Introduction to Finance

Abstract

The course explores fundamental financial decisions encountered by corporate managers and demonstrates how financial theory can be applied to address practical, real-world challenges.

Objective

After taking this course, students will be able to: • Analyze how organizations make investment and financing decisions using core financial principles. • Apply various valuation techniques to assess business opportunities. • Evaluate the limitations of financial tools and theories when applied to real-world scenarios. • Critically examine corporate policies such as capital budgeting, cost of capital, capital structure, and dividend decisions. • Assess the interplay between sustainability and finance, identifying risks and opportunities

Content

Financial management plays a crucial role in shaping a company's future, as today's capital investment decisions can define the industries and opportunities the firm will engage in 10, 20, or more years from now. This course focuses on the key financial decisions corporate managers face, covering major topics such as investment valuation, capital budgeting, capital structure, and payout policy. Students will not only develop the tools and mindset of a financial practitioner based on financial theory but also explore practical applications through real-world examples. Introduction to Finance is structured in six parts: The introductory part puts value topics into the spotlight, such as the time value of money concept, the valuation of bonds and stocks as well as the net present value and other investment criteria. The second part takes up risk and return and the third part capital budgeting. The fourth part focuses on different corporate financing options and behavioural finance followed by lectures on capital structure and payout policies (part five) as well as corporate objectives and governance (part six). All lecture topics are complemented with real-world examples and sustainability aspects given its increasing importance in financial management aspects given its increasing importance in financial management. Part I: Value 18.02.2025: Introduction to Corporate Finance and How to Calculate Present Values (Book Chapters: 1,2; Key Points: Corporate Investment and Financing Decisions, Financial Goal of the Corporation, Future and Present Values) 25.02.2025: Valuing Bonds (Book Chapter: 3; Key Points: Term Structure, Real and Nominal Interest Rates, Default Risk) 04.03.2025 (online): Valuing Stocks (Book Chapter: 4; Key Points: CoE, EPS, DCF) 11.03.2025 (online): Net Present Value and Other Investment Criteria and Making Investment Decisions with the Net Present Value Rule (Book Chapters: 5,6; Key Points: NPV, IRR, Payback Rule) Part II: Risk 18.03.2025: Introduction to Risk and Return, Portfolio Theory and the Capital Asset Pricing Model (Book Chapters: 7,8) 25.03.2025: Risk and the Cost of Capital (Book Chapter: 9) Part III: Best Practices in Capital Budgeting 01.04.2025: Project Analysis, How to Ensure That Projects Truly Have Positive NPVs (Book Chapters: 10,11; Key Points: The Capital Investment Process, Sensitivity Analysis) Part IV: Financing Decisions and Market Efficiency 08.04.2025: Efficient Markets and Behavioral Finance (Book Chapter: 12) 15.04.2025: An Overview of Corporate Financing, How Corporates Issue Securities (Book Chapter: 13, 14; Key Points: Common Stock, Debt, The Role of Financial Markets and Intermediaries, Venture Capital, IPO, Security Sales) 22.04.2025: No lecture, Easter break Part V: Payout Policy and Capital Structure 29.04.2025: Payout Policy (Book Chapter: 15; Key Points: Dividends vs Repurchases) 06.05.2025: Does Debt Policy Matter (Book Chapter: 16; Key Points: Financial Risk and Expected Returns, WACC) 13.05.2025: How much should a Corporation Borrow? & Financing and Valuation (Book Chapter: 17, 18; Key Points: Corporate Taxes, Financial Distress) 20.05.2025: Guest Lecture Sika Part VI: Corporate Objectives and Governance 27.05.2025: Agency Problems and Corporate Governance (Book Chapters: 19, 20)

Resources