Preparation and Evaluation of Investment Projects

Financial Analysis

Financial Management

The course will have a theoretical and practical approach, beginning with the presentation of fundamental concepts and techniques, followed by their application through the analysis of practical cases.

Throughout the semester, the development of an Investment Project (IP) will also be developed, supported by a previously structured spreadsheet.

The ESG (Environmental, Social, and Governance) component will be integrated as a complement to traditional economic and financial assessment, allowing students to identify non-financial risks and opportunities in projects, utilize ESG metrics, and connect the Sustainable Development Goals (SDGs) with the feasibility and impact analysis of investments.

The objective of this course is to enable the student to prepare and analyze an investment project; provide students with theoretical and practical knowledge of the base methodologies for analyzing the economic and financial feasibility of investment projects under conditions of certainty and uncertainty.

Analysis of the Investment Financing Problem. Analysis of the risk associated with an investment project. The sustainability of projects and social projects. Additionally, it is intended that students develop critical sensitivity and the ability to perform an integrated evaluation of projects, considering environmental, social and governance (ESG) dimensions, as well as their contribution to the Sustainable Development Goals (SDGs), recognizing the relevance of these dimensions in the sustainability and long-term impact of investments.

The skills to be acquired:

At the end of the semester students should be able to:

– Use the necessary technical and instrumental skills in the economic and financial analysis of investments.

– Use technical skills capable of proposing investment financing solutions.

– Analyze and assess the risk level of investment.

I. INTRODUCTION

Phases of Investment Project Development

Required Information

Types of Projects

II. BASIC CONCEPTS

The Incremental Nature of Investment Projects

The Concept of Sunk Costs

The Concept of Opportunity Cost of Invested Capital

CAPM and Cost of Capital: Levered and Unlevered Beta.

Typology of Costs of Capital.

The Duration of Investment in Project Analysis.

The “Residual Value” of Investment Projects

Accuracies of Project Cash Flow

III. PROJECT EVALUATION AND SELECTION CRITERIA

Net Present Value (NPV)

Internal Rate of Return (IRR)

Project Return Index (PRI)

Payback Period (BRP)

Integrated Internal Rate of Return (IIR)

Capital Rationing and Project Selection

Annuity Criterion and the Cycle Method

Inversion of the IRR Criterion,

Multiple IRRs, and the Absence of an IRR.

Fisher Criterion.

IV. INTERACTION OF INVESTMENT AND FINANCING DECISIONS

The Fiscal Effect of Debt VALA Criterion

V. UNCERTAINTY REDUCTION TECHNIQUES AND RISK TREATMENT IN PROJECT ANALYSIS

Sensitivity Analysis

Scenario Analysis

Break-Even Review

Decision Trees

Case Studies.

Regarding the assessment methodology, the student will have the following modalities at their disposal:

i. Assessment through a final exam that will focus on all the topics of the program, with students with a grade equal to or greater than 10 being approved.

ii. Two interim written tests during the school term, with the approval of students with an average mark in the tests of not less than 9.5 points, and in any of them they cannot have a classification less than 40% of the maximum mark of the test. . In case the average of the two tests is greater than or equal to 9.5 values without the student having fulfilled one of the minimum values, the grade that will appear in the agenda will be of 09 values. The dates for these tests will be defined together with the students in the first week of classes.

NAO