Knowledge

• Understand the place of investment analysis business economics.
• Understand why we focus on cash flows and not results.
• Understand what cash flow means.
• Understand what is meant by the different discounting principles- Time value of money/financial mathematics.
• Understand what is meant by discount rate / capital cost.
• Understand the importance of, and the differences between, the different decision-making criteria for an investment. including; Net present value, Internal rate of return, Payback, etc.
• Understand what is meant by term structure of interest rates and forward rates.
• Understand what lies in the terms total risk, relevant risk and irrelevant risk.
• Understand the content of portfolio theory and its significance for what we call gains of diversification.
• Understand what is meant by Beta as well as being able to interpret the size of it.
• Understand the Capital Asset Pricing Model (CAPM) and how it is derived.
• Understand what is meant by the weighted average cost of capital (WACC) and when it will be used.
• Understand the concept of market efficiency.
• Be able to make investment calculations and decisions for projects
• Understand financing choices
• Understand options, futures / forwards, put-call parity, international interest rate parities

Skills

• On completion of the course students should be able to:
• Budget cash flows, according to the equity method and the total capital method.
• Apply the different discounting rules using both calculator and spreadsheet.
• Apply the different decision-making criteria to both equities and bonds.
• Apply portfolio theory to various investment alternatives.
• Calculate Beta values.
• Derive the Capital Asset Pricing Model
• Apply the Capital Asset Pricing Model. *
• Calculate the weighted average cost of capital.
• Calculate the present value of investment projects and discuss risk in investment decisions
• Estimate option premiums

General competence

• As it will consistently be focused on the prerequisites of the different theories, students are expected to have a critical attitude towards the relevance of these. After completion of the course, students will have a good understanding of the practical relevance of the presented theory.