About this Course
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Specialization
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100% online

Start instantly and learn at your own schedule.
Flexible deadlines

Flexible deadlines

Reset deadlines in accordance to your schedule.
Intermediate Level

Intermediate Level

Hours to complete

Approx. 21 hours to complete

Suggested: 5 hours/week...
Available languages

English

Subtitles: English
Specialization
100% online

100% online

Start instantly and learn at your own schedule.
Flexible deadlines

Flexible deadlines

Reset deadlines in accordance to your schedule.
Intermediate Level

Intermediate Level

Hours to complete

Approx. 21 hours to complete

Suggested: 5 hours/week...
Available languages

English

Subtitles: English

Syllabus - What you will learn from this course

Week
1
Hours to complete
5 hours to complete

Why Finance Matters? Net Present Value. How to Calculate NPV

In Week 1 we propose the game plan for our study of value. Then we analyze the key assumptions for the general valuation model. We focus on the understanding of the sources of value and the fundamental ideas of investor’s choice, the opportunity cost of capital, risk and return. We discuss the importance of time and expectations in determining value. Then we discuss the present value approach to studying the projects’ value and choice. We present the general PV formula and introduce the key concept of net present value (NPV) as a criterion of the choice of good investment projects. Then we study some most widely used shortcuts and apply the formulas to find the NPV’s of certain projects that play a special role in valuation. We end up with the general NPV formula and discuss the challenges in using it....
Reading
10 videos (Total 79 min), 6 readings, 2 quizzes
Video10 videos
1.1. Introduction – the idea of value6m
1.2. The game plan – a jumbo jet taking off5m
1.3. The valuation model – key assumptions11m
1.4. The opportunity cost of capital6m
1.5. Introducing PV and NPV12m
1.6. PV calculation shortcut (1) – perpetuities9m
1.7. PV calculation shortcut (2) – annuities6m
1.8. A fixed rate mortgage – an example of PV11m
1.9. The general NPV formula4m
Reading6 readings
Konstantin Kontor10m
AIBEc. The American Institute of Business and Economics10m
Grading10m
Handouts – an important comment10m
1.1. Introduction: why finance matterss
1.2. How to calculate present value10m
Quiz2 practice exercises
1 (Practice)20m
1 - The power of PV calculationss
Week
2
Hours to complete
4 hours to complete

Applications of NPV. Valuing Bonds and Stocks

Week 2 of the Course is devoted to the applications of NPV. In the first part of the week we use NPV to study riskless debt. Of special attention will be the challenges in valuing even riskless bonds. We discuss bond parameters and the special role of yield to maturity. Then we demonstrate how the NPV approach helps determine spot and forward interest rates. The second part of Week 2 deals with the core concepts in valuing equity. We introduce the idea of the common stock value as a function of its cash disbursements. Then we present some formulas that are used to value common stock on the basis of NPV. We focus on growth as a major contributor to the stock value. We analyze growth drivers and the mechanism of growth. On an example we reveal the influence of investments on the stock value. Finally, we pose some questions with respect to NPV approach....
Reading
10 videos (Total 68 min), 3 readings, 2 quizzes
Video10 videos
2.2. Valuing riskless debt6m
2.3. Bond cash flows and other parameters. Yield to maturity10m
2.4. Calculating spot rates8m
2.5. Forward rates – the idea and calculation8m
2.6. Valuing common stocks – the expected rate of return5m
2.7. The general stock valuation formula. The “tail”7m
2.8. The model of growth. PVGO5m
2.9. A constant growing company – an example10m
2.10. – What’s ahead?2m
Reading3 readings
2.1. Application of NPV (1) – valuing riskless bondss
2.2. Application of NPV (2) – valuing common stocks10m
2.3. Analyzing growth10m
Quiz2 practice exercises
2 (Practice)20m
2 - PV of bonds and stocks – models and market valuess
Week
3
Hours to complete
4 hours to complete

Making the Choice of Good Investment Projects. NPV and Other Criteria. Why Is NPV Better?

We start Week 3 of the Course by the discussion of criteria of choosing investment projects. Beside NPV, the internal rate of return (IRR) and other approaches are introduced. We show why the NPV criterion is the best and why the application of others may lead to wrong investment decisions. Then we focus on the main ideas to be taken into account while setting up cash flow patterns and making the choice of project on the basis of NPV. We mention some special issues – relevant costs, depreciation, inflation. We present the concept of equivalent annual cost (EAC) as a method of comparing projects of different length. Then we study the application of EAC in greater detail in a case....
Reading
12 videos (Total 106 min), 2 readings, 2 quizzes
Video12 videos
3.2. Other criteria – pluses and minuses8m
3.3. Internal rate of return (IRR)8m
3.4. Problems with IRR – it’s not exactly like NPV!12m
3.5. Using NPV – what should we know3m
3.6. NPV and cash flows. Some accounting details11m
3.7. Sunk costs – opportunity costs – relevant costs10m
3.8. Depreciation – an overview relevant to cash flows5m
3.9. Discount rates – nominal and real. The role of inflation6m
3.10. Projects of different length. Equivalent annual cost (EAC)9m
3.11. EAC – an example11m
3.12. Conclusions and unanswered questions10m
Reading2 readings
3.1. Equivalent annual cost (EAC)s
3.2. Case – comparing two heating systems10m
Quiz2 practice exercises
3 (Practice)20m
3 - The problems of IRR and the power of EACs
Week
4
Hours to complete
5 hours to complete

Risk and Return – From Basics to Reality

In Week 4 we study risk and return. We present a stochastic mathematical model of risk and apply it to find the returns and standard deviations of portfolios of assets. We discuss diversification and the role of special portfolios – the riskless portfolio and the market portfolio – in approaching asset risk. We demonstrate how any asset contributes to the market risk and introduce the β coefficient. Then we derive the capital asset pricing model (CAPM) and study how it is used on examples. We discuss the application of the company cost of capital (CCC) rule to choosing investment projects. Then we use CAPM to determine the cost of capital – first, for an equity-financed company and then in the general case with debt and equity. We present the weighted average cost of capital (WACC) formula and discuss it. Finally, on an example we study the steps in applying CAPM....
Reading
11 videos (Total 100 min), 4 readings, 2 quizzes
Video11 videos
4.2. The expected return and the standard deviation for a portfolio of securities. Some empirical evidence9m
4.3. Diversification. “Special” portfolios6m
4.4. Contribution to the portfolio risk. β6m
4.5. Efficient portfolios. The market portfolio’s efficiency7m
4.6. Capital asset pricing model (CAPM). Examples9m
4.7. The company cost of capital (CCC) rule10m
4.8. Applying CAPM – a no debt case4m
4.9. Applying CAPM – the general case. WACC13m
4.10. Steps in applying CAPM – an example15m
4.11. Conclusions. The roadmap to determining WACC. Some objections to using normal distributions7m
Reading4 readings
4.1. Mathematics of risk – an overviews
4.2. Risk and return (1) – the game plan and diversification10m
4.3. Risk and return (2) – market risk and asset pricing10m
4.4. Risk and return (3) – cost of capital10m
Quiz2 practice exercises
4 (Practice)20m
4 - Returns, betas, and the cost of capitals

Instructor

Avatar

Konstantin Kontor

Director and Professor of Finance and Strategy
American Institute of Business and Economics (AIBEc)

About Moscow Institute of Physics and Technology

Московский физико-технический институт (неофициально известный как МФТИ или Физтех) является одним из самых престижных в мире учебных и научно-исследовательских институтов. Он готовит высококвалифицированных специалистов в области теоретической и прикладной физики, прикладной математики, информатики, биотехнологии и смежных дисциплин. Физтех был основан в 1951 году Нобелевской премии лауреатами Петром Капицей, Николаем Семеновым, Львом Ландау и Сергеем Христиановичем. Основой образования в МФТИ является уникальная «система Физтеха»: кропотливое воспитание и отбор самых талантливых абитуриентов, фундаментальное образование высшего класса и раннее вовлечение студентов в реальную научно-исследовательскую работу. Среди выпускников МФТИ есть Нобелевские лауреаты, основатели всемирно известных компаний, известные космонавты, изобретатели, инженеры....

About American Institute of Business and Economics

The American Institute of Business and Economics (AIBEc) offers a wide variety of business courses in finance, accounting, marketing, strategy, HR, business law, economics, general management, business psychology, as well as course projects and the Field study. AIBEc provides for flexibility and customization of programs and schedules....

About the Understanding Modern Finance Specialization

This Specialization is designed for a wide audience of those interested in finance either professionally or just of curiosity, including managers of different levels specializing in finance, accounting, business planning, strategy, consulting, and project management, IT specialists engaged in the area of finance, fin-tech, big data, and valuation, etc. Through four courses and the final Project, you will cover the theory and practice of capital markets and financial institutions, corporate finance and project valuation, financial and managerial accounting as applied to finance, as well as the M&A market as the ultimate judge of financial efficiency and value creation. The Specialization will prepare you to understand and use the applications of financial ideas, concepts, models, strategies, and tools to build a successful career in finance and in business, as well as to take advantage of opportunities offered by financial markets....
Understanding Modern Finance

Frequently Asked Questions

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