The aim of the course is to train students to independently conduct financial and economic analysis of an investment project using capital budgeting and cost-benefit analysis methodologies. Students will gain knowledge for project evaluation under risk conditions, as well as for evaluation of investment projects from the perspective of investors and society as a whole.
1. Basics of investment projects: The concept of an investment project. Characteristics of investment projects. Types of investment projects.
2. Cash flows of the investment project: Relevant cash flows of the project. Estimated investment costs. Estimated replacement costs. Liquidation value of the project. Operating income and expenses. Sources of financing. Profit and loss account. Financial flow. Economic flow.
3. Financial evaluation of the investment project: Static project evaluation. Dynamic project evaluation. Net present value. Internal rate of return. Payback period.
4. Cost of capital: Components of the cost of capital. Capital Asset Pricing Model (CAPM). Weighted Average Cost of Capital (WACC).
5. Project assessment under risk conditions. Static approach to risk assessment (minimum scope of implementation; minimum sales price). Dynamic approach to risk assessment (project sensitivity analysis; scenario analysis)
6. Basics of economic analysis of investment projects: Concept of cost and benefit analysis. Basic principles for conducting a cost-benefit analysis. Steps in creating a cost-benefit analysis.
7. Defining the context for economic analysis: Environmental analysis. Project identification. Technical feasibility and environmental sustainability.
8. Basic assumptions for conducting economic analysis: Social discount rate. Fiscal adjustments. Conversion of market to accounting prices. Valuation of external (non-market) influences.
9. Economic evaluation of an investment project: Economic benefits. Economic costs. Economic net present value. Economic rate of return. Benefit-cost ratio.
10. Risk assessment: Sensitivity analysis. Qualitative risk analysis.
1. assess the cash flows of the investment project and assess its liquidity,
2. analyze the selected investment proposal using capital budgeting methods,
3. provide a final and reasoned recommendation on accepting or abandoning the implementation of the investment project based on the financial analysis conducted,
4. assess the economic benefits and economic costs of the investment project by applying the methodology prescribed by the European Union guidelines, and give a final recommendation on its economic justification,
5. compare and critically assess the advantages and disadvantages of selected methods of risk analysis of investment projects,
6. rank investment projects according to acceptability criteria from the perspective of investors and society,
7. review the assessment of the investment proposal and propose suggestions for its changes in order to create the prerequisites for achieving its financial or economic justification.
