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<span style="font-size:large">[[SSKE Knowledge/isPartOfProgram::FEUP MESG - Services Engineering and Management]]</span> == Capital Budgeting Course == === Objectives, Skills and Learning Outcomes === This course unit aims to provide students with knowledge of basic methodologies for the analysis of the financial and economic feasibility of investment projects in certainty and uncertainty conditions.<br/>After the completion of the course unit, students should be capable of:<br/>- justifying a decision or real investments<br/>- designing a business plan<br/><br/>Inf: the Business Plan will be based on Portuguese relevant legislation === Program === I – Introduction<br/>1- An overview on project evaluation; description of project evaluation; concept of real investment; the importance of evaluation; basic evaluation methodology; project typology; life cycle and project stages .<br/>2- Business plan: description; Basic components of a business plan; Structure.<br/><br/>II- Project elaboration and evaluation<br/>3- Feasibility studies; project background: analysis; resource and technical feasibility analysis; market analysis; economic and financial analysis; legal procedures; organizational and human analysis; political, social and environmental analysis.<br/>4- The documents of an economic and financial study; investment plans; operational plan; financing plan.<br/><br/>III- Economic and financial evaluation of a project<br/>5- Cash flow (CF) analysis; concept of projects’ cash flow; basic principles of measuring and estimating cash flow; cash flow investment analysis; project side vs. entrepreneur side; cash flow estimation in a situation of inflation.<br/><br/>6- Decision criteria: decision criteria no update: recovery, return rate, net present value (NPV). Decision criteria update: internal rate of return (IRR), profitability index, annuity criteria, and macroeconomic indicators.<br/><br/>7- Project cost of capital; cost of capital; weighted average cost of capital for company: why and how to use it; the interaction of investment and financing decisions; estimate the cost of financing sources<br/><br/>8- Selection of mutually exclusive projects; directly comparable projects; incomplete alternatives<br/>III- Risk and investment decisions<br/>9- Risk and uncertainty evaluation; basic concepts of risk, risk and uncertainty components; empirical methods in &nbsp;risk management; decision theory; simulation methods- sensitivity analysis, alternative scenarios, breakeven point analysis; Monte Carlo simulation; decision trees; capital asset pricing model (CAPM) – risk management; reference to real options. [[Category:SSKE Knowledge/University Course]] [[SSKE Knowledge/isPartOfProgram::FEUP MESG - Services Engineering and Management| ]][[SSKE Knowledge/isTaughtBy::Lopes, Maria Dulce Soares| ]]

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