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Finance & Investments

Exam number: 1532

Semester: from 3rd semester (Grundlagenausbildung)

Duration of the module: One semester

Form of the module (i.e. obligatory, elective etc.): Obligatory

Frequency of module offer: Each winter semester

Prerequisites: IBA-Bachelor-Students and Foreign Exchange Students ONLY!

Applicability of module for other study programmes:
Obligatory or elective in other study programmes. For further information check regulations of the study programme.

Person responsible for module: Prof. Dr. Karl L. Keiber

Name of the professor: Prof. Dr. Karl L. Keiber

Language of teaching: English

ECTS-Credits (based on the workload): 6

Workload and its composition (self-study, contact time):
Contact time (lecture, tutorials etc.) 45 h; self-study: 135 h

Contact hours (per week in semester): 4

Methods and duration of examination:
Successful written exam (120 min)

Emphasis of the grade for the final grade: Please check regulations of the study programme

Aim of the module (expected learning outcomes and competencies to be acquired):
The participants can distinguish between finance and investments and get to know how finance and investment are related to each other. The participants can assess the net present value of investments in both one-period and multiperiod capital budgeting. They are able to apply this technique to both the valuation of corporate securities (shares of stocks, corporate bonds) and to investment in fixed assets. The participants can determine the risk and return characteristics of two asset portfolios. Furthermore, they know how expected returns of both efficient portfolios and individual assets are related to the respective risk measures in capital market equilibrium. Participants can determine the impact of financial leverage on the equity cost of capital on the one hand and on the firm value on the other hand in both perfect and imperfect capital markets i.e. without and in the presence of corporate taxation. The participants can explain the advantages and disadvantages of debt financing and are able to distinguish theories of capital structure. The participants can apply three different methods of company valuation that differ with respect to the relevant cash flows and the discount rate.

Contents of the module:
Net present value in a two-date world; net present value in a multiperiod world; application of present value formulas to stocks and bonds; net present value and capital budgeting; returns; portfolio theory; capital market line; capital asset pricing model; cost of equity capital; capital structure, firm value, and cost of capital (perfect capital market, capital market with frictions - case of corporate taxation); theories of capital structure (trade-off theory, pecking order theory, personal taxes); financial statement analysis; discounted cash flow valuation methods (adjusted present value method/valuation by parts, flow-to-equity method/equity valuation, weighted average cost of capital (WACC) method/free cash flow valuation/entity valuation); economic value added (EVA); relative valuation

Teaching and learning methods:
Lecture with tutorials, self-studies

Literature (compulsory reading, recommended literature):
Hillier D., S. A. Ross, R. W. Westerfield, J. F. Jaffe, and B. Jordan, Corporate Finance - Second European Edition, McGraw-Hill, 2013.***
Damodaran, A., Corporate Finance - Theory and Practice, 2nd edition, Wiley, 2001.**
Copeland, Thomas E., Fred J. Weston, and Kuldeep Shastri, Financial Theory and Corporate Policy, 4th edition, Pearson Addison-Wesley, 2005.**
Ross, S. A., R. W. Westerfield, and J. F. Jaffe, Corporate Finance, 10th edition, McGraw-Hill, 2013.*
Brealey, R. A., S. C. Myers, and F. Allen, Principles of Corporate Finance, 11th edition, McGraw-Hill, 2014.*
Grinblatt, M. and S. Titman, Financial Markets and Corporate Strategy, 2nd edition, McGraw-Hill, 2001.*
***mandatory, **supplementary, *optional

Further information:
Registration in Moodle Viadrina required.