Applying Investment Decision Rules for Startups

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Applying Investment Decision Rules for Startups

Coursera (CC)
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Description

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About this course: In the previous course, you learned financial statement analysis and how to make estimate of future financial status. In this course, you are going to learn capital budgeting. That is, how to make an investment decision. You would like to select the best project among various projects you can take. Then, you need to know the criteria. In this course, you are going to learn investment decision criteria such as NPV and IRR, which are most popular decision rules. Using financial analysis and discounted cash flow method, you can make pro forma financial statement and estimate project cash flows. Then, you apply investment criteria to determine whether to invest or not. Af…

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When you enroll for courses through Coursera you get to choose for a paid plan or for a free plan

  • Free plan: No certicification and/or audit only. You will have access to all course materials except graded items.
  • Paid plan: Commit to earning a Certificate—it's a trusted, shareable way to showcase your new skills.

About this course: In the previous course, you learned financial statement analysis and how to make estimate of future financial status. In this course, you are going to learn capital budgeting. That is, how to make an investment decision. You would like to select the best project among various projects you can take. Then, you need to know the criteria. In this course, you are going to learn investment decision criteria such as NPV and IRR, which are most popular decision rules. Using financial analysis and discounted cash flow method, you can make pro forma financial statement and estimate project cash flows. Then, you apply investment criteria to determine whether to invest or not. After learning how to apply NPV and IRR method to investment decision, you are going to learn how to evaluate NPV estimate and scenario, what-if analyses and break-even analysis. In addition to NPV and IRR, you are going to learn Payback period method and Profitability method to determine whether to invest or not when there is a political risk or capital rationing.

Who is this class for: The target audience of this Specialization includes venture capitals, angel investors, and entrepreneurs, Particularly, entrepreneurs are wondering the value of their startups and how much ownership they need to give up to raise additional capital. It is same for angel investors. They are wondering how much ownership they need to ask in return for their investment.  Venture capitals may know the value of startups better than entrepreneurs or angel investors but they need to communicate with startups how they value startups. This Specialization helps angel investors, entrepreneurs, and venture capitals understand and communicate the value of startups.

Created by:  Yonsei University
  • Taught by:  Saeyeul Park, Assistant Professor

    School of Business
Basic Info Course 4 of 5 in the Valuation and Financial Analysis For Startups Specialization Level Beginner Language English, Subtitles: Korean How To Pass Pass all graded assignments to complete the course. User Ratings 4.0 stars Average User Rating 4.0See what learners said Coursework

Each course is like an interactive textbook, featuring pre-recorded videos, quizzes and projects.

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Yonsei University Yonsei University was established in 1885 and is the oldest private university in Korea. Yonsei’s main campus is situated minutes away from the economic, political, and cultural centers of Seoul’s metropolitan downtown. Yonsei has 3,500 eminent faculty members who are conducting cutting-edge research across all academic disciplines. There are 18 graduate schools, 22 colleges and 133 subsidiary institutions hosting a selective pool of students from around the world. Yonsei is proud of its history and reputation as a leading institution of higher education and research in Asia.

Syllabus


WEEK 1


Capital Budgeting techniques
Capital budgeting is the process of deciding whether to undertake an investment project. In this module, you will study the three most popular capital budgeting techniques in practice: Net present value (NPV), Payback period, and Internal rate of return (IRR).


5 videos, 4 readings, 1 practice quiz expand


  1. Video: Welcome to This Course
  2. Video: 1.1 Introduction to Capital Budgeting
  3. Reading: 1.1 Slide
  4. Video: 1.2 Net Present Value (NPV)
  5. Reading: 1.2 Slide
  6. Video: 1.3 Payback Period
  7. Reading: 1.3 Slide
  8. Video: 1.4 Internal Rate of Return
  9. Reading: 1.4 Slide
  10. Practice Quiz: Practice Quiz (1.1~1.4)
  11. Discussion Prompt: IRR assumption & NPV assumption

Graded: Week 1 Quiz

WEEK 2


Project Analysis



In this module, you will learn how to estimate project cash flows using Excel. Overall, project cash flow analysis is similar to firm-level cash flow analysis. However, there also exist some unique features of a project cash flow analysis, which requires us to study the project cash flow principles.


4 videos, 4 readings, 1 practice quiz expand


  1. Video: 2.1 Project Cash Flow Principles
  2. Reading: 2.1 Slide
  3. Video: 2.2 Pro Forma Income Statement
  4. Reading: 2.2 Slide
  5. Video: 2.3 Free Cash Flow
  6. Reading: 2.3 Slide
  7. Video: 2.4 Sensitivity Analysis
  8. Reading: 2.4 Slide
  9. Practice Quiz: Practice Quiz (2.1~2.4)

Graded: Week 2 Quiz

WEEK 3


Issues in Capital Budgeting



Sometimes you have to evaluate multiple projects at a time. In this module, you will learn how to choose the best project among multiple projects. We will also discuss various important issues in NPV and IRR techniques. Finally, we discuss the fundamental principle in choosing the discount rate.


4 videos, 4 readings, 1 practice quiz expand


  1. Video: 3.1 Evaluating Multiple Projects
  2. Reading: 3.1 Slide
  3. Video: 3.2 Comparing NPV and IRR techniques I
  4. Reading: 3.2 Slide
  5. Video: 3.3 Comparing NPV and IRR techniques II
  6. Reading: 3.3 Slide
  7. Video: 3.4 Choosing the Discount Rate
  8. Reading: 3.4 Slide
  9. Practice Quiz: Practice Quiz (3.1~3.4)

Graded: Week 3 Quiz

WEEK 4


Real Options in Business Projects



We continue to study analyzing business projects, but the difference in this module is that now we consider the value of "real options" embedded in the project. You will learn how to estimate the project's value by using the decision tree approach or the Black-Scholes option pricing model.


4 videos, 4 readings, 1 practice quiz expand


  1. Video: 4.1 Options Basics
  2. Reading: 4.1 Slide
  3. Video: 4.2 Decision Tree Approach
  4. Reading: 4.2 Slide
  5. Video: 4.3 Black-Scholes Option Pricing Model
  6. Reading: 4.3 Slide
  7. Video: 4.4 Evaluating Projects Using B-S Model
  8. Reading: 4.4 Slide
  9. Practice Quiz: Practice Quiz (4.1~4.4)
  10. Discussion Prompt: Applying the B-S model to price a real option

Graded: Week 4 Quiz
Graded: Final Quiz
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