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On successful completion of the module, students should be able to:
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Demonstrate an understanding of the role of business finance in strategic management and influences on business financing decision making.
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Explain cost of capital from a company's and investors perspective, calculate cost of equity, debt and weighted average cost of capital (WACC), assumptions and limitation of WACC , the link between cost of capital and a company's value. Evaluate capital structure theories including their respective assumptions and limitations, discuss the arbitrage process and other issues that impact on the level of gearing in a company's capital structure.
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Explain portfolio theory and portfolio management (risk and expected return), measuring risk, investor indifference curves and preferences, efficient frontier, risk free investments, the capital market line and market portfolio M. Explain systematic and unsystematic risk, systematic risk and CAPM, what is the beta factor, calculating CAPM and its assumptions, usefulness and limitations.
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Explain capital rationing and select optimum combination of investments with single period capital rationing, calculate incremental taxation payments from a proposed investment, adjusting for inflation when appraising capital projects, explain how risk adjusted discount rates are calculated, explain how sensitivity analysis can be applied to investment appraisal, describe the initiation, authorisation and review procedure of the investment process.
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Explain reasons why valuation of entities and equities are required, calculate a company's valuation using market value, asset values, earnings, dividend payout policy, accounting rate of return and discounted cash flow, explaining the advantages and disadvantages and practical issues to be considered for each method.
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Describe and discuss the nature and types of risk and approaches to risk management, the causes of exchange rate and interest rate fluctuations. Discuss, apply and evaluate hedging techniques for foreign currency and interest rate risk including traditional and basic methods of foreign currency and interest rate risk management. Identify the main types of currency and interest rate derivative used to hedge risk and explain how they are used in hedging.
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