structure. You will examine how corporations issue securities and what other options they have for financing. You will also explore the Nobel Prize-winning work of Modigliani and Miller (MM) who devised two propositions for evaluating capital structure and financing issues. Using the MM model, you will consider corporate and personal taxes, costs of bankruptcy, financial distress, asymmetric information, and agency costs.
Throughout this course, topics may include but are not limited to:
- Financial Foundations
- Determinants of Value
- Risk and Return
- Capital Budgeting
- Sources of Financing
Course Learning Outcomes
Upon successful completion of FINA 6101, you will be able to:
- Examine the functions of capital markets and their impact in financial management decisions.
- Examine valuation techniques used by corporations in assessing investments.
- Analyze how and why corporations make decisions regarding capital budgeting, raising capital, managing working capital and the nuances of mergers.
- Analyze financial data and trends that guide corporate decisions.
- Apply financial analysis skills to identify performance problems that impact the corporation and develop recommendations.
- Develop analytical skills to determine the strategic needs of the corporation.
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To learn more about the online Master of Business Administration curriculum from Benedictine University, including Financial Management, call (866) 295-3104 to speak with a program manager or request more information.
Course content and outcomes may vary and are subject to change without notice.