Course ObjectiveAt the end of the course you are able to examine and understand the
capital budgeting problem, the asset pricing problem and the investment
problem from the perspective of an investor in real assets and from the
perspective of an investor in financial assets (Bridging Theory and
At the end of the course, you are be able to:
- examine and understand the capital budgeting problem, the asset
pricing problem and the investment problem from the perspective of an
investor in real assets and from the perspective of an investor in
- analyse a real project from the perspective of financial economics;
- determine the value of financial assets such as shares and bonds;
- combine individual financial assets into a portfolio of financial
assets and select an optimal portfolio given an investor’s utility
- determine the cost of capital of a project and of a firm;
- explain and apply basic concepts in financial economics;
- apply theoretical knowledge into practice.
Course ContentIn this course we discuss three main issues in finance: capital
budgeting, asset pricing and financial investments. The capital
budgeting decision involves how firms select projects that create value.
The theoretically optimal decision rule—the net present value method—is
discussed, also in relation to other selection criteria that are applied
in practice. The asset pricing part concerns the way financial assets
are priced by the market. The focus is on the pricing of shares issued
by firms and bonds issued by firms and governments. Questions raised
are: How are the term structure of interest rates and promised coupon
payments related to bond prices? What is the influence of the expected
stream of dividends and the level of market risk of firm’s projects on
the price of shares? The financial investment decision is approached
from a portfolio perspective and ends with a discussion of the Capital
Asset Pricing Model (CAPM).
Method of AssessmentWritten exam – Individual assessment
(Interim) Assignment(s) – Individual assessment
Literature- J. Berk and P. DeMarzo, Corporate Finance, Pearson, latest Global
- Finance, Text- and Workbook, latest edition.
- Additional material will be announced on Canvas.
Recommended background knowledgeQuantitative Research Methods I or equivalent
|Language of Tuition||English|
|Faculty||School of Business and Economics|
|Course Coordinator||dr. M.B.J. Schauten|
|Examiner||dr. M.B.J. Schauten|
You need to register for this course yourself
Last-minute registration is available for this course.
|Teaching Methods||Study Group, Lecture|
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