• Introduction and Motivation of the Course Goals, Basic Concepts (Cost of Capital)
• Basic Concepts (Valuation and Valuation Shortcuts, Internal Rate of Return, YTM of Bonds, EXCEL Solver, Basic Concepts of Uncertainty)
• Expected Portfolio Return and Portfolio Risk
• Implementation in Practice (Scenario-Based Implementation, Implementation Based on Historical Data)
• Market Risk, Unique Risk, Diversification, Beta, Efficient Portfolios
• Portfolio Management without Risk-Free Borrowing/Lending, Portfolio Management with Risk-Free Borrowing/Lending, Sharpe Ratio
• Capital Asset Pricing Model (Capital Market Line, Security Market Line, CAPM Implementation in Practice)
• Capital Structure and Cost of Capital, Cost of Equity, Cost of Debt, Weighted Average Cost of Capital
• Use of Cost of Capital (Stock Valuation, Capital Budgeting, Business Valuation)

The teaching approach is based on a mix of methods that includes presentations by the professor, class discussions, numerical examples, real-life case studies, mandatory and optional homework exercises, enrichment material and a final exam.

Based on an explanation of the underlying theoretical concept, small numerical problems ("examples") will be solved in class. When useful, these examples will be interpreted from an economic point of view. Some of the examples are linked in a case study like manner to provide more insight into existing cross-links. To enable you to further connect the knowledge acquired in the individual examples, the Learn@WU platform also includes two optional case studies that represent more complex situations where the pieces have to be put together and knowledge has to be transferred to a comprehensive real world problem.

To reinforce knowledge of the Finance terminology and to optimize the transfer from the "theoretical" concepts to the practical application, some enrichment material (e.g. newspaper material, journal articles, screen shots from data providers like Reuters or Bloomberg, web pages, ...) has been included in the enrichment booklet.

At the end of some lectures, mandatory homework exercises will be announced to be solved in teams and to be submitted via Learn@WU before the deadline stipulated. Note that with this respect any co-operation between the teams is strictly forbidden. Any signs of inter team co-operation in solving the mandatory homework exercises will be dealt strictly according to the plagiarism rules of WU.

The lectures have been designed in a very structured form to make things easier to comprehend. This particularly regards to the order of the stuff components and the careful and successive increase in complexity. The course is structured in a way that puts the different pieces of content into context with the pieces already covered before. At the end of the class, you will get a good overview how all the concepts are related to each other.

The course ends with a final exam that includes numerical exercises, maybe accompanied by verbal questions (e.g. questions that test your understanding of the course contents like interpretation of the results received) but no multiple choice questions or questions for definitions.

10 % Mandatory homework exercise A (team work)

10 % Mandatory homework exercise B (team work)

10 % Mandatory homework exercise C (team work)

70 % Final exam (individual work)

Nikola Panic: nikola.panic@wu.ac.at

For administrative matters and registration please contact cfm@wu.ac.at

The text and the solution of a representative sample exam can be downloaded from the Learn@WU platform. The exam will take place in the last session of the course (for details including date, time and place see the course catalogue on the homepage of WU. Make sure to have with you a pocket calculator and the "List of Formulas for the Exam" (included in the course materials; only the original list without any modifications or additions may be used).

You are allowed to use pocket calculators that are able to solve numerical differential equations, to calculate standard deviation and mean. E.g., you are allowed to use the following calculators:

Texas Instruments: TI-30 series, TI-34, TI-106, TI-BAII PLUS;
Sharp: EL-500M, EL-501W, EL-509W, EL-510R, EL-520G, EL-520W, EL-531W,
EL-531WH, EL-531X, EL-733A, EL-735;
Casio: FX-82, FX-82ES Plus, FX-82 MS, SL-82SX, FX-83GT Plus, FX-85MS, FX-86DE PLUS, FX-92B, FX-115D, FX-220, FX-350MS, SL-450L, FX-992s;
HP: HP 10 Bii, HP 12C, HP 17 Bii Plus;
KARCE Kc 186 Scientific Calculator;
Sencor SEC 183

You are not allowed to use pocket calculators that have a memory function (with add-ins), calculators that calculate matrices, calculators that perform symbolic differentiation, calculators that include financial mathematical functions, calculators that can be programmed or calculators that can solve linear equations. Mobile phones with calculator function, laptops and tablet PCs are not allowed either. Examples of pocket calculators that are not allowed:
 

Texas Instruments: TI-68, TI-82, TI-83, TI-83 Plus, TI 84 PLUS, TI-89, Voyage 200;
Sharp: EL-506W, EL-512 H, EL-546L, EL-546X, EL-5120, EL-9450, EL-9650/9600c, EL-9900;
Casio: FX-50 FH, FX-570ES, FX-991ES, FX-991MS, FX-3650, FX-4500PA, FX-4800P, FX-5500LA, FX-7400G Plus, FX-9750G Plus, ClassPad 300, Algebra FX20 Plus, FX 1.0 Plus, CFX-9850GB Plus;

Even though use of the EXCEL Solver is an integral part of this class, you will not use a laptop or the EXCEL Solver during the exam. So you do not have to apply the Solver at the exam. However, you may be required to describe verbally how you would operate with the Solver.