Benefits and Added Value

This program shows how to identify the relevant cash flows of a project including initial investment outlays, operating cash flow, and the needed changes in networking capital, and possible changes in long term investments to determine the free cash flow (FCF) during the span period of the project. The program will also examine the impact of inflation and risk on project discount rate.

Structure

This program will be conducted over five sessions, five hours per session, i.e. 25 hours. It will cover the following topics and issues:

• 1st Capital structure: some main concepts
  • Long term source of funds.
  • Capital structure question and the pie theory
  • Traditional Approach
  • Modigliani and Miller (MM) proposition I
  • Modigliani and Miller (MM) proposition II
• 2nd Limitation on using debts as part of the capital structure
  • Bankruptcy and its relevant cost.
  • Protective covenants as a way to reduce costs of debts.
  • Integration of tax effect and financial distress costs.
  • A note on agency cost of equity.
• 3rd Net present value and capital budgeting for unlevered firm.
  • Incremental cash flows.
  • Case studies
  • Inflation and capital budgeting.  
  • A capital budgeting simplification
  • Investments of unequal lives.
• 4th Valuation and capital budgeting for the levered firm.

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