ØKA2008 Corporate Finance
- Number of credits7,5
- Teaching semester2024 Autumn
- Language of instructionEnglish
- CampusLillehammer
- Required prerequisite knowledge
Recommended prerequisites: basic corporate finance, accounting, calculus /mathematics, and statistics.
The main purpose of the course is to show how the uncertainty in investment and financing projects can be analyzed. Based on analysis of the stock market and exchange rates, it is possible to say something about the risk the owner and investor is exposed to. One can also use the results of the analysis to establish risk-adjusted interest rates. These can be used in connection with investment analysis. The course further provides an introduction to risk assessment, risk reduction and risk balancing by presenting portfolio theory. We will also look at debt ratio issues and introduce options theory and application of options.
The following topics are included:
- Uncertain projects and risk - seen from the investor perspective
- Risk attitude and risk compensation
- Basic statistics - the key factors in financial analysis: statistical expectation, standard
- Deviation and correlation
- Portfolio theory and estimation of beta (β)
- Diversification and reduction of risk – the portfolio effect
- The capital asset pricing model (CAPM) with applications
- Information efficiency
- Debt-equity ratio and risk
- Risk analysis with the traditional models; sensitivity analysis, scenario analysis and decision tree
- Financial gearing and risk
- Corporate value and risk in perfect capital markets
Learning Outcome
Upon passing the course, students have achieved the following learning outcomes:
The student
- have perspective on the stock exchange as: an arena for acquisition of venture capital, a marketplace for the establishment of the market value of the company, and as a market for the pricing of risk
- know how to compute the main statistical concepts; expected value/mean/median, standard deviation and correlation
- know the concept of diversification and the reduction of risk exposure as a consequence of diversification
- understand portfolio theory
- know the consequences for investor of high/low gearing of the company and how the market value of the enterprise is affected by gearing
- is able to perform statistical analysis of stock data; using spreadsheets to calculate: expected return, standard deviation, correlation and β (beta)
The student
- can apply modern portfolio theory for finding optimal investment portfolios
- can calculate prices of option contracts
- can apply the CAPM to estimate the rate of return for investments
- can establish risk-adjusted rate of return in investments
- can calculate "financial figures" using spreadsheets
The student
- can implement and disseminate financial analysis and assessments for the business management
- is able to ask critical questions and reflect on crucial assumptions and theories within the field of corporate finance
Lectures, problem solving, student presentations, individual and group work with mandatory hand-ins.
Mandatory hand-ins that must be passed in order to be allowed to take the exam. Specific form, number and other details will be announced during course start-up.
| Form of assessment | Grading scale | Grouping | Duration of assessment | Support materials | Proportion | Comment |
|---|---|---|---|---|---|---|
Written examination with invigilation | ECTS - A-F | Individual | 4 Hour(s) |
| 100 | About permitted aids: Calculator that meets the requirements for the use of calculator at the business education at INN. Updated guidelines are available and will be distributed at start-up each year. |