Course description for 2019/20
Capital Budgeting
ECO5018
Course description for 2019/20
Capital Budgeting
ECO5018
The investment decision for projects is the key theme of this course. Special emphasis will be placed on how insecurity affects the decision, and this will be highlighted both for the individual project as well as for investments in a portfolio and market context.
The investment decision for projects is the key theme of this course. Special emphasis will be placed on how insecurity affects the decision, and this will be highlighted both for the individual project as well as for investments in a portfolio and market context. Furthermore, various option aspects of real investments (so-called real options) are treated, included gradual revealing of insecurity. Special emphasis will be placed on recent examples from research literature tying real option analysis in with other areas in economics (e.g. strategy, game theory or innovation/R&D). Examples emphasized may vary from one semester to the next. Capital structure's significance for profitability requirements and market value will be discussed, including investment behavior in case of financial emergency costs.
It is possible to apply for admission to the course as a single course. There are reservations about the available capacity on the course. The applicant must meet the current admission requirements for the Master of Science in Business program.
Must fulfill the requirements for admission to the two year Master of Science in Business program.
Upon successful completion of this course, the student:
Knowledge:
- Has knowledge of different methods in investment analysis, in particular related to how to manage insecurity
- Has knowledge of advantages and restrictions related to using real option analysis, in particular in light of traditional investment analysis
- Has knowledge to current research in real option analysis
Skills:
- Can make investment decisions substantiated in relation to assessing, quantifying and analyzing insecurity
- Can evaluate whether using real option analysis is of particular relevance to an investment decision and if so; what potential restrictions should be taken into account
- Can identify, model, analyse and to some extent valuate real options
- Can account for how financing may influence project values
General competence:
- Has an overview over how insecurity affects investment decisions
- Is able to communicate the above-mentioned elements related to knowledge and skills and apply this insight to various relevant issues
- Can exchange views with others whose background is in investment and through this contribute to best practice.
No tuition fees. Costs for semester registration and course literature apply.
Optional
Lectures, two mandatory individual coursework assignments to be submitted and an assignment seminar.
The programme is evaluated accirding to the university's quality assurance system.
Written school exam, duration 4 hours, counts 100%. Two individual compulsory assignments must be passed to be eligible for the exam. The exam may be answered in English or a Scandinavian language.
Pen, pencil, ruler, bilingual dictionary and simple calculator.
Candidates should have skills in and interest in quantitative analysis.