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  4. Entrepreneurship and Project Analysis

Entrepreneurship and Project Analysis

Objectives

Successful innovation requires more than just a great idea. It almost always involves convincing others to provide the resources needed to implement that idea. To do so, you will need to demonstrate that the investment will be well-rewarded. In this course we will develop the necessary skills to build a financial model for your project or innovation, and learn how to use that model to analyse the profitability of a given investment proposal and to maximize the value created and the return to your investors. The course assumes no prior finance background. We will start from scratch and give you the understanding you will need to understand key information a firm¿s financial statements, how to assess the impact of an investment decision on the firm¿s earnings and cash flows, and how to value a project using the discounted cash flow (DCF) and valuation techniques. We continue discussing the problem of selecting between different projects. We will then see how these techniques can be used to guide managerial decision making and enhance shareholder value.

General characterization

Code

100051

Credits

4.0

Responsible teacher

Henrique Alberto Martins Figueiredo

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. (2019). Principles of Corporate Finance, 13/e, McGraw Hill; BRIGHAM, E. & HOUSTON, J. (2013). Fundamentals of Financial Management, 13th edition. South-Western Cengage Learning; DAMODARAN, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 3rd Edition, John Wiley and Sons; BARROS, Carlos (1999). Avaliação Financeira de Projectos de Investimento, Editora Vulgata, Lisboa; BARROS, Carlos (2000), Decisões de Investimento e Financiamento de Projectos, Edições Sílabo, Lisboa.; CEBOLA, A. (2017). Projectos de Investimento de Pequenas e Médias Empresas, Elaboração e Análise, 2ª Ed., Edições Sílabo, Lisboa; COMISSÃO EUROPEIA (2002), Guide to Cost-Benefit Analysis of Investment Projects, DG da Política Regional; MARQUES, Albertino (2000), Concepção e Análise de Projectos de Investimento, 2.ª edição, Edições Sílabo, Lisboa; SÁ SILVA, E. e QUEIRÓS, M. (2011). Gestão Financeira - Análise de Investimentos - 2ª edição, Vida Económica; TITMAN, S., KEOWN, A. & MARTIN, J. (2014). Financial Management Principles and Applications, 12th Edition, Pearson Education; BERK, Jonathan; de MARZO, Peter, Corporate Finance (2010),. Pearson, 2nd Ed; FREIRE, Adriano, Estratégia, Verbo Editora; BROWN, Tim, (2008), Design Thinking, Harvard Business Review Kelley; TOM e LITTMAN, J. (2005), The ten faces of innovation: IDEO's strategies for defeating the devil's advocate and driving creativity throughout your organization; CROWN BUSSINESS DRUCKER, PF, (2006), Innovation and entrepreneurship, HarperBusiness.

Teaching method

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

Evaluation method

Oral Presentation (20% of final grade)

Projet Group  (40% of final grade)

Individual final written exam (40% of final grade, with a minimum grade of 8/20)

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.