This class exists in these courses :
• Faculté de Gestion, Economie & Sciences - Licences & Prépas - Licence 2 Internationale d'Economie et de Gestion - S4 - 2 ECTS

Prerequisites

Mathematics

Learning outcomes

This lecture will introduce financial mathematics, a sound understanding of which is imperative for a student to do well in the later, more complex topics of corporate finance. The students should be well-grounded in measuring future values, present values, interest rates, and the number of periods necessary to achieve various cash flow streams.

The different lectures will cover the compounding and discounting techniques associated with single cash outflows and inflows over a single period of time, such as a year, as well as over multiple periods of time. He shows how time value problems associated with single cash flow streams are a function of four variables, i.e., the present value (PV), future value (FV), interest rate (i), and the number of periods (n) involved. Additionally, we will cover also, how a project can be value and the rule to choose a good project to invest in.

Course description

First Part: Present and Future Values

Lecture 1 Calculate future values and understand compounding.

Lecture 2 Calculate present values and understand discounting.

Lecture 3 Time value equation and applications.

Lecture 4 The Rule of 72 and additional examples.

Second Part: Cash Flows, annuities and perpetuties

Lecture 5 Compute the future value of multiple cash flows. Determine the future value of an annuity.

Lecture 6 Determine the present value of an annuity. Adjust the annuity equation for present value and future value for an annuity due and understand the concept of a perpetuity.

Lecture 7 Distinguish between the different types of loan repayments: discount loans, interest-only loans, and amortized loans.

Third Part: Capital Budgeting Decision Models

Lecture 8 Understand the net present value (NPV) decision model and appreciate why it is the preferred criterion for evaluating proposed investments. Calculate the most popular capital budgeting alternative to the NPV, the internal rate of return (IRR); and explain how the modified internal rate of return (MIRR) model attempts to address the IRR’s problems.

Lecture 9 Understand the profitability index (PI) as a modification of the NPV model. Compare and contrast the strengths and weaknesses of each decision model in a holistic way.

Class type

Class structure

Inverted classes, personal works and tutorials sessions in practice. Assessment will take place during each lecture.

- Powerpoints

- Tutorials and development of analytical thinking

- Assessment during each lecture class

Teaching methods

Assessment

Recommended reading

• Raymond M. Brooks, Financial Management: Core Concepts, Fourth Edition, Oregon State University, 2019.