This 2-day education will be an intense introduction to capital budgeting and more importantly discounted cash flow valuation of corporate investments.
The reason of existence for every company is to develop profitable long-term projects and investing in them with the purpose of increasing shareholder value. Financial theory provides analytical tools to assess whether a project is worthwhile to invest and the valuation consequences of these investments. This branch of finance is called Capital Budgeting. The goal of this certificate program is to acquaint participants with the basics of capital budgeting with a particular focus on discounted cash flow valuation.
Each day will consist of morning and afternoon sessions. The first day we will get acquainted with simple heuristics for choosing between available projects. Our focus will be on the net present value rule but we will also cover other heuristics such as the internal rate of return, payback period and profitability index. Next, we will apply this knowledge to make decisions about various types of projects one may encounter in real-life situations. Finally, since there is always a degree of uncertainty regarding how the future will unfold, we will talk about how to deal with such uncertainty in project valuation.
In the second day, we will first focus on the topic of risk and return and how these two concepts are related to each other. It is imperative to understand this linkage for being able to calculate the cost of capital for a corporation, i.e. the cost of raising funds to finance projects. In the afternoon, we will focus primarily on examples involving all concepts discussed thus far.
After these two days, participants will have a strong foundation of capital budgeting principles and a basic model for discounted cash flow valuation. After that, they will be ready to take advanced classes such as Corporate Valuation and Mergers and Acquisitions.