PROJ_MGT 405
Managerial Finance
Course Objective:
This Course provides an introduction to corporate finance, with an emphasis on project valuation. We
review important ideas from modern finance theory and develop financial tools needed for valuing
investment projects. Topics covered include the time value of money, estimating cash flows, accounting
for risk, performing sensitivity analysis, developing appropriate selection criteria, and valuing projects as
real options. The objective of the course is to apply basic insights from corporate finance theory to real
business decisions.
Where possible, real-world examples are used to link theory with practice with an emphasis on the
construction industry.
A major portion of the class effort is devoted to a case study of an actual project financed cogeneration
facility. Students work in groups to prepare a presentation on its financial performance, including
quantifying the risks it faces under changing circumstances.
The following is a week-by-week description of the course:
Week 1
Introduction and basics of present value.
Course overview and objectives are presented as well as housekeeping matters such
as the use of Canvas, syllabus and the text. Why financial issues are important to a
Project Manager. The time value of money and present value. Related key terms
are defined. Use of cash flow diagrams to aid in financial
analysis. Rules for
choosing the best investment. Useful short cuts.
Chapter 2 of the text; no homework due
Week 2
Using net present value to rank projects.
Evaluating investments; using EXCEL financial function included with EXCEL
.
Alternative methods of ranking projects: the payback period, the discounted
payback period, internal rate of return, book rate of return, and profitability index.
Using net present value to rank projects; handling
inflation; nominal and real
interest rates/discount factors; projects with different lives; depreciation and taxes.
Cogeneration group case study assigned.
Chapters 5 and 6 of the text; homework due 2-16,18,34,38
Week 3
Valuing stocks, bonds and firms.
Using the Present value formula to value bonds; how bond prices vary with interest
rates; determining yield to maturity; how common stocks are valued; estimating the
cost of equity capital; stock prices and earnings per share.
Chapters 3 and 4 of the text; homework due 5-8,13,15, 6-18,24,31
