Corporate Finance and Financial Intermediation

This session will introduce you to the structure of the module. We shall discuss the notion of shareholder value and how it can be measured. We shall also relate shareholder value to the scope of corporate finance from the perspective of value-based investment management.

In the corporate environment investments are formally managed as projects. This allows the investment decision to be based on a systematic strategic, financial and risk appraisal. In this session we shall discover how this information is gathered in what is called an investment business case.

Depending on the company's profile, investors expect higher or lower risks and returns. It is one of the key challenges of corporate finance to identify both the optimal investment and funding opportunities that will most likely respond to shareholder expectations.

Companies finance their short, mid and long term liabilities through a diverse array of financial instruments, each having a different interest rate, risk, timing and cost. In this session we shall the main differences between the cost of equity and of debt.

The test covers lessons 1 to 4. This exercise consists of multiple choice and fill-in-the-blanc questions concerning the fundamental concepts of corporate finance, such as shareholder value indicators, project evaluation, required rate of return, etc.

In order to assess the desirability of investments a company does not only have to know its average cost of capital, but its weighed average cost of capital, in order to keep a healthy mix between debt and equity financing. In this session we shall see how the WACC is calculated.

In this session we are reviewing the most commonly used project appraisal techniques: payback period (PBP), discounted payback (DPB), net present value (NPV), and internal rate of return (IRR). We shall also discuss the pros and cons of each of these methods and explain why it is important to consider each investment using these different techniques.

The test covers lessons 5 to 9. You will be asked to calculate the Weighted Average Cost of Capital (WACC) of a fictitious company.

In most circumstances companies are in a situation where their limited investment capacity requires a choice between a multitude of investment opportunities. Their ability to prioritise and chose the right projects is a critical factor in achieving shareholder value. In this session we shall see how a portfolio of projects is managed.

A bank's core business is to intermediate between lenders and borrowers. At a macro-economic level banks respond to a demand for capital emanating from firms, households and government. We shall see how by applying fractional-reserve banking today's banks are actually creating money in the process of lending.

The test covers lessons 11 to 14. In this assessment, you are asked to evaluate various investment projects using various methods: project payback, discounted payback, IRR and NPV.

Today's banks do not operate autonomously. They are part of a complex worldwide financial system. In this session you will discover how the actual financial network of institutions and firms has been developing since the 15th century.

The test covers lessons 11 to 14. In this assessment, you will be asked to conduct a comparative project evaluation based on the result of each investment evaluation method.

Banks are just one type of financial firm amongst a zoo gathering other financial institutions and firms. In this session we shall further explore the specific role of banks within the context of the international financial system, and relate it to the activities of other institutions.

Today's banks, whether they are serving private customers (retail banks) or large companies (investment banks), operate under the close scrutiny of central banks. We shall see what the role of central banks is in today's financial system. In the second part of this session we shall have a look at the services retail banks offer to households and small firms.

Large or multinational corporations have a need for different financial services than households or SMEs. This session will provide an overview of the services investment banks offer to their clients.

Companies and governments cover both their short and long-term needs for capital by emitting loans, bonds, and equity via a so-called primary market. We shall see how these financial assets are then further traded in secondary money, bond and stock markets. In this session we shall have a closer look at what bonds are and how domestic money markets function.

Companies and governments cover both their short and long-term needs for capital by emitting loans, bonds, and equity via a so-called primary market. We shall see how these financial assets are then further traded in secondary money, bond and stock markets. In this session we shall have a closer look at what bonds are and how domestic bond and stock markets function.

The final examination covers lessons 15 to 22. The exam includes multiple choice and short open questions.