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Summary

• Options: Basic understanding, put‐call‐parity, binomial and Black and Scholes option pricing, equity as call option • Real options: Identification and binomial pricing • Valuation: Introduction to discounted cash flow (DCF) methods, multiples methods and applications • Initial Public Offerings (IPOs): Empirical studies of IPO costs, IPO process • Capital structure: Weighted average cost of capital (WACC) under the option pricing model (OPM), capital asset pricing model (CAPM) and Modigliani and Miller, trade‐off theory of debt, agency theory of debt, pecking‐order theory of debt • Efficient markets: Definitions, modeling, empirical approaches and results • Mergers and acquisitions (M&A): Explanations of wealth effects of M&A, explanations for conglomerates, empirical results on other forms of ownership decreases and change (divestitures, carve‐outs, spin‐offs, tracking stock, split‐ups, leveraged buyouts) • Dividend policy: Theories of optimal dividend policy, empirical evidence

Learning outcomes

After successful completion of the module, students can explain the most common concepts in corporate finance such as real and financial options, company valuation, market efficiency and dividend and leverage policies. Furthermore, they are able to critically discuss these topics. Finally, they are able to apply the above concepts and decide on corporate financial policies as well as evaluate financial and real options and companies (e.g., by using option theory or DCF methods).
Number of credit hours per week 2
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