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2016/2017  BA-BHAAI1011U  Undergraduate Financial Modeling

English Title
Undergraduate Financial Modeling

Course information
Language English
Course ECTS 7.5 ECTS
Type Elective
Level Bachelor
Duration Summer
Start time of the course Summer
Timetable Course schedule will be posted at calendar.cbs.dk
Max. participants 120
Study board
Study Board for BSc in Economics and Business Administration
Course coordinator
  • Course instructor - Dr Hassan Tanha, College of Business, Victoria University Melbourne Australia, ht.acc@cbs.dk
    Sven Bislev - Department of Management, Society and Communication (MSC)
In case of any academic questions related to the course, please contact the course instructor or the academic director, Sven Bislev at sb.ikl@cbs.dk
Main academic disciplines
  • Finance
Last updated on 29/05/2017
Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors: In this class you will learn to implement in Excel using Data Tables and many Excel financial functions the financial concepts. These concepts include:
  • Capital budgeting and time value of money
  • Corporate, bonds and stock valuation models:
  • Portfolio analysis, capital asset pricing model (CAPM) and the security market line (SML) Measuring investment performance
  • Options: strategies and pricing
  • Excel functions used : PV, NPV, IRR, PMT, NPer • Goal seek • Data table, Average • Varp • Stdevp • Frequency •Ln •Count •Covar and correl • Trendlines (Excel term for regressions) •Slope, Intercept. Rsq. • Regression •Solver • Sophisticated graphing, • XIRR • Rate •Yield •Sum, •If• Max • Min •Exp
Course prerequisites
Introductory Finance and good knowledge of Excel
Examination
Undergraduate Financial Modeling:
Exam ECTS 7.5
Examination form Written sit-in exam
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Summer, Ordinary exam: End of July - beginning of August 2017.

Retake exam: End of September - beginning of October 2017.

3rd attempt (2nd retake) exam: End November - beginning of December 2017.

Exam schedule is available on http://www.cbs.dk/summer http:/​/​www.cbs.dk/​uddannelse/​summer-university-programme/​exam.
Aids allowed to bring to the exam Closed book: no aids
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
4 hour written sit-in exam, new exam question.

Exam form for 3rd attempt (2nd retake): 72 hours home project assignment, max. 10 pages.
Course content and structure

In this class you will learn to implement in Excel the financial concepts . These concepts include: 
• Time value of money , and capital budgeting: Future value • Present value • Net present value • Internal rate of return • Pension and savings plans and other accumulation problems , IRR,  NPV, Project ranking using NPV and IRR,  Terminal value, Taxation and calculation of cash flows,  Cost of foregone opportunities, Sunk costs Excel functions used : PV, NPV, IRR, PMT, NPer • Goal seek • Data table
• Portfolio analysis, capital asset pricing model (CAPM) and the security market line (SML): Ex-post and ex-ante returns • Holding-period returns • Treasury bond returns • Return statistics—mean, variance, and standard deviation Mean and standard deviation of portfolio of two assets • Portfolio risk and return • Minimum variance portfolio • The efficient frontier • Mean-variance calculations for three-asset portfolios  Portfolios, risk-free asset • Capital market line (CML) • Beta, security market line (SML) • Sharpe ratio Excel functions used • Month • Sqrt • Average • Varp • Stdevp • Frequency •Ln •Count •Covar and correl • Trendlines (Excel term for regressions) •Slope, Intercept. Rsq. • Regression •Solver  • Sophisticated graphing
• Valuation: Building a proforma model for valuation • Net present value, present value • Cash flows and free cash flows (FCF);  Bond Valuation: Treasury Bills, Treasury Bonds, yield curve, YTM, callable bonds and preferred stocks.  Valuing  Stocks: Discounted cash flows, free cash flows (FCF)• Cost of capital, cost of equity, cost of debt, weighted average cost of capital (WACC) • Equity premium • Beta, equity beta, asset beta • Two-stage growth models Excel concepts and functions • Excel formulas and model building • Relative versus absolute copying • Circular references • IRR • XIRR • Rate •Yield •Sum, •NPV, •If • Data table
• Options:  concepts (cash flows of options; option strategies); Option pricing restrictions:  No early exercise of calls; Put-call parity; Early exercise of American puts; Option price convexity.  Black-Scholes formula Stock price volatility; Implied volatility;  Binomial model and replicating portfolio  Excel functions used • Max  • Min • If  •Exp • Ln  • Stdevp • Varp • Data Table

 

Class 1: Background to Excel:  (PFE, Chapters24- 29). Time value of money (PFE, Chapter 2)
Class 2: Time value of money (PFE, Chapters 2, 3)

Class 3:Capital budgeting (PFE, Chapters 4, 5 and 6)

Class 4:Free cash flows financial model (PFE, Chapter 7)

Class 5:Risk, portfolio mathematics (PFE, Chapters 8, 9, 10)

Class 6: CAPM, SML , and cost of capital (PFE, Chapters 11, 12 and 13)  

feedback activity: 

Class 7:Bond Valuation(PFE, Chapter 15).

Class 8: Valuing Stocks(PFE, Chapter 16).

Class 9:Options: strategies and pricing facts(PFE, Chapters 20-21)

Class 10:Black-Scholes formula (Chapter 22)

Class 11: Binomial model (chapter 23)  Comprehensive Review
Teaching methods
I teach interactively—a combination of lecture, theory of finance, Excel. I expect students to follow along with my lectures, implementing in Excel the models that are explained in class.
Student workload
Preliminary assignment 10 hours
Classroom attendance 33 hours
Preparation 144 hours
Feedback activity 7 hours
Examination 12 hours
Further Information

Preliminary Assignment: To help students get maximum value from ISUP courses, instructors provide a reading or a small number of readings or video clips to be read or viewed before the start of classes with a related task scheduled for class 1 in order to 'jump-start' the learning process.

 

Feedback Activity: A feedback activity defined by the course instructor will take place approx. half-way through the course.

 

Course timetable is available on http://www.cbs.dk/uddannelse/summer-university-programme/courses.
Expected literature

Simon Benninga. (n.d.). Principles of Finance with Excel. 2nd Edition. Oxford University Press.
Last updated on 29/05/2017