Entrepreneurship and Project Analysis
Code
100051
Academic unit
NOVA Information Management School
Credits
4.0
Teacher in charge
Henrique Alberto Martins Figueiredo
Teaching language
Portuguese. If there are Erasmus students, classes will be taught in English
Objectives
At the end of the semester students should be able to:
-Know the process of decision-oriented evaluation of investment projects
-Identify the various stages of developing a business plan
-Prepare a real business plan
-Understand the basics of financial statements
-Understand the scope of investment project analysis and the different approaches to valuation
-Understanding of the determinants of an investment's cost of capital
-Estimate the inputs of discounted cash flow valuation methods
-Understand, distinguish and calculate the different criteria used for investment project analysis
-Analyse investment projects under risk and uncertainty
-Rank and select between different investment projects
-Know how to build a financial model in Excel
-learn about real options and how we can increase the value of an opportunity by timing or staging our investment
-Understand value enhancement methods for investment project analysis
Prerequisites
NA
Subject matter
1.Entrepreneurship: where do investment ideas come from?
2.Preparing a Business Plan: Market & Strategic analysis, marketing strategy, funding sources, Financial Statements, Forecasting a Project's Earnings & Cash Flows, Shareholder Value
3.Scope of Investment Project Analysis: The classification of investment projects; Goals of project appraisal: socioeconomic appraisal and financial appraisal; Cost-benefit and multicriteria decision analysis; Approaches to Valuation; Interest Rates and the Time Value of Money.
4.Criteria for investment project analysis: Net Present Value (NPV) and other Discounted Cash Flow (DCF) Approaches, Internal Rate of Return (IRR), Other investment criteria: modified IRR; Profitability Index, Payback period; Average Accounting Return; Adjusted Present Value; Break-Even and financial equilibrium analysis; Real Option Methodology.
5.Estimating the inputs of Discounted Cash Flow Valuation: Cash flows measures; Cost of Capital: Capital Asset Pricing Model, Arbitrage Pricing Theory, The Risk free Rate, Equity Risk and Country Premiums, Regression Betas; Debt: Measure & Cost; Financing Weights and the WCCC, Accounting for inflation
6.Selecting between different projects: Projects with Different Lives; Ranking Independent Projects; Ranking Mutually Exclusive Projects; Projects with Different Size; investment selection under specific circumstances; Differential cash flows and replacement analysis; Choosing between long and short-lived equipment; Optimal timing of investment; Capital rationing.
7.Project Analysis under Risk and Uncertainty: Empirical methods; Sensitivity Analysis; Probabilistic methods; Monte Carlo Simulation; Decision theory methods
8.Value Enhancement: Economic Profit, CVA, EVA and CFROI.
Bibliography
Brealey, R., Myers, S. & Allen, F. (2014). Principles of Corporate Finance, 11/e, McGraw Hill.; Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 3rd Edition, John Wiley and Sons.; McKinsey & Company Inc., Tim Koller, Marc Goedhart, David Wessels (2010). Valuation - Measuring and Managing the Value of Companies 5Ed, Wiley.; COMISSÃO EUROPEIA (2002), Guide to Cost-Benefit Analysis of Investment Projects, DG da Política Regional.; CEBOLA, A. (2011), Projectos de Investimento de Pequenas e Médias Empresas, Elaboração e Análise, Edições Sílabo, Lisboa.
Teaching method
Expositional and Questioning Methods
Active Methods and Case Studies
Investigation projects and practical applications
Knowledge development and learning capability
Evaluation method
Group Work Assignments (50% of final grade)
Individual final written exam (50% of final grade, with a minimum grade of 9/20)