Alternative Approaches to Valuation and Investment

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Description

About this course: In this course, participants will develop an understanding of the intuitive foundations of asset and investment valuation, and how alternative valuation techniques may be used in practice. This is part of a Specialization in corporate finance created in partnership between the University of Melbourne and Bank of New York Mellon (BNY Mellon). View the MOOC promotional video here: http://tinyurl.com/h75pzt6

Who is this class for: Learners who wish to develop practical skills in quantifying the role of risk when assessing different investments. Some of the most widely used models in finance are demonstrated in an intuitively appealing way that makes clear the advant…

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When you enroll for courses through Coursera you get to choose for a paid plan or for a free plan

  • Free plan: No certicification and/or audit only. You will have access to all course materials except graded items.
  • Paid plan: Commit to earning a Certificate—it's a trusted, shareable way to showcase your new skills.

About this course: In this course, participants will develop an understanding of the intuitive foundations of asset and investment valuation, and how alternative valuation techniques may be used in practice. This is part of a Specialization in corporate finance created in partnership between the University of Melbourne and Bank of New York Mellon (BNY Mellon). View the MOOC promotional video here: http://tinyurl.com/h75pzt6

Who is this class for: Learners who wish to develop practical skills in quantifying the role of risk when assessing different investments. Some of the most widely used models in finance are demonstrated in an intuitively appealing way that makes clear the advantages and limitations of the models employed. The course also introduces the concept of 'real options' as a tool to augment discounted cash flow analysis.

Created by:  The University of Melbourne
  • Taught by:  Paul Kofman, Dean, Faculty of Business and Economics

    Sidney Myer Chair of Commerce
  • Taught by:  Sean Pinder, Associate Professor

    Faculty of Business and Economics
Basic Info Course 4 of 5 in the Essentials of Corporate Finance Specialization Language English How To Pass Pass all graded assignments to complete the course. User Ratings 4.7 stars Average User Rating 4.7See what learners said Coursework

Each course is like an interactive textbook, featuring pre-recorded videos, quizzes and projects.

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Syllabus


WEEK 1


Defining Attitudes Towards and Alternative Measures of Risk



This week we will define a statistical measure of stand-alone risk as being the standard deviation of returns. We will describe three alternative attitudes towards risk, settling on risk aversion as being the standard assumption made in financial markets. We will then analyse the impact of combining assets into a portfolio upon both risk and return and then quantify the benefits from diversification by comparing performance against a suitable benchmark.


6 videos, 7 readings, 1 practice quiz expand


  1. Video: Alternative Approaches to Valuation and Investment - Overview
  2. Reading: Course Syllabus
  3. Reading: Your Teaching Team
  4. Reading: Week 1 Outline
  5. Reading: Start of Course Survey
  6. Video: 1.0 Welcome and Introduction
  7. Video: 1.1 Measuring stand-alone risk (Just the same old standard deviations)
  8. Video: 1.2 Alternative attitudes towards risk (I don’t hate risk, I’m just averse to it...)
  9. Video: 1.3 Portfolio Return and Risk (The more the merrier…)
  10. Video: 1.4 Defining the Diversification Benefit (It’s All About the Eggs and Baskets...)
  11. Practice Quiz: Week 1 Practice Quiz - This quiz does not contribute to your final grade
  12. Reading: Resources
  13. Reading: Social Media
  14. Reading: Study Tools and Tips

Graded: Week 1 Graded Quiz - This quiz contributes 10% towards your final grade

WEEK 2


Linking risk with expected return



This week we differentiate between systematic and unsystematic risk and explain how the expected returns that are reflected in the prices of assets should be linked to only one type of risk. We illustrate how the Capital Asset Pricing Model might be used to link systematic risk with expected return and then discuss the empirical shortcomings of the model. This leads to a description of more advanced models and we conclude with a review of survey evidence that considers the approach taken by finance mangers of large listed firms in practice.


7 videos, 1 reading, 1 practice quiz expand


  1. Reading: Week 2 Outline
  2. Video: 2.0 Introduction
  3. Video: 2.1 Unsystematic versus Systematic Risk (Getting rid of unrewarded risk)
  4. Video: 2.2 Capital Asset Pricing Model (It’s all about the discount rate)
  5. Video: 2.3 Empirical Evidence of the Capital Asset Pricing Model (Testing the untestable...)
  6. Video: 2.4 Multi-factor Models and Evidence from the Field (Risk factors – the more the merrier!)
  7. Practice Quiz: Week 2 Practice Quiz - This quiz does not contribute to your final grade
  8. Video: Mid Course Check-in
  9. Video: A View from Industry with BNY Mellon

Graded: Week 2 Graded Quiz - This quiz contributes 10% towards your final grade

WEEK 3


Using financial statement analysis to measure cost of capital



This week we will explain the logical underpinnings of the Weighted Average Cost of Capital Formula and show how it might be estimated in practice by a firm. We will also consider the many challenges that might be faced in using this approach to estimating hurdle rates and conclude with a warning about the perverse outcomes that might occur if the technique is used in a haphazard manner.


5 videos, 1 reading, 1 practice quiz expand


  1. Reading: Week 3 Outline
  2. Video: 3.0 Using Financial Information to Estimate Cost of Capital (Introduction)
  3. Video: 3.1 Foundations of the WACC (Finance is so WACC!)
  4. Video: 3.2 WACC and Debt (WACC-Owe!)
  5. Video: 3.3 WACC and Equity (Share the WACC-iness)
  6. Video: 3.4 Issues with WACC (To WACC or not to WACC..?)
  7. Practice Quiz: Week 3 Practice Quiz - This quiz does not contribute to your final grade

Graded: Week 3 Graded Quiz - This quiz contributes 10% towards your final grade

WEEK 4


Addressing financial reality with real options analysis



This week we describe how standard NPV analysis might lead to incorrect decisions when we fail to account for the impact of (or upon) firm flexibility. We then describe the three most common types of real options that firms face in practice and then explain how decision trees might be used to arrive at an approximation of the value of the real option that is embedded within a project. We conclude by considering empirical evidence on the take-up of real options analysis and discuss the situations in which real options analysis might most be needed.


5 videos, 4 readings, 1 practice quiz expand


  1. Reading: Week 4 Outline
  2. Video: 4.0 Introduction (One with all the options...)
  3. Video: 4.1 The Problem with NPV (It always works… except when it doesn’t…)
  4. Video: 4.2 Examples of Real Options in Practice (Is that an option in your project?)
  5. Video: 4.3 Approximation of Real Option Values Using Decision Trees (Options do grow on trees!)
  6. Video: 4.4 Empirical evidence and final points (Does anyone exercise their option to use real options?)
  7. Practice Quiz: Week 4 practice quiz - This quiz does not contribute to your final grade
  8. Reading: Academic Integrity
  9. Reading: Where to From Here? The Next Step.
  10. Reading: End of Course Survey

Graded: Week 4 graded quiz - This quiz contributes 10% towards your final grade
Graded: Course Final Exam - This quiz contributes 40% towards your final grade
Graded: Peer Assessment - This contributes 20% towards your final grade

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