This course gives a more advanced treatment of the theoretical bases and/or economic rationale of the investment-financing -decision criteria; valuation objective; single period and multi-period investment consumption of model; theories of valuation and financial policy; investment decisions under certainty and uncertainty; the capital asset pricing model (CAPM) and option pricing; the behavior of stock market prices and efficient market hypothesis; interactions of investment and financing decisions; the theory of optimal capital structure and dividend policy.

SPECIFIC OUTLINE

1. Complex Investment decisions

   - Projects with different lives

   - Annual equivalent value (AEV)

   - Annuity equivalent value for perpetuity

2. Replacement of an existing asset

    -where there is a salvage value

3. Investment decision under capital rationing

    -use of profitability index in capital rationing

4. Theories of share pricing

    - The fundamental theory

    - The technical theory

    - The capital asset pricing model

    - The arbitrage pricing model

    - The random walk theory or the efficient market theory

5. Share valuation

    - Reason for valuing share 

        - Methods:

            Net asset/book value basis

           Break-up/liquidation basis

           Replacement cost basis

          Price/earning basis

         Dividend yield basis

         Dual capitalization Method 


Level of Study: 400 Level