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Alternative Approaches to Valuation and Investment

In this course, participants will develop an understanding of the intuitive foundations of asset and investment valuation, and how alternative valuation techniques may be used in practice. This is part of a Specialization in corporate finance created in partnership between the University of Melbourne and Bank of New York Mellon (BNY Mellon).

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What's inside

Syllabus

Defining Attitudes Towards and Alternative Measures of Risk

This week we will define a statistical measure of stand-alone risk as being the standard deviation of returns. We will describe three alternative attitudes towards risk, settling on risk aversion as being the standard assumption made in financial markets. We will then analyse the impact of combining assets into a portfolio upon both risk and return and then quantify the benefits from diversification by comparing performance against a suitable benchmark.

Linking risk with expected return

This week we differentiate between systematic and unsystematic risk and explain how the expected returns that are reflected in the prices of assets should be linked to only one type of risk. We illustrate how the Capital Asset Pricing Model might be used to link systematic risk with expected return and then discuss the empirical shortcomings of the model. This leads to a description of more advanced models and we conclude with a review of survey evidence that considers the approach taken by finance mangers of large listed firms in practice.

Using financial statement analysis to measure cost of capital

This week we will explain the logical underpinnings of the Weighted Average Cost of Capital Formula and show how it might be estimated in practice by a firm. We will also consider the many challenges that might be faced in using this approach to estimating hurdle rates and conclude with a warning about the perverse outcomes that might occur if the technique is used in a haphazard manner.

Addressing financial reality with real options analysis

This week we describe how standard NPV analysis might lead to incorrect decisions when we fail to account for the impact of (or upon) firm flexibility. We then describe the three most common types of real options that firms face in practice and then explain how decision trees might be used to arrive at an approximation of the value of the real option that is embedded within a project. We conclude by considering empirical evidence on the take-up of real options analysis and discuss the situations in which real options analysis might most be needed.

Good to know

Know what's good

, what to watch for

, and possible dealbreakers

Analyzes the risks associated with asset and investment valuations, which is foundational work for all financial professionals

Applies theoretical concepts to practical applications of financial valuation, which builds a strong bridge between the classroom and the real world

Introduces foundational financial valuation concepts, making it a good starting point for entry-level finance professionals

Lacks advanced concepts that seasoned finance professionals may be looking for

May require real world finance experience to relate to the coursework

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Reviews summary

Alternative approaches to valuation and investment

Learners say practical examples and clear lectures from Professor Pinder make this very informative course well-received by students interested in investment theory. While the course is challenging, most students agree that it is doable even for those without a finance background.

Students new to finance can succeed.

"It's a great refresher course if you have a finance background but it's also beginner-friendly if you do not have finance background."

There could be more examples of real-world applications.

"However, a greater dive into the applications of it all, in a more complicated scenarios that are closer in approximating real-life situation, would have been great."

Professor Pinder is an effective.

"Prof. Pinder is always effective in his lectures."

The material is challenging but doable.

"The course work is challenging but can be accomplished."

"Good course overall. But I wish there was more explanation, a bit natural lecture (not a written speech) and have some MS Excel examples."

Practical examples help reinforce concepts.

"The course did a great job in explaining the principles and the lecturers' slides are very clear and helpful in understanding the topic."

"It is a very informative and practical course by combining lectures, practical works and peer assignments."

"Very Comprehensive course with practical examples"

Activities

Be better prepared before your course. Deepen your understanding during and after it. Supplement your coursework and achieve mastery of the topics covered in Alternative Approaches to Valuation and Investment with these activities:

Read: Fundamentals of Financial Management

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Review the fundamentals of financial management to strengthen your understanding of the course content.

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Purchase the book, either in print or ebook format
Read Chapter 1: Introduction to Financial Management
Summarize the key concepts discussed in Chapter 1
Review vocabulary and definitions introduced in Chapter 1

Calculate expected return and standard deviation of returns

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Practice calculating expected return and standard deviation of returns to solidify your understanding of risk and return concepts.

Browse courses on Expected Return

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Find historical data for a stock or index
Calculate the average return and standard deviation of returns
Compare your results to published data

Watch tutorial on the Capital Asset Pricing Model (CAPM)

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Watch a tutorial on CAPM to enhance your understanding of how systematic risk is linked to expected return.

Browse courses on Capital Asset Pricing Model

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Search for a tutorial on CAPM on YouTube or other online platforms
Watch the tutorial in its entirety
Take notes on the key concepts discussed

Four other activities

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Write a short essay on the importance of diversification

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Writing an essay on diversification will help you synthesize and articulate your understanding of its benefits and challenges.

Browse courses on Diversification

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Brainstorm the benefits and challenges of diversification
Organize your thoughts into a coherent outline
Write a draft of the essay
Revise and edit your essay

Attend a workshop on real options analysis

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Real options analysis is a valuable tool for evaluating investment opportunities. Consider attending a workshop to learn more.

Browse courses on Real Options Analysis

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Find a workshop on real options analysis that fits your schedule
Register for the workshop
Attend the workshop and take notes
Ask questions and participate in discussions

Read: Advanced Corporate Finance

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Reading this book will expose you to advanced concepts and case studies to further expand your knowledge in corporate finance.

View Investment Valuation on Amazon

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Purchase the book, either in print or ebook format
Read Chapter 1: Introduction
Summarize the key concepts discussed in Chapter 1
Review case studies and examples provided in the book

Create a video tutorial on how to use the Black-Scholes model

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Creating a tutorial on the Black-Scholes model will not only benefit others, but also reinforce your own understanding.

Browse courses on Black-Scholes Model

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Gather materials and resources on the Black-Scholes model
Write a script for your tutorial
Record and edit your video tutorial
Publish your tutorial on YouTube or other video sharing platforms

Career center

Learners who complete Alternative Approaches to Valuation and Investment will develop knowledge and skills that may be useful to these careers:

Financial Analyst

Financial Analysts provide strategic recommendations to help companies make key decisions during critical junctions. The course \"Alternative Approaches to Valuation and Investment\" can help build a foundation for a career as a Financial Analyst. The course covers topics such as risk management, return analysis, and financial statement analysis, which are all essential skills for financial analysts.

See salaries and explore the career path for Financial Analyst

Investment Banker

Investment Bankers provide advisory services to companies and governments, assisting them with mergers and acquisitions, capital raising, and other financial transactions. The course \"Alternative Approaches to Valuation and Investment\" can help build a foundation for a career as an Investment Banker. The course covers topics such as valuation techniques, financial modeling, and risk management, which are all essential skills for investment bankers.

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Portfolio Manager

Portfolio Managers make investment decisions for clients, managing investment portfolios and implementing investment strategies. The course \"Alternative Approaches to Valuation and Investment\" can help build a foundation for a career as a Portfolio Manager. The course covers topics such as portfolio theory, asset allocation, and risk management, which are all essential skills for portfolio managers.

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Risk Manager

Risk Managers identify, assess, and mitigate risks for organizations, ensuring that risks are managed effectively. The course \"Alternative Approaches to Valuation and Investment\" can help build a foundation for a career as a Risk Manager. The course covers topics such as risk management techniques, financial modeling, and regulatory compliance, which are all essential skills for risk managers.

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Financial Planner

Financial Planners provide financial advice to individuals and families, helping them manage their finances and plan for their financial futures. The course \"Alternative Approaches to Valuation and Investment\" may be useful for Financial Planners, as it covers topics such as financial planning, investment management, and risk management, which are all relevant to financial planning.

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Actuary

Actuaries use mathematical and statistical methods to assess and manage risks in various industries, such as insurance, finance, and healthcare. The course \"Alternative Approaches to Valuation and Investment\" may be useful for Actuaries, as it covers topics such as risk management, financial modeling, and statistical analysis, which are all relevant to actuarial work.

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Auditor

Auditors examine financial records and provide assurance on the accuracy and reliability of financial statements. The course \"Alternative Approaches to Valuation and Investment\" may be useful for Auditors, as it covers topics such as financial statement analysis, auditing procedures, and risk management, which are all relevant to auditing.

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Tax Accountant

Tax Accountants specialize in taxation laws and regulations, preparing tax returns and providing tax advice to individuals and businesses. The course \"Alternative Approaches to Valuation and Investment\" may be useful for Tax Accountants, as it covers topics such as financial statement analysis, tax planning, and risk management, which are all relevant to tax accounting.

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Data Analyst

Data Analysts collect, analyze, and interpret data to help organizations make informed decisions. The course \"Alternative Approaches to Valuation and Investment\" can help build a foundation for a career as a Data Analyst, as it covers topics such as data analysis, statistical modeling, and risk management, which are all essential skills for data analysts.

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Quantitative Analyst

Quantitative Analysts develop and use mathematical and statistical models to analyze financial data and make investment decisions. The course \"Alternative Approaches to Valuation and Investment\" can help build a foundation for a career as a Quantitative Analyst, as it covers topics such as financial modeling, risk management, and data analysis, which are all essential skills for quantitative analysts.

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Research Analyst

Research Analysts conduct research on companies, industries, and economies, providing insights and recommendations to investors. The course \"Alternative Approaches to Valuation and Investment\" can help build a foundation for a career as a Research Analyst, as it covers topics such as financial statement analysis, valuation techniques, and risk management, which are all essential skills for research analysts.

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Economist

Economists study the production, distribution, and consumption of goods and services, analyzing economic data and trends. The course \"Alternative Approaches to Valuation and Investment\" may be useful for Economists, as it covers topics such as financial markets, economic analysis, and risk management, which are all relevant to economics.

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Consultant

Consultants provide advice and guidance to organizations on a variety of topics, such as business strategy, operations, and technology. The course \"Alternative Approaches to Valuation and Investment\" may be useful for Consultants, as it covers topics such as financial analysis, risk management, and decision-making, which are all relevant to consulting.

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Entrepreneur

Entrepreneurs start and run their own businesses, taking risks and making sacrifices in the pursuit of profit. The course \"Alternative Approaches to Valuation and Investment\" may be useful for Entrepreneurs, as it covers topics such as financial management, risk management, and decision-making, which are all essential for entrepreneurs.

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Financial Advisor

Financial Advisors provide financial advice and guidance to individuals and families, helping them manage their finances and plan for their financial futures. The course \"Alternative Approaches to Valuation and Investment\" may be useful for Financial Advisors, as it covers topics such as financial planning, investment management, and risk management, which are all relevant to financial advising.

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Reading list

We've selected 27 books that we think will supplement your learning. Use these to develop background knowledge, enrich your coursework, and gain a deeper understanding of the topics covered in Alternative Approaches to Valuation and Investment.