Course: Financial analysis
Semester: 2nd semester, academic year 2010-2011
Course Manager: André Cabannes
Code:
Email: andre.cabannes@m4x.org
Course taught by: André Cabannes
Teaching language: English
Class hours: 18 Credits

PRE-REQUISITES

• A course in General accounting

COURSE SUMMARY

• Introduction to evaluating investments

COURSE OBJECTIVES

• Understand the difference between Accounting and Finance
• Use elementary probability to model the randomness of future cash flows
• Learn how to evaluate investments

SKILLS ACQUIRED

• Elementary probability theory
• Discounted cash flow analysis
• Calculate opportunity cost of capital and IRR

COURSE SCHEDULE

• Twelve 1 ½ hour classes + a 1 ½ hour written final examination

 Lesson1 Correction of last exam Correction of final exam of Financial accounting Lesson 2 Difference between accounting and finance Role of time Present value of a promise of future payment Lesson 3 Financial investment and physical investment φ inv : the cash flows I buy just add up to mine. NPV = 0 phys. inv : the increase of my CF is more than just the CF I buy. NPV > 0 Lesson 4 Modelling of variable future CF. Introduction to elementary probabilities Securities with sure future CF and with random future CF. Random experiment, random variable, stability of experimental frequencies in long series. Lesson 5 Elementary probability (cont'd) Distribution, expectation, histogram, variance Lesson 6 The no arbitrage principle Calculation of the price of a security Lesson 7 Present value, discounting Discounting future CF of investment Lesson 8 Opportunity cost of capital Opportunity cost of capital Lesson 9 IRR IRR Lesson 10 Application of discounting Polyzone example Lesson 11 General review Exercises Lesson 12 General review Exercises

TIE-IN WITH THE CORPORATE WORLD

• All concepts are illustrated with examples from the real world and when possible from the current news.

TEACHING METHODOLOGY

• Lectures by the teacher and many in class exercises
• Reading assignments prior to each lesson

ASSESSMENT

• Continuous assessment and Final exam (50% - 50%)