Financial Forecasting and Project Analysis

FINANCIAL FORECASTING AND CAPITAL
BUDGETING ANALYSIS

Ronald W. Spahr
Professor and Chair, Department of Finance, Insurance and Real Estate
Fogelman College of Business and Economics
University of Memphis, Memphis, TN 38152-3120
Office phone: [phone] or 5930, Fax: [phone] [e-mail] January 10, 2011

FINANCIAL FORECASTING AND CAPITAL
BUDGETING ANALYSIS

Course Description

This course covers fundamental concepts and techniques of financial forecasting and financial analysis including time value of money, cost of capital, capital investment decisions, product costing and lease-buy analysis.

Course Outline

I. Time Value of Money ....................................................................................4 A. Present Value and Future Value 1. Discrete Compounding 2. Compound Interest Tables 3. Continuous Compounding 4. Effective Annual Rate 5. Calculations Involving Fractional Years B. Annuities 1. Ordinary Annuities (Annuities in Arrears) 2. Annuities Due 3. Deferred Annuities 4. Continuous Payment Annuities 5. Perpetuities 6. Calculations Involving Fractional Years 7. Amortization Schedules

II. Break-Even Analysis and Financial Forecasting 20

III. Cost of Capital........................................................................................ 23 A. Component Costs B. Concept of Weighted Average Cost of Capital (WACC)

IV. Capital Budgeting.................................................................................... 31

A. Definitions 1. Conventional vs. Nonconventional Cash Flows 2. Independent, Mutually Exclusive, Contingent, Competitive and Complementary Projects B. Decision Rules for Project Evaluation/Comparison 1. Net Present Value (NPV) 3. Payback Period

C. Estimation