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
- Lecturer: s aguwamba