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TABLE OF CONTENTS 1-Measuring the profitability of investments Criteria for the analysis of investments Project definition Simple return

on investment First Considerations on other methods: calculation of cash flows The Pay-back period Net Present Value Method (NPV) Internal Rate of Return (IRR) Relationship between the Present Value and the IRR

Discounting Cash Flows with and without inflation Indexed financial flows. Rates with or without inflation The question can get more complicated The practical effect of amortization on historical acquisition values The effects of inflation on the Operational financial necessities Other effects on the profits in accounting records and taxes Conclusion The IRONSOUHTH case FINALTERNA case The FERSA case 2-The cost of Permanent Resources ( Equity and external resources) The cost of Debt The cost of debt for the company. Introduction of the effect of taxes. The cost of the capital The Gordon-Shapiro model for the calculation of the cost of the companys funds Ke Estimating the g factor for the Gordon-Shapiro model What is the best method to estimate g? Average Cost of the Permanent Resources. The Weighted Average Cost of Capital: WACC Factors that affect the cost of the permanent resources 3-The Capital Structure and the Optimun Debt level The theory of Optimal Capital Structure and the Modigliani & Miller formula How the reality does not always match up to the theory ( Modigliani & Miller) Avoiding serious mistakes. How the Modigliani and Miller formulas can lead you into error And even worse. The leveraged beta formulas and without leverage And now what shall we do with the real problem of the structure of capital? Putting a financial strategy into practice Conclusions on the practice of taking financial decisions Exercises on the cost of resources 4-The CAPM. Calculation of the Cost of Equity Calculation of the cost of the resources wuith the Capital Asset Pricing Model The CAPM formula is a simple Regression model Calculating Conclusions reached so far The CAPM for Asset pricing For the cost of Capital: how to go from the CAPM one period model to the formula Limitations of the CAPM model

5-Methods to Value a Company Value and price Methods based on the Balance sheet Net Asset Value & Real Net Asset Value Terminal Value & Replacement Value Methods based on the Profit and Loss Account Value of the profits. PER Value of the dividends Multiple of sales Other multiples Example. Use of the multiples method to value a company (case) Multiples methods used to value companies in Internet Methods based on Discounted Cash Flow Present value, but of what? The concept of flows of funds General method for discounting cash flows Determination of the correct cash flow rate for discounting Ensuring the companys financial balance is correct The free cash flow The cash flow available for shares Capital cash flow Calculation of the company value through the free cash flow Calculation of the unlevered company value plus the value of the tax savings due to the debt (APV adjusted present value). Calculation of the equity value from the cash flow available for the shares A numerical example and reflections on market values The main stages in company valuation by discounted flows Critical aspects in a valuation These methods give good results in any situation The break up value of a company The specialists opinion on the valuation Key factors that affect the companys value: growth, return, risk and the interest rates Some commentaries on valuation The most common errors when valuing companies Case: CONSULTANCY vs. INVESTMENT BANK: valuation of a TELCO 6- Appendix: The Value of Money over Time The time factor. The concept of compound interest Elements: Time, Interest, Flows of funds Equivalence between a present flow and a future flow. Inflation and the Value of Money over time Present value of a perpetual income Solved exercises on basic concepts

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