Principles of Finance
Principles of Finance
University of Dhaka
EMBA Program
Course: EIB - Principles of Finance
COURSE PRE-REQUISITES:
A familiarity with basic Financial Accounting, Quantitative Methods and Statistics is desired.
COURSE DESCRIPTION:
This is an introductory course in Finance and the first in a series of required Finance core courses for the
BBA degree. This course together with the next course, Corporate Finance, completes an introduction to
Financial Management using the modern theory of finance. The final required course in the sequence,
Intermediate Finance, introduces advanced topics and explores certain topics in depth.
Firms invest in real assets such as plant and equipment (the Investment decision) and raise money via
personal funds, stocks, bonds or bank loans (the Financing decision). Broadly speaking, Financial
Management is about how these Investment and Financing decisions should be made. This course
explores the first part of Financial Management and introduces the framework, tools and techniques for
making Investment decisions. Specifically, we will cover Valuation, Capital Budgeting, Modern Portfolio
Theory and Equilibrium Risk-Return Relationship.
The required reading for the course constitutes relevant chapters from the book and occasional lecture
handouts. These Handouts will be posted on the course web site a day before each lecture.
Principles of Managerial Finance, 11th Edition by Lawrence J. Gitman, 2005, Addison Wesley,
3. Cost of Capital: Concept & Significance, and Calculation of the cost of different sources of
capital, weighted average cost of capital.
4. Time Value of Money: The idea of Cash Flow, Compounding & discounting, Calculations of
terminal value and present value of single and multiple cash flow, Annuity, Present value and
terminal value of annuity, loan amortization, Sinking fund development and other application of
time value of money.
5. Valuation of Financial Assets: Stock Valuation, Bond Valuation and investment decision
making principles.
6. Capital Budgeting: Definition, Application and steps in capital budgeting, Different concepts,
Methods of capital budgeting, payback period, NPV, IRR and ARR methods of capital budgeting
7. Capital Structure and Leverage : Concepts, Factors, Effect of leverage on EPS, Indifferent
point of EBIT, EBIT- EPS Analysis
8. Lease Financing: Concepts, Types and Methods of lease financing, Provision of lease
agreements, Leasing VS buying decision.