Aims

The aim of this module is to provide students with the foundations of finance theory needed in accounting valuation methods. This will be achieved through the development of a common vocabulary and a set of tools that will assist students to gain a basic understanding of the theory of modern finance.

Learning Outcomes

On completing this module, students will:

• Understand the fundamental principles of modern finance theory;
• Appreciate the foundations of capital budgeting decisions;
• Understand the foundations of valuing financial assets;
• Understand the principles of risk in capital markets;

Knowledge and Understanding

• Support decision making with regard to investment and capital expenditure analysis, including how they should be financed and structured;
• Be familiar with the fundamental principles of financial economics;
• Understand the concepts and principles of risk and return;
• Understand basic financial concepts, computational methods, and techniques of financial analysis;
• Understand the principles of portfolio theory and asset pricing;

Skills

• Apply financial and investment decision criteria in a variety of business cases;
• Utilize valuation concepts as applied to shares and bonds;
• Assist decision making with regard to investment and capital expenditure problems;
• Use models and their applications in relation to investment and business decisions

Content

The module aims to develop practical skills and this requires substantial time in practising with problems, exercises, quizzes and other such learning drills.

• Introduction and Basic Principles
• Agency Problems and Corporate Governance
• Time value of money
• Bond Valuation
• Term Structure of Interest Rates
• Stock Valuation
• Investment Decision Rules
• Making Investment Decisions with the Net Present Value Rule
• Portfolio Theory
• Capital Asset Pricing Model
• Arbitrage Pricing Theory
• The Weighted Average Cost of Capital
• Contemporary issues in Finance
• Derivatives