Undergraduate Course: Investment and Securities (BUST10138)
Course Outline
| School | Business School |
College | College of Humanities and Social Science |
| Credit level (Normal year taken) | SCQF Level 10 (Year 3 Undergraduate) |
Availability | Available to all students |
| SCQF Credits | 10 |
ECTS Credits | 5 |
| Summary | This course is proposed as a 2-week component of a larger 4-week course in the Summer School.
This Summer School course is intended to provide a foundation in financial decision making ¿ and an understanding of the techniques of financial analysis. It introduces the key elements of financial management and provides an outline of how to carry out financial evaluations of business decisions.
The course covers both descriptive material on financial markets, institutions and instruments, and analytical material on the assessment of projects and the valuation of securities.
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| Course description |
Finance plays a central role in almost all business decisions. Issues of valuation and risk are central to many decisions facing firms. Discounted cash flow techniques, time value of money, capital budgeting and risk, and other such concepts have entered into the business vocabulary and are used with varying degrees of knowledge and accuracy. This course is intended to provide a foundation in financial decision making ¿ and an understanding of the techniques of financial analysis. It introduces the key elements of financial management and provides an outline of how to carry out financial evaluations of business decisions.
The course covers both descriptive material on financial markets, institutions and instruments, and analytical material on the assessment of projects and the valuation of securities.
Topics to be explored include:
Introduction to Finance: This topic introduces students to the basics of finance. We will analyse what exactly a corporation is and focus on corporate goals. We will look at the role of financial institutions and markets in an economy.
Time value of money and bond valuation: In this topic we introduce the concept of discounted cash flow (DCF) and use these insights to value bonds. We describe the characteristics of these corporate securities and look at factors affecting their value
Valuing shares: In this topic we look at ways to determine share prices, and explore aspects of market efficiency and anomalies
Investment appraisal techniques: We introduce the concepts of net present value (NPV), payback rules and the internal rate of return (IRR).
Investment appraisal using DCF: We build on the foundations of Discounted Cash-Flow (DCF) analysis for the purposes of appraising corporate investment projects, and introduce tools that facilitate sensitivity analysis of corporate valuations.
Risk, return and the WACC: In this topic we look at ways in which corporations can measure risk exposures. We divide risks up into market based and idiosyncratic and analyse the benefits of diversification. We derive the relationship between a corporations risk profile and their weighted average cost of capital (WACC). We use the cost of capital as a key element in business valuation.
Capital Structure: We analyse how a corporation¿s mix of debt and equity affects its value. We begin with a theoretical model and its predictions and we then introduce market frictions such as corporate taxes and financial distress and look at how these affect capital structure decisions.
Payout Policy and Conclusions: We analyse the valuation implications of what a corporation chooses to do with its cash. We describe the effects of dividend payouts and share repurchases. We look at payout policy trends internationally.
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Entry Requirements (not applicable to Visiting Students)
| Pre-requisites |
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Co-requisites | |
| Prohibited Combinations | |
Other requirements | None |
Information for Visiting Students
| Pre-requisites | None |
Course Delivery Information
| Not being delivered |
Learning Outcomes
On completion of this course, the student will be able to:
- understand the functions and aims of financial management, and the role of capital markets
- appreciate some of the main techniques of financial analysis on which finance practice depends, and also how risk affects project evaluation
- understand how debt and equity are valued in financial markets, the role of capital markets, and financial decision-making within the organisation
- apply simple discounted cash flow analysis to business decisions, and also apply the financial approach to evaluate decisions with uncertain outcomes
- comprehend the criteria used to evaluate investments or capital projects
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Additional Information
| Graduate Attributes and Skills |
Research & Enquiry:
Demonstration of improved numeracy and quantitative skills.
Personal & Intellectual Autonomy:
1. Demonstration of the ability to evaluate assumptions and statements on the basis of data-driven evidence;
2. Engagement with new ideas and be able to detect false logic by leveraging available resources
Personal Effectiveness:
Effectively managing time and workload demands within a dynamic and challenging work environment
Communication skills:
Presentation of reasonable and data-supported argument in writing.
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| Special Arrangements |
University of Edinburgh students will not receive credit for this course. |
| Keywords | Not entered |
Contacts
| Course organiser | |
Course secretary | |
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