Coronavirus (COVID-19) Update
Due to the Coronavirus (COVID-19) pandemic, any references to assessment tasks and on-campus delivery may no longer be up-to-date on this page.
Students should consult iLearn for revised unit information.
Find out more about the Coronavirus (COVID-19) and potential impacts on staff and students
Unit convenor and teaching staff |
Unit convenor and teaching staff
Stephen Reid
Contact via Email
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Credit points |
Credit points
5
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Prerequisites |
Prerequisites
ECFS866 or AFCP8003
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Corequisites |
Corequisites
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Co-badged status |
Co-badged status
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Unit description |
Unit description
This unit develops skills required in the assessment and valuation of projects, companies or divisions, and is designed for those with a role in business development, strategic planning or advising companies on financing, investment or restructuring decisions. Students will be equipped to address a wide range of valuation situations by being able to critically evaluate and apply the variety of valuation techniques used in practice. Building on the principles from Corporate Finance we consider in detail the assumptions and implementation issues involved in valuation models, recent developments in cost of capital estimation, valuation methodologies and real options. Valuation in an international context will also be considered. Considerable emphasis is placed on assessing the robustness of valuations and how to incorporate risk into valuation and decision making. The unit provides opportunities to develop financial modelling skills, and provides exposure to @Risk software (used for Monte Carlo simulation), and access to S&P Capital IQ. |
Information about important academic dates including deadlines for withdrawing from units are available at https://www.mq.edu.au/study/calendar-of-dates
On successful completion of this unit, you will be able to:
Coronavirus (COVID-19) Update
Assessment details are no longer provided here as a result of changes due to the Coronavirus (COVID-19) pandemic.
Students should consult iLearn for revised unit information.
Find out more about the Coronavirus (COVID-19) and potential impacts on staff and students
Information - Extension Requests / Penalties
Pre-unit Quiz (10%)
You are expected to make yourself available for assessment during the relevant quiz window.
Students who do not submit this task by the due date and time receive a result of zero. This penalty does not apply when an application for Special Consideration has been made and approved.
Note: Applications for Special Consideration must be made within 5 (five) business days of the due date and time.
Refer to MAFC Program Rules at https://mafcstudents.mq.edu.au/ for information on the University’s Special Consideration Policy.
Assignment (35%)
No extensions will be granted. There will be a deduction of 10% of the total available marks made from the total awarded mark for each 24 hour period or part thereof that the submission is late (for example, 25 hours late in submission incurs a 20% penalty). This penalty does not apply for cases in which an application for Special Consideration is made and approved.
Late submissions will be accepted up to 96 hours after the due date and time.
Note: Applications for Special Consideration must be made within 5 (five) business days of the due date and time.
Refer to MAFC Program Rules at https://mafcstudents.mq.edu.au/ for information on the University’s Special Consideration Policy.
Final Exam (55%)
You are expected to present yourself for examination at the time and place designated in the relevant MAFC Timetable at https://www.mq.edu.au/about/about-the-university/faculties-and-departments/business/study-with-us/macquarie-applied-finance-centre/timetables.
Deferral of an examination is not permitted unless an application for Special Consideration is made and approved.
Students who do not attend receive a mark of zero. This penalty does not apply in cases where an application for Special Consideration has been made and approved.
Note: Applications for Special Consideration must be made within 5 (five) business days of the due date and time.
Refer to MAFC Program Rules at https://mafcstudents.mq.edu.au/ for information on the University’s Special Consideration Policy.
Coronavirus (COVID-19) Update
Any references to on-campus delivery below may no longer be relevant due to COVID-19.
Please check here for updated delivery information: https://ask.mq.edu.au/account/pub/display/unit_status
Face-to-Face Teaching: Generally 20 hours.
Timetable: Detailed timetable for classes are available at https://www.mq.edu.au/about/about-the-university/faculties-and-departments/business/study-with-us/macquarie-applied-finance-centre/timetables.
Consultation Times:
Students who wish to contact any of the teaching staff may do so through:
Text: Nil
Course Resources:
Lecture Notes: Available via iLearn.
Case Studies:
Pre-unit Materials:
Useful References:
Calculators:
Assumed Knowledge: Mathematical content
Present Value = Σnt=0 ((Cash Flow t ) / (1+Kt)t )
as well as alternate expressions for calculating the present value of a series of cash flows using level and growing perpetuities and annuities.
You should review Chapter 4 of the textbook if you are not comfortable with this material.
Assumed Access:
Unit iLearn Site:
Important:
Coronavirus (COVID-19) Update
The unit schedule/topics and any references to on-campus delivery below may no longer be relevant due to COVID-19. Please consult iLearn for latest details, and check here for updated delivery information: https://ask.mq.edu.au/account/pub/display/unit_status
1: REVIEW OF VALUATION FRAMEWORK
Taking the basic DCF model as the starting point, the topic presents some extensions of the valuation models introduced in pre-requisite subjects and demonstrates how they can be used in practice to inform strategy development and decision making.
Key learning outcomes for this topic:
2: ALTERNATIVE VALUATION MODELS
The topic examines the linkages between the various models, similarities and differences and how to determine the appropriate model for a range of valuation scenarios. Special attention is paid to the Residual Income valuation method as a forerunner to linking it with strategy development.
Key learning outcomes:
3: USING THE VALUATION MODELS
The wide ranging applications of valuation techniques used in practice will be reviewed. The material includes a critical analysis of the types of valuation issues which often arise in practice, especially around the estimate of the terminal value which generally represents the largest component of a valuation. [NOTE: this unit does NOT consider the legal or other regulatory issues involved in preparing a valuation, nor issues such as marketability or other discounts. These matters are covered in Applied Valuation].
Key learning outcomes for this topic:
4: RISK AND VALUATION
How to address risk in the different contexts of valuation is considered. Various ways to assess and measure risk and whether each risk can be assessed by a valuation adjustment (i.e. cash flows or discount rate), deal structure or decision making process (e.g. more information, decision criteria under risk) is considered. Also examined is how to assess the source of a project’s NPV, and how it can be incorporated into risk appraisal.
Key learning outcomes for this topic:
5: PREPARING A COST OF CAPITAL RECOMMENDATION
This topic extends the discussion of cost of capital from Corporate Finance and discusses the practical application of the cost of capital concepts in the range of valuation situations.
Key learning outcomes for this topic:
5A: FINANCIAL MODELLING AND FORECASTING TOOLS
This topic reviews financial modelling best practice, and procedures for establishing key relationships in a financial model, including multiple regression.
Key learning outcomes for this reading (time available in class to discuss questions arising from the material):
6: STRATEGIC FLEXIBILITY AND VALUE
The impact of strategic flexibility on value is reviewed to introduce the use of option valuation techniques to value this flexibility. An approach for introducing real options into a valuation is considered along with and comparing the use of decision trees and option valuation approaches. It presents a number of straightforward scenarios which demonstrate the impact of introducing real options into the traditional DCF framework.
Key learning outcomes for this topic:
7: REAL OPTIONS: ADVANCED VALUATION ISSUES
This topic examines advanced issues in using option pricing methods in real option applications. It will examine in detail the robustness of real options methodology in practice. It will look at the impact of early exercise on option value, projects whose value declines prior to exercise, how to incorporate multiple options within one project and the impact of different project risk profiles on option value. This topic will concentrate on understanding of issues and identifying the appropriate modelling techniques available.
Key learning outcomes for this topic:
8: SPECIAL TOPICS IN VALUATION
If time is available, this topic will address emerging or interesting issues in the application of valuation techniques. It can vary from class to class, depending on interests of class, issues of the day and time available. The focus will be on using existing knowledge of finance to resolve interesting valuation problems.
Key learning outcomes for this topic:
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Students seeking more policy resources can visit the Student Policy Gateway (https://students.mq.edu.au/support/study/student-policy-gateway). It is your one-stop-shop for the key policies you need to know about throughout your undergraduate student journey.
If you would like to see all the policies relevant to Learning and Teaching visit Policy Central (https://staff.mq.edu.au/work/strategy-planning-and-governance/university-policies-and-procedures/policy-central).
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