Project Preparation and Investment Analysis

Math

Economy

Financial Accounting

Financial management

Theoretical-practical classes.

Carrying out group work.

After successfully completing this course, the student should be able to: 

• Relate the construction of an investment project with the companies’ strategy, with the markets with which they aspire to relate and with the different interests that are manifested in the management of companies;
• Identify and build the central maps of an investment project and the partial values ​​that inform them;
• Analyze an investment project using traditional criteria: NPV; IRR; Profitability Index and Payback;
• Understand and quantify the relationship between the viability of investment projects and the selection of a specific financing structure;
• Identify and quantify the different options emerging in each project over the analysis horizon.
• Elaborate and analyze agricultural projects with technical, economic and financial coherence, viable and sustainable;
• Assess the uncertainty or risk associated with each investment project using the usual tools: sensitivity analysis, calculation of the critical sales point in relation to NPV; resources to the mean value and variance of NPV and IRR.

I. INTRODUCTION

1. Delimitation of the study area.

2. Types of investment projects.

3. Preparation/Development Phases of an investment project.

4. General course on the necessary information.

II. BASIC CONCEPTS

1. Notion of investment in project analysis.

2. The incremental nature of the investment project.

3. The notion of sunk costs.

4. The notion of opportunity cost of invested capital.

5. CAPM and cost of capital: Levered and unlevered beta. Typology of capital costs.

6. The duration of investment in project analysis.

7. The “residual value” of the investment project (net book value versus going concern value). The importance of strategy in quantifying the residual value of the project.

8. Cash-flow meanings of the project.

9. Reasons for preferring the use of cash flows in the evaluation of projects to the detriment of accounting results.

III. PROJECT SELECTION AND EVALUATION CRITERIA

1. Criteria that do not take into account the time value of money. Limitations.

2. The Net Present Value (NPV).

3. The Internal Rate of Return (IRR).

4. Comparison between NPV and IRR.

5. The Project Profitability Index (IRP).

6. The Payback Period (PRI).

7. Limitations of the IRP and PRI.

8. The Integrated Internal Rate of Return (TIRI)

IV. INTERACTION OF INVESTMENT AND FINANCING DECISIONS

1. Notion of present value of a financing decision.

2. Adjusted Present Value Approach

3. Flows to Equity Approach

4. Weighted Average Cost of Capital Method

V. UNCERTAINTY REDUCTION TECHNIQUES IN PROJECT ANALYSIS

1. Sensitivity analysis.

2. Scenario Analysis.

3. Analysis of the critical point of sales from the point of view of investment evaluation, that is, as a cut-off point between destruction and creation of wealth.

VI. USE OF RISK TREATMENT TECHNIQUES IN ANALYSIS OF INVESTMENT PROJECTS

1. The use of mathematical expectation in calculating the average values ​​of cash flows.

2. The adoption of investment decisions based on the average value and the variance of the NPV.

VII. CONSIDERING STRATEGIC OPTIONS IN INVESTMENT EVALUATION.

1. Sequential investment decisions. Presentation of traditional real options embedded in investment projects (Deferral option; Expansion or growth option; Contraction option; Activity Change Option; Option to temporarily close and resume operations; Option to abandon at residual value; Option to partially guaranteed production placement).

2. Use of decision trees.

3. Presentation of traditional real options embedded in investment projects (deferral option; option for expansion or growth; option for contraction; option for temporary closure and resumption of operations; option to abandon at residual value; option for partially guaranteed placement of the production

VIII. THE PREPARATION OF AN INVESTMENT PROJECT IN THE AGRICULTURAL AREA

1. Elaboration of a production or transformation business plan in the agricultural sector;

2. Identification and selection of measures to support investment in the agricultural sector suited to the business plan and the project proponent;

3. Completion of application forms for the selected programme/measure/action;

4. Analysis and evaluation of the project, based on the criteria considered in the selected support mechanism.

NAO

– Avillez, F.; Gomes da Silva, F.; Trindade, C.; Avillez, F.; Salema, J.; Pereira, N. (2006). Formação Global em Gestão Agrícola: Análise de Investimento. Programa Agro.

– Bodie Z., Kane, A. And Marcus A. (2017). Essentials of Investments, McGraw Hill, 10th Edition

– Brealey, R. A.; Myers, S. C. and Alen, F. (2017). Principles of corporate Finance, McGraw Hill, 12º edition.

– Cebola, A., (2017). Projectos de Investimento de Pequenas e Médias Empresas: Elaboração e Análise, Lisboa, Edições Sílabo.

– Damodaran, A, (2012). Investment Valuation: Tools and Techniques for Determining the Value of any Asset, University Edition.

– Esperança, J. P. e F. Matias, (2009). Finanças Empresariais, Texto Editores.

– Esperança, J. Paulo, Carlos D. (2014). Empreendedorismo e Planeamento. Financeiro-Transformar oportunidades em negócios. Criar micro, pequenas e médias empresas, 2ª edição, edições sílabo.

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– Koller, T.; Goedhart, M. and David, W. (2015). Valuation: Measuring and Managing the Value of Companies, University Edition, 6th Edition, McKinsey & Company Inc.- Megre, L. (2013), Análise de Projetos de Investimento – Uma perspetiva económica, Lisboa: Edições Sílabo.

– Mota, A. G.; Barroso, C.; Soares, H. e Laureano, L. (2014). Introdução às Finanças. Fundamentos de Finanças com Casos Práticos Resolvidos e Propostos”, Edições Sílabo, 2ª Edição, Lisboa.

– Neves, J. C. (2012). Análise e Relato Financeiro – uma visão integrada de gestão, 5ª Edição, Texto Editores.

– Ross, S.; Westerfield R. and Jaffe, J. (2016). Essentials of Corporate Finance, McGraw-Hill Education, 11ª edition.

– Silva, E. (2014). O cálculo do Risco em Projetos de Investimento, Vida económica.

– Silva, E, Queirós, M. (2011). Gestão Financeira: Análise de Investimentos, Porto, Vida Económica, 2ª edição.

– Soares, I. Moreira, J.; Pinho, C. e Couto, J. (2015). Decisões de Investimento – Análise Financeira de Projectos, 4ª edição. Edições Sílabo.