TEJU ("teach you") finance

How to determine whether an investment makes financial sense or not? This module introduces the most important investment decision criteria that try to answer this question. The basic idea is very simple: Investors like projects that make more money than they cost!

We start with the Net Present Value (NPV) rule, wich measures the difference between the present value of all cash inflows and the present value of all cash outflows that are associated with an investment decision. We show that managers who follow the NPV rule and accept only projects with positive NPV generally increase the financial value of the firm.

We also discuss other approaches to measure the difference between the costs and benefits of a project, in particular the Internal Rate of Return (IRR), which indicates which return an investor can expect by investing in a project, and Payback rule, which shows how long it takes for a project to return the invested capital. While both metrics have their justifications, NPV generally does a better job.

The purpose of this module is to learn how to estimate risk-adjusted discount rates to value projects (or firms). It takes us on a journey with many important steps. First, we have to understand what "risk" actually means and how the relation between risk and return can be formulated. To find the necessary answers, the first major block of this module introduces the basic principles of portfolio theory. The second part of the module then shows how to use the insights from portfolio theory to derive discount rates. To this end, we present the Capital Asset Pricing Model (CAPM), which formalizes the relation between return and risk, and we show what practical steps are relevant to get to what we ultimately want: A discount rate to estimate project or firm value, the so called Weighted Average Cost of Capital (WACC).

In this module, we learn how to read and analyze financial statements. Most importantly, we learn how to quickly assess the financial health and performance of a company and how to interpret the most important financial ratios. Very often, a detailed financial analysis is the starting point for important corporate decisions. Financial analysis also provides very useful information for Financial Planning and Valuation.

This module introduces you to the most popular valuation approach among practitioners: Relative valuation. Its popularity is based on the fact that relative valuation is fairly simple to conduct and very easy to communicate. However, in order to properly apply this method, we need to take a careful look at what valuation multiples actually are and how we can use them to value firms or their equity. We also take a careful look at the most popular multiple among financial analysts: The P/E ratio.

When valuing firms, the market generally assumes a very long-term perspective. This module shows how to incorporate such a long-term perspective in our firm valuation framework. It also discusses key relations between growth, investment policy, and value creation in the long run. Finally, it presents a simplified model that allows us to assess the value of mature companies with only 5 assumptions.

It turns out that the expected cash flows that arise after the years that are typically covered by the financial plan financial plan often account for 50% or more of firm value. It is therefore crucial to understand and assess this so-called continuing value.

This modules inquires into the relevance of financing decisions in the real world. In particular, it takes a close look at the various costs and benefits of debt financing, including tax effects, distress costs, and potential "agency" problems. We also present a simple yet powerful model to better understand the incentive implications of debt financing as well as the valuation of debt and equity. Finally, the module presents the major capital structure theories and illustrates how firms can solve the various trade-off to find an optimal leverage range.

This module focuses on the fascinating process that converts privately held firms into public corporations. The module starts with a discussion of the main advantages and disadvantages of going and being public. Then it discusses in detail the various ways of tapping into public equity markets. In particular, it takes a close look at Initial Public Offerings (IPOs), in which firms hire an underwriting syndicate of investment banks to help with the marketing, pricing, and allocation of the shares. We present a simple model to understand the total costs of an IPO as well as its implications for the value and ownership allocation of the firm. Next, we study alternative ways of going public, including Direct Listings and Direct Public Offerings. We conclude the module with an overview of recent trends in the context of "digitalization," where new platforms emerge to cut out the underwriters and open public equity to a much broader base of firms and investors (e.g., Crowd Financing). In this context, we also discuss the potential risks and benefits that the emerging blockchain technology poses when firms engage in crowd financing via Initial Coin Offerings (ICOs).

Mergers and Acquisitions (M&A) have tremendous economic relevance and constitute a crucial mechanism in an economy's reallocation of resources. This course focuses on important financial aspects of M&A transactions. After discussing the various forms of takeover, we present the standard M&A process and the valuation challenges that are associated with that process, in particular with respect to the anticipated net synergies of the deal. Then we study the key considerations of how to set the offer price and its composition (e.g., cash vs. stock deals). We look at how the deal structure affects the risk- and value allocation among the parties, and we close with a discussion of why creating value with M&A is easier said than done.