Capital Budgeting

Code:

ESG0024

Acronym:

API

Keywords
Classification	Keyword
OFICIAL	Economics

Instance: 2015/2016 - 1S

Active?	Yes
Responsible unit:	Department of Industrial Engineering and Management
Course/CS Responsible:	Master in Services Engineering and Management

Cycles of Study/Courses

Acronym	No. of Students	Study Plan	Curricular Years	Credits UCN	Credits ECTS	Contact hours	Total Time
MESG	12	Syllabus since 2007/08	2	-	6	56	162

Teaching language

Portuguese

Objectives

This course unit aims to provide students with knowledge of basic methodologies for the analysis of the financial and economic feasibility of  real investment projects. 

Learning outcomes and competences

After the completion of the course unit, students should be capable of: - justifying a decision or real investments - designing a business plan
Inf: the Business Plan will be based on Portuguese relevant legislation

Working method

Presencial

Pre-requirements (prior knowledge) and co-requirements (common knowledge)

Basic concepts of Accounting.

Program

I – Introduction 1- An overview on project analysis;2- Business plan.  II- Project elaboration and evaluation 3- Feasibility studies. 4- The documents of an economic and financial study; investment plan; operational plan; financial plan. III- Economic and financial evaluation of a project 5- Cash flow (CF) analysis; concept of projects’ cash flow; basic principles of measuring and estimating cash flows; investment and operational cash flows; cash flow estimation in a situation of inflation. 6- Decision criteria: net present value (NPV), internal rate of return (IRR), profitability index, and macroeconomic indicators. 7- Project cost of capital; how to estimate the cost of financing sources  III- Risk and investment decisions 8- Empirical methods in risk management; simulation methods - sensitivity analysis, alternative scenarios, breakeven point analysis; Monte Carlo simulation; decision trees; capital asset pricing model (CAPM) .

Mandatory literature

Maria Dulce Soares Lopes; Elaboração e Análise de Projectos de Investimento, Feup Edições, 2011

Complementary Bibliography

Shapiro, Alan C.; Capital budgeting and investment analysis. ISBN: 0-13-066090-6

Teaching methods and learning activities

The theoretical part of this course is supported by theoretical type lectures. Theoretical lectures are complemented with case analysis and practical classes, to which experience in the analysis of investments from the team work will be made part.

keywords

Social sciences > Economics > Management studies > Financial management

Evaluation Type

Distributed evaluation with final exam

Assessment Components

Designation	Weight (%)
Defesa pública de dissertação, de relatório de projeto ou estágio, ou de tese	20,00
Exame	50,00
Trabalho escrito	30,00
Total:	100,00

Amount of time allocated to each course unit

Designation	Time (hours)
Elaboração de projeto	60,00
Estudo autónomo	60,00
Frequência das aulas	42,00
Total:	162,00

Eligibility for exams

 FEUP general rules of evaluation  are applicable.

Calculation formula of final grade

The assessment will be based on a closed book exam and the execution and discussion of a group assignment;: or by final exam only (your choice at the begining of the course). They will be graded as follows:Assignment 50%; Final exam 50%, with minimum mark of 7(out of 20); 

FG =  0.50 x GGA+0.50 x GFE ; or 100% GFE

in which: FG = Final Grade FEC = Grade of the Final Exam GGA = Grade of the Group Assignment

Obs:1- If FG >18 there will be an extra exam , written or oral (or FG=18) 2-Students with GAC exceeding 4  points  over FEG will be awarded a score in their group  work equal to FEG +4 ; students with GGA  less than the FEG will be assigned a weighting of 20% to the group work.3- Final  grade may be majorated  (up  to 2 points) attending to  the work done throughout the tutorials  (assumes full attendance to classes and active participation ); FG after this majoration will not exceed 18 (out of 20) unless the student  attends an extra exam (according to  obs 1).

Examinations or Special Assignments

Group Assignment- Business Plan -Groups of 6students to be defined at the beginning of the semester -2  interim reports have to be written and a final report at the end - Each group will present its work  (oral presentation) to class and  make a critical analysis of another´s  group work.

Obs_ Work is intended only for students with assiduity to classes ; students unable to attend classes should undergo a final examination (weighted 100%)

Special assessment (TE, DA, ...)

Final exam (100%) on specific dates for these students.

Classification improvement

Final Exam (100%), loosing the grade of groupo assigment.

(If final grade >18 there will be  an extra  exam  or final grade=18)