The module provides an introduction to corporate governance, social considerations and investing/financing decisions. Capital budgeting and the assessment of capital investments are covered with practical techniques to estimate a company’s or project’s cost of capital.

This study session covers the capital budgeting process with emphasis on its principles and investment decision criteria. Project evaluation through the use of spreadsheet modeling is presented. The various types of leverage (operating, financial, total), measures of leverage, and how leverage affects a company’s earnings and financial ratios are examined. A discussion then follows on the different types of working capital and the management issues associated with each. Other income and valuation model approaches are compared. The subject of capital structure is introduced with the classic Modigliani– Miller irrelevance theory. Additional considerations of taxes, agency costs, financial distress and dividend policies are introduced.

Mergers, acquisitions, and corporate restructurings—which create changes in ownership and control—are examined.

• The module provides a structural overview of financial markets and their operating characteristics. Overview markets include equities, fixed income, derivatives, and alternative investments. A discussion of market efficiency and the degree to which market prices may reflect available information concludes is presented. This study session introduces essential equity valuation concepts. The various definitions of value and the application of equity valuation techniques to solve everyday problems are first discussed (discounted cash flow valuation models, dividend discount model and residual income). A five-step equity valuation process is then described with the three main categories of equity valuation models (absolute, relative, total entity) presented in step three. Key return measures including the equity risk premium and derivation of the equity required return using various models (CAPM, multifactor, build up) conclude the session. The main approaches for valuing private company equity (income, market, asset based) are explained in the module. The module introduces the unique attributes that define fixed-income securities, then follows with an overview of global debt markets. Primary issuers, sectors, and bond types are explained. Key concepts for the calculation and interpretation of bond prices, yields, and spreads and coverage of interest rate risk and key related risk measures (credit risk, duration, convexity) are presented. Securitization—the creation of fixed-income securities backed by certain (typically less liquid) assets—including the various types, characteristics, and risks of these investments are discussed in detail. Traditional and modern theories and models explaining the shape of the yield curve are presented. An arbitrage-free framework using observed market prices is introduced for valuing option-free bonds. This approach also holds for more complex valuation of bonds with embedded options and other bond types. The binomial valuation method to value bonds with embedded options is explained. Option-adjusted spreads are introduced for the evaluation of risky bonds. From financial risk perspective, credit default swaps and their use in managing credit exposure is presented.