BUKD-F745 Valuation and Capital Investments
*Prerequisite: C540 (or Core 2). Typically offered Summer & Winter
A key focus of most publicly owned companies is enhancement of shareholder value. The value of a firm is determined through investors’ assessment of the efficacy of managerial actions. Three key finance decisions that affect investors’ assessments are the form in which capital is raised, how the capital is employed, and how returns are distributed to providers of capital. Managers and investor have differential access to information on the actions and impact of decisions. Investors try to compensate for this differential information by establishing governance structures to monitor and control management actions and by trying to read intent from management decisions. In turn, management attempts to create a structure for analyzing decisions that is consistent with investors valuation if management action could be freely observed. This course investigates how agency relationships and financial contracting affect financial decisions such as capital structure, dividends, share repurchases, and managerial incentives. A capital investment process will be developed that includes the application of analytical tools to assess the economic value created by capital investments, adjustments for project risk using external market information and simulations techniques, and the use of real options analysis to value management flexibility and strategic investments.