BUS332 Decicion Analysis and Capital Budgeting
Showing course contents for the educational year 2016 - 2017 .
Course responsible: Karl Jens Fredrik Bengtsson
ECTS credits: 10
Faculty: School of Economics and Business
Teaching language: NO
Teaching exam periods:
Course frequency: Yearly
First time: Study year 2015-2016
Master in Business Administration (M-ØA) and M-IØ
From certainty to uncertainty, Risk measures, Sensitivity analysis, Scenario analysis, Expected utility, Structuring of decisions, Decision trees, Decision criteria, Value of information, Subjective probabilities, Stochastic dynamic programming (focus on applications within the course), Multi-attribute decision making, Dominance, Portfolio perspective, CAPM, State preference model, Risk adjustment inside and outside the market, Relevant risk, Use of market information, Option aspects of real investments, Capital rationing, Implications of capital structure, Investment behavior in case of financial distress.
The course deals with decision analysis and real investement in companies and under uncertainty. The course will have a predominance of theory and the main part of the course deals with understanding and using different approaches to analyse and model decisions under uncertainty. This also includes calulating present values of projects with real options. This will at a later stage be used in decision making. A number of stylized problems and models with a simple structure, but still with important general results, are used.
After the course the student will be able to:
- make decisions and investment decisions where uncertainty is thoroughly evaluated, quantified and analyzed.
- use different approaches to evaluate uncertainty at project and portfolio level
- link project evaluation to capital market models (capital asset pricing model CAPM and state preference model SPM)
- decide which analysis level that is the most appropriate with respect to relevant risk and target group
- model and analyze investments when there are possibilities to adapt decisions as more information becomes available (using stochastic dynamic programming)
- identify, model, analyze and, to some extent, determine the value of real options
- analyze investment choices when capital is limited using linear programming
- discuss and explain how capital structure can affect investement decision and result in conflict between share holder and creditors
Lessons and exercises
Selected articles and selected parts of books
BUS210 Managerial Accounting ad Budgeting, BUS220- Finance and Investment, BUS230-Operation research
Term paper with submission in four parts. If the student has approved mandatory activity from before it is not necessary to hand in new assignments.
Final written exam 3,5 hours, counts 100%.
Reduction of credits:
BUS331 5 stp
Type of course:
50 lectures and presentations
Allowed examination aids: Calculator handed out, no other aids
Examination details: One written exam: A - E / Ikke bestått