Investment Valuation

Scholar Year: 2023/2024 - 2S

Courses

Head Teacher Responsability Agostinho Manuel de Inácio Bucha Head

Weekly workload Hours/week T TP P PL L TC E OT OT/PL TPL O S Type of classes 6 2 Lectures Type Teacher Classes Hours Theoretical Totals 1 6,00 Practices Totals 3 6,00

Teaching language

Portuguese

Intended learning outcomes (Knowledges, skills and competencies to be developed by the students)

A. BACKGROUND

The significant increase in competitiveness at national and international levels often forces organizations to incorporate investments into their strategies, forcing them to make investment decisions in a variety of areas with complex environments that induce uncertainty and risk.
In support of these decision-making and with the aim of minimizing uncertainty and risk, it is first necessary to define, quantify and plan the resources and actions required for investments, as well as to evaluate the expected results with implementation.

B. SYNTHESIS OF THE COURSE

Presentation of the concepts, techniques and models of study, analysis and evaluation of Investments, a priori.

C. CONTRIBUTIONS OF THE COURSE FOR THE DEVELOPMENT OF COMPETENCES

To contribute to:

• Organizational understanding, professional adaptability, autonomy, problem solving and decision making;
• The systemic and interdisciplinary view of economic activity and organizational development;
• The application of knowledge in an organizational context;
• Detection of investment opportunities in organizations;
• Understanding the adequacy of the type of financing to the particular type of investment;
• The autonomy in the execution and evaluation of investment projects, in situation of uncertainty and risk;
• The development of capacity for analysis and critical reflection, and self-discipline;
• The development of teamwork skills and individual and team continuous improvement.

D - Objectives (Intented learning outcomes)

By the end of this course students should be able to:

• Know and to understand the concept of investment, its typology and other correlated fundamental elements;
• Identify an investment and develop a business model;
• Analyse the different types of investments, their respective impact on profitability and the associated risk;
• Understand the investment as an integral part of the business strategy implementation;
• Know and to interrelate the phases of execution of an investment project;
• Distinguish business model, investment project and business plan;
• Know the methodologies for calculation of cash flows, the cost of capital and the definition of the discount rates;
• Adapt the process of the financing decision to the characteristics of the investment;
• Develop an investment project and to analyse and evaluate an investment, under uncertainty and risk;
• Select investments of different types and in different situations;
• Know and to understand the effects of inflation on investments evaluation;
• Know and to distinguish the different impacts of the nvestments.

Syllabus

1. INTRODUCTION
1.1 Concept of investment
1.2 Classification of investments
1.3 Stages of an investment
1.4 Opportunity cost of capital
1.5 Uncertainty and risk
1.6 Profitability and economic, social and environmental benefits
1.7 Types of investment evaluation

2. BUSINESS MODEL, INVESTMENT PROJECT AND BUSINESS PLAN
2.1 Investment opportunity
2.2 Creating a business model
2.3 Investment project
2.4 Business plan
2.5 Business model vs. investment project vs. business plan

3. INVESTMENT AND STRATEGY
3.1 Vision, mission and values
3.2 Strategic analysis
3.3 Definition of strategic objectives
3.4 Strategic formulation
3.5 Implementation of the strategy and investments
3.6 Control

4. CASH FLOW
4.1 Concept of cash flow
4.2 Investment cash flow
4.3 Operating cash flow
4.4 Global cash flow
4.5 Provisional financial statements
4.6 Cash flow from the perspective of the firm and from the perspective of the equity

5. FINANCING OF INVESTMENTS
5.1 Concept of financing
5.2 Financing requirements
5.3 Internal and external sources of financing
5.4 Short, medium and long-term financing
5.5 Relationship between investment decision and financing decision

6. COST OF CAPITAL
6.1 Cost of equity without indebtedness (economic capital)
6.2 Cost of external capital and debt service
6.3 Cost of equity capital with indebtedness
6.4 Weighted average cost of capital

7. CRITERIA FOR INVESTMENTS EVALUATION
7.1 Cash flow perspectives
7.2 Update rate
7.3 Accounting criteria
7.2 Criteria based on cash flows

8. UNCERTAINTY AND RISK IN INVESTMENTS EVALUATION
8.1 Empirical methods
8.2 Simulation methods
8.3 Probabilistic methods

9. SELECTION OF INVESTMENTS
9.1 Mutually exclusive investments
9.2 Investments with unconventional cash flows
9.3 Replacement investments
9.4 Modernization and innovation investments
9.5 Investments under financial constraints

10. INFLATION IN THE INVESTMENTS EVALUATION
10.1 Inflation
10.2 Nominal values vs. actual values
10.3 Impact of inflation on the investments evaluation

11. IMPACT OF INVESTMENTS
11.1 Organizational impact
11.2 Macroeconomic impact
11.3 Social impact
11.4 Environmental impact

Demonstration of the syllabus coherence with the UC intended learning outcomes

The chapter (s):

• 1 of the syllabus, Introduction, aims to answer to the objectives "To know and to understand the concept of investment, its typology and other correlated fundamental elements";
• 2, Business model, investment project and business plan, aims to: "Identify an investment and develop a business model", "Know and interrelate the phases of execution of an investment project" and "Distinguish business model, investment project and business plan";
• 3, Investment and strategy, welcomes the objective "To understand investment as an integral part of the business strategy implementation";
• 4 and 6, Cash flows and cost of capital, respond to the objective "To know the methodologies for calculating cash flows, the cost of capital and the definition of discount rates";
• 5, Financing of investments, welcomes the objective "To adapt the process of the financing decision to the characteristics of the investment";
• 7 to 10, Criteria for investments evaluation, Uncertainty and risk in investments evaluation, Selection of investments and Inflation in the investments evaluation, aim to respond to the objectives "To select investments of different types and in different situations", "To know and to understand the effects of inflation on investments evaluation "and" Analyse the different types of investments, their respective impact on profitability and the associated risk ";
• 11, Impacts of investments, welcomes the objective "To know and to distinguish the different impacts of the investments";
• 1 to 11, respond to the objective "To develop an investment project and to analyse and evaluate an investment, under uncertainty and risk ".

Teaching methodologies

Currently, theoretical classes and face-to-face practical classes are replaced by online classes, which may, in the future, be switched to mixed, face-to-face and online classes, if the pandemic situation allows and so is defined by ESCE / IPS.
• Theoretical sessions: Use of expository, deductive and participative methods, to introduce the concepts, techniques and models;
• Practical sessions: Use of the participatory method in the analysis, discussion and resolution of exercises and problems; Use of teamwork method in the development of an investment project - identification of the idea, study and feasibility analysis and evaluation of the investment.
Use of the coaching method in the follow-up and development of teamwork.
In addition to synchronous sessions and possible face-to-face classes, Students must hold asynchronous sessions (Student work sessions, with the support of materials and or bibliography provided by the teacher) and individual and autonomous Student work sessions (research, study, analysis and critical reflection).
A space for debate and clarification of doubts is promoted by carrying out asynchronous activities, through the creation of a forum on the moodle platform.of the group work.
A space for debate and clarification of doubts is promoted by carrying out asynchronous activities, through the creation of a forum on the moodle platform.

Since May 1, 2021: Mixed practical classes

The practical classes started to be processed in a mixed regime for the students, ace to face and online, alternately, by class, maintaining the theoretical classes in online sessions.
As in online teaching, in face to face practical classes the participatory method is used in the analysis, discussion and resolution of exercises/problems and the coaching method in the monitoring and development of group work.
A space for debate and clarification of doubts continues to be promoted, with asynchronous activities taking place, through the creation of a forum on the teams platform.

Demonstration of the teaching methodologies coherence with the curricular unit's intended learning outcomes

• In the theoretical sessions the expository method is used to present the concepts, techniques and models, and the participative method, student-centred, in the analysis and discussion of several organizational examples, involving them in the teaching-learning process and developing the capacity for analysis and critical reflection, and self-discipline;
The combination of the two methods will lead the students to acquire the knowledge that allows to reach the objectives set forth.
• In the practical sessions the participatory method is used in the analysis, discussion and resolution of exercises and problems, since it allows students to be involved and to acquire in a consolidated way the technique to develop a business model based on an idea, to discount and to capitalize capital, to calculate investments, operating and global cash flows, to prepare an investment plan, operating plan and financial plan, to evaluate investments, to analyse their sensitivity and to prepare the financial statements related to an investment project, as the experience and practice lead to the discovery, assimilation of knowledge and autonomy of decisions.
The teamwork method is used in the design of an investment project, including idea generation, business model, technical and feasibility studies, investments, exploration and financial plans, sensitivity, investment decision, once it allows the application of knowledge simulating the organizational context, generating critical analysis and reflection skills, management skills and competences, autonomy in decisions and problem solving, teamwork skills and encouragement of individual and team continuous improvement, with the study, research and execution of the work;
The method of coaching that aims at non-directive follow-up, questioning and active listening is applied in the follow-up and development of the teamwork.
The asynchronous sessions and the individual and autonomous work sessions of the Student lead to autonomy, problem solving and decision making, as well as the development of analysis and critical reflection skills.
• The tests allow to assess concepts, techniques, models and their application, verifying if the respective objectives have been reached, and
• Teamwork will evidence the integration and consolidation of knowledge, in simulation of organizational context, as well as the skills and competences mentioned above, validating the pursuit of the objectives.

Since May 1, 2021: Mixed practical classes

Once the methodologies to be applied are maintained, the consistency between teaching methodologies and learning objectives continues to be verified.

Assessment methodologies and evidences

The evaluation system should be confirmed by the Pedagogical Council.

1 - CONTINUOUS ASSESSMENT
(it is intended for students who explicitly opt for this evaluation method, requiring at least 2/3 of the theoretical synchronous sessions and 2/3 of the practical synchronous sessions)

The knowledge assessment is continuous and consists of the following:

• Performing an Individual Test (T)
• Elaboration, presentation and discussion of a Group Work (elaboration and evaluation of an investment project, according to the respective script), which assessment may be individual (GW).

Final Classification = 50% T + 50% GW

Remarks:

a) Students will be approved with a classification of the Test and of the Group Work greater than or equal to 10 values, considering the elements individually. Otherwise, Students may take an appeal exam and or restructure the Group Work, to be delivered up to five working days before the exam date, depending on the respective situation;
b) When the test classification is equal to or higher than 13.5 values, the Student will have to take an oral test to justify the grade, if the teacher so chooses. In this case, if the classification of the oral test is lower than the test classification or if the Student does not take the oral test, the test will be assigned a classification of 13 values;
c) The classification of the GW can be individual, if the teacher so chooses;
d) All elements related to the GW are defined in the respective guide.

2 - FINAL ASSESSMENT

There are three moments for final assessment:

• Normal season | 1st season
(it is intended for students who do not choose continuous assessment)

The assessment system is the same as in Continuous Assessment, being the test replaced by an Exam. The GW must be delivered up to 5 working days before the exam date.

• Time of Appeal | 2nd season
(it is intended for students who were not present or have failed the continuous assessment or the normal season)

The assessment system is the same as in Normal Season.

Remarks:
a) Students will be approved with a classification of the Examination and of the Group Work superior or equal to 10 values, considering the elements individually. If the Students have been successful in the test, exam or group work, at the time of previous assessment, in the same academic year, they should only take the assessment element where they did not obtain approval, assuming the Exam or GW the previous approval classification.
b) When the classification of the exam is equal to or higher than 13.5 values, the Student will have to take an oral exam to justify the score, if the teacher so chooses. In this case, if the classification of the oral exam is inferior to the classification of the exam or if the Student does not take the exam, the exam will be assigned with a classification of 13 values;
c) The classification of the GW can be individual, if the teacher so chooses;
d) All elements related to the GW are defined in the GW script.

• Special Season

The assessment system is the same as in the Time of Appeal.

3 – GROUP WORK

All elements relating to group work are included in the respective script.

4 - SITUATIONS ASSOCIATED WITH FRAUD IN THE ASSESSMENT PROCESS

In the case of proven fraud, it will be applied the Despacho No. 40 / President / 2021, which prescribes, namely, the annulment of the assessment element, the disapproval on the subject, at the time the element relates and the respective disciplinary process.
In the event of suspected fraud, the same Despacho is applied, which establishes, in particular, the possibility of conducting an further oral assessment to prove the results obtained.

Since May 1, 2021: Mixed practical classes

The assessment system is maintained.

Attendance system

The frequency of theoretical synchronous sessions and of face to face classes or practical synchronous sessions is highly recommended for all Students, especially for Students who choose continuous assessment.
Frequency is understood as the student's attendance, the effective presence in the entire class or session, equal to or greater than 2/3 of the number of contact hours of the course, excluding the moments of assessment.

Main Bibliography

Complementary Bibliography

Observations

SUPPORT FOR STUDENTS

Office hours:

Professor: Agostinho Bucha; Email: agostinho@bucha.ips.pt; Office: C2.15
Hours: Thusday, from 11:30 a.m. to 1:30 p.m.

Professor: João Piteira; Email: joao.piteira@esce.ips.pt; Office: B2.03
Hours: Wednesday, from 5:30 p.m. to 6:30 p.m. and Thusday, from 1:30 p.m. to 2:30 p.m.

Notes:

1. If the office hours are not favourable, Students may contact the teacher, by mail, requesting the scheduling of another moment, which will be observed, as far as the availability of the teacher;
2. Any contacts with teachers should be made in advance so that a timely response is possible.


FINAL REMARK

Given the lack of knowledge about the evolution of the pandemic situation and the learning process about online education, which is still ongoing, the elements presented in this program will be revised and changed, whenever the School bodies or teachers consider it necessary, depending on the reality and the situation. experience, in order to achieve the objectives of UC, Course, ESCE and IPS.