Project Economics and Finance

 


 Tittle  Project Economics and Finance
 Department International Economic Relations and International Information
 Type (compulsory/optional)  Optional
 Cycle (first/second) Second Cycle
 Semester when the component is delivered 1-st semester
 Course description  Main purpose of course "Project Economics and Finance”
The overall aim of this course to help students to use financial information to improve their decisions as project managers and to learn and apply tools that maximize value.
 Course content
Module 1. Projects Economics
Topic 1. Introduction to Projects Economics
Topic 2. Risk and Return, Valuation Methods and Investment Criteria
Topic 3. Capital Budgeting, Cost Management and Agency Issues
Module 2. Project Finance
Topic 4. Introduction to Project Finance 
Topic 5. Valuation of a Project
Topic 6. Financial and Capital Structure of a project
 Learning outcomes Knowledge:
The students can explain
- fundamentals of project economics;
- influence of projects on economy;
- different types of projects;
- historic projects with large cost overrun;
- PMBOK knowledge area project cost management;
- in reasons for project disappointment;
- project selection methods for investment;
- and discuss the role of time value in calculations, the use of computational aids, and the basic patterns of cash flow;
- the concept of future value and present value, their calculation for single amounts, and the relationship between them;
- the effect that compounding interest more frequently than annually has on future value and the effective annual rate of interest;
- the motives for key capital expenditure and the steps in the capital budgeting process;
- and define basic capital budgeting terminology;
- the procedures involved in determining deposits needed to accumulate to a future sum;
- define Project Finance and raise several examples to describe its use in the past years;
- explain the difference between Corporate Finance and Project Finance;
- describe the economic motivations of firms using Project Finance and explain why Project Companies represent optimal governance structures for certain kind of assets;
- explain why the combination of a firm plus a project might be worth more when financed separately (Project Finance) than when financed jointly with corporate funds (Corporate Finance);
- explain for which situations in general and in particular Project Finance might be an attractive mean of financing;
- explain how to protect the corporate balance sheet from incremental distress costs by using Project Finance;
- explain the relationship between project structure and both managerial incentives and value creation;
- explain basic valuation tools and new tools applicable to Project Finance.
Skills:
The students are able
- to differentiate between internal and external projects;
- to calculate both the future value and the present value of a mixed stream of cash flows;
- to calculate the initial investment associated with a proposed capital expenditure;
- to calculate, interpret, and evaluate the payback period;
- to calculate, interpret, and evaluate the net present value (NPV);
- to calculate, interpret, and evaluate the internal rate of return (IRR);
- to find the future value and the present value of both an ordinary annuity and an annuity due, and the present value of perpetuity;
- to find the relevant operating cash inflows associated with a proposed capital expenditure;
- to determine the terminal cash flow associated with a proposed capital expenditure;
- choose the optimal capital structure;
- discover agency conflicts associated with a project;
- build an effective governance structure for a project;
- classify sponsor types, asset types, and country settings;
- model the forecasted cash flows of a Project as the basis of the economic analysis;
- compute a financial model in order to evaluate the economic value of a certain project;
- measure the returns of a project by using certain DCF and IRR methods;
- interpret the results in terms of the validity as a sound decision basis.
 Contact hours (lectures/seminars)

 30/15
 
Prerequisites


 Number of ECTS credits allocated

5 credits