Entrepreneurship and Project Analysis

Objectives

At the end of the semester students should be able to:
- Know the process of decision-oriented evaluation of investment projects
- Identify the various stages of developing a business plan
- Prepare a real business plan
- Understand the basics of financial statements
- Understand the scope of investment project analysis and the different approaches to valuation
- Understanding of the determinants of an investment's cost of capital
- Estimate the inputs of discounted cash flow valuation methods
- Understand, distinguish and calculate the different criteria used for investment project analysis
- Analyse investment projects under risk and uncertainty
- Rank and select between different investment projects
- Know how to build a financial model in Excel
- learn about real options and how we can increase the value of an opportunity by timing or staging our investment
- Understand value enhancement methods for investment project analysis

General characterization

Code

100051

Credits

4.0

Responsible teacher

Najat de Freitas

Hours

Weekly - Available soon

Total - Available soon

Teaching language

Portuguese. If there are Erasmus students, classes will be taught in English

Prerequisites

NA

Bibliography

Brealey, R., Myers, S. & Allen, F. (2014). Principles of Corporate Finance, 11/e, McGraw Hill.; Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 3rd Edition, John Wiley and Sons.; McKinsey & Company Inc., Tim Koller, Marc Goedhart, David Wessels (2010). Valuation - Measuring and Managing the Value of Companies 5Ed, Wiley.; COMISSÃO EUROPEIA (2002), Guide to Cost-Benefit Analysis of Investment Projects, DG da Política Regional.; CEBOLA, A. (2011), Projectos de Investimento de Pequenas e Médias Empresas, Elaboração e Análise, Edições Sílabo, Lisboa.

Teaching method

Expositional and Questioning Methods
Active Methods and Case Studies 
Investigation projects and practical applications
Knowledge development and learning capability

Evaluation method

Group Work Assignments (50% of final grade)
Individual final written exam (50% of final grade, with a minimum grade of 9/20)

Subject matter

1. Entrepreneurship: where do investment ideas come from?
2. Preparing a Business Plan: Market & Strategic analysis, marketing strategy, funding sources, Financial Statements, Forecasting a Project's Earnings & Cash Flows, Shareholder Value
3. Scope of Investment Project Analysis: The classification of investment projects; Goals of project appraisal: socioeconomic appraisal and financial appraisal; Cost-benefit and multicriteria decision analysis; Approaches to Valuation; Interest Rates and the Time Value of Money.
4. Criteria for investment project analysis: Net Present Value (NPV) and other Discounted Cash Flow (DCF) Approaches, Internal Rate of Return (IRR), Other investment criteria: modified IRR; Profitability Index, Payback period; Average Accounting Return; Adjusted Present Value; Break-Even and financial equilibrium analysis; Real Option Methodology.
5. Estimating the inputs of Discounted Cash Flow Valuation: Cash flows measures; Cost of Capital: Capital Asset Pricing Model, Arbitrage Pricing Theory, The Risk free Rate, Equity Risk and Country Premiums, Regression Betas; Debt: Measure & Cost; Financing Weights and the WCCC, Accounting for inflation
6. Selecting between different projects: Projects with Different Lives; Ranking Independent Projects; Ranking Mutually Exclusive Projects; Projects with Different Size; investment selection under specific circumstances; Differential cash flows and replacement analysis; Choosing between long and short-lived equipment; Optimal timing of investment; Capital rationing.
7. Project Analysis under Risk and Uncertainty: Empirical methods; Sensitivity Analysis; Probabilistic methods; Monte Carlo Simulation; Decision theory methods
8. Value Enhancement: Economic Profit, CVA, EVA and CFROI.