BØK 3423 Finance
This introductory course in finance focuses primarily on the investment side of the subject of finance. The purpose of the course is to equip students with necessary knowledge about terms and methods used in order to make sound investment decisions. It should be mentioned that the methods taught are applicable to both financial investments (stocks and bonds) and real investments (production facilities, equipment etc.).
During the course students should develop knowledge of:
- The role of investment analysis in finance.
- Why we focus on cashflows and not on earnings.
- The economic content/meaning of cashflows.
- The concepts underlying the time value of money.
- What is meant by the term discount rate/cost of capital.
- The meaning of, and difference between, the different decision criteria for an investment/financing oppurtunity. Notably the NPV, IRR, Payback etc.
- How capital rationing affects the investment decision for real investment oppurtunities.
- How one can use the above mentioned decision criteria in order to value financial investments like bonds and stocks as well as real investment oppurtunities.
- UWhat is meant by total risk, relevant risk and irrelevant risk.
- The portfolio theory and its impact on what we call diversification benefits - on a conceptual level,
- What is meant by Beta and how to interpret its size.
- The Capital Asset Pricing Model (CAPM) and how this is derived - on a conceptual level,
- What is meant by the Weighted Average Cost of Capital (WACC) and when this should be used.
- The value of flexibilty in investment oppurtunities - on a conceptual level,
Upon completion of the course the students should be able to:
- Budget cash flows.
- Apply the different rules for discounting and compounding with the help of a financial calculator, Excel or interest rate tables.
- Understand the economic content in the different decision criteria for an investment/financing oppurtunity.
- Distinguish among the different decision criteria.
- Apply the different decision criteria on real investment oppurtunities with or without capital rationing.
- Apply the different decision criteria on financial investments like bonds and stocks.
- Apply the portfolio theory on different investment opportunities.
- Calculate Beta.
- Derive the Capital asset Pricing Model (CAPM) on an intuitive level.
- Apply the Capital Asset Pricing Model (CAPM).
- Calculate the Weighted Average Cost of Capital (WACC).
In the course there will be focus on the assumptions underlying the different theories covered. Hence, it is expected that students will have a critical attitude towards the realism of these. The students should upon completion of the course have a good understanding of the practical aplicability of the theories covered.
- Introduction - How the course fit into the subject of finance.
- Time value of money.
- Capital budgeting (Net Present Value, Internal Rate of Return, Payback etc.).
- Capital rationing.
- The pricing of bonds.
- The pricing of stocks.
- Introduction to risk.
- The Capital Asset Pricing Model (CAPM).
- Weighted Average Cost of Cpital (WACC).
There will be 11 3-hours lectures and lecturer-guided problemsolving sessions. thes lectures are supported by about 30 videos and 9 films explaining theory and discussing problems. In order to stimulate the learning environment the lecturer will seek two ways communication with the students. Students should feel responsible for class participation by asking questions, commenting and
Although software tools is not a requirement, it may be useful to do some tasks from the syllabus which require the use of Excel.
When course is delivered online, lecturer, in cooperation with the Academic Servises Network, will organize an appropriate combination of digital teaching and lectures. Online students are also offered a study guide to contribute to progression and overview. Total recommended time spent for completing the course also applies here.
Higher Education Entrance Qualification.
Basic course in mathematics and statistics or equivalent.
|Exam category||Weight||Invigilation||Duration||Support materials||Grouping||Comment exam|
Form of assessment:
Internal and external examiner
Examination every semester
|Form of assessment:||Written submission|
|Support materials:|| |
|Resit:||Examination every semester|
|Workload activity||Duration||Type of duration||Comment student effort|
|Review of assignments in plenary||27||Hour(s)||.|
|Prepare for teaching||110||Hour(s)|
|Workload activity:||Review of assignments in plenary|
|Workload activity:||Prepare for teaching|
|Workload activity:||Self study|
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 7,5 ECTS credit corresponds to a workload of at least 200 hours.
|Bøhren, Øyvind; Gjærum, Per Ivar||cop. 2016||Finans: innføring i investering og finansiering||2. utg.||Fagbokforl|