Kotebe University of Education

Faculty of Business and Economics

Department Accounting and Finance
Course Information
Course Number AcFn 3052
Course Title Financial Modeling
Degree Program BA Degree in Accounting and Finance
Module Finance
Module Code AcFn-M3040
ETCTS Credits 3
Contact Hours 2
(per week)
Course Objectives & Competences to be Acquired:
After successfully completing this course, the students should be able to:
 Explain financial modeling; valuation techniques and basic financial calculations using spread sheet like
excel.
 Perform corporate valuation be applying various methods to determine business value
 Model pro forma financial statements and determine business value;

Course Description:
The course is designed to enable students understand financial models and develop valuation financial model to
ascertain the values of assets and business.
Course Contents Reading
1. Introduction to Financial Modeling and Valuation
1.1. Introduction to financial modeling
1.2. Overview of excel functions for modeling
1.3. Basic Financial Calculations using excel
1.4. Present value and Net Present Value
1.5. The IRR and Loan Tables
1.6. Future values and Applications
1.7. Introduction to valuation and valuation standards
2. Corporate Valuation
2.1. Methods to Compute Enterprise Value (EV)
2.2. Using Accounting Book Values to Value a Company: The Firm’s
Accounting Enterprise Value
2.3. Efficient Markets Approach to Corporate Valuation
2.4. Enterprise Value (EV) as the Present Value of the Free Cash Flows: DCF
“Top Down” Valuation
2.5. Free Cash Flows Based on Consolidated Statement of Cash Flows (CSCF)
2.6. Free Cash Flows Based on Pro Forma Financial Statements

3. Determining the value of the firm

3.1. Computing the Value of the Firm’s Equity, E
3.2. Computing the Value of the Firm’s Debt, D
3.3. Computing the Firm’s Tax Rate, TC
3.4. Computing the Firm’s Cost of Debt, rD
3.5. Two Approaches to Computing the Firm’s Cost of Equity, rE

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 3.6. Implementing the Gordon Model for rE
3.7. The CAPM: Computing the Beta, β
3.8. Using the Security Market Line (SML) to Calculate Merck’s Cost of
Equity, rE
3.9. Three Approaches to Computing the Expected Return on the Market,
E(rM)

4. Pro-Forma Financial Statement Modeling

4.1. How Financial Models Work: Theory and an Initial Example
4.2. Free Cash Flow (FCF): Measuring the Cash Produced by the Business
4.3. Using the Free Cash Flow (FCF) to Value the Firm and Its Equity
4.4. Some Notes on the Valuation Procedure
4.5. Alternative Modeling of Fixed Assets
4.6. Sensitivity Analysis

Teaching & Learning Methods/strategy

The teaching and learning methodology include lecturing, discussions, problem solving, and analysis. Take-home
assignment will be given at the end of each chapter for submission within a week. Solution to the assignments will
be given once assignments are collected. Cases with local relevance will also be given for each chapter for group
of students to present in a class room. The full and active participation of students is highly encouraged.
Assessment/Evalu The evaluation scheme will be as follows:
ation Test Test Test Quiz1 Assignment 1 Final Total
1 2 3
10% 10% 15% 5% 10% 50% 100%
Work load in hours
Hours Required
Self- Total ECT
Assessme Tutoria Studie Assignme Advisi Hrs S
Lectures Lab nts ls s nt ng
48 20 10 12 45 - - 135 5
Roles of the Instructor
He/she will come to the class regularly on time and deliver the lecture in a well-organized manner. Besides, at the
end of each class he/she gives reading assignment for the next class. He/she will make sure that proper
assessments are given. He/she is also responsible to give feedback for each assessment.
Roles of the students
The success of this course depends on the students’ individual and collective contribution to the class discussions.
Students are expected to participate voluntarily, or will be called upon, to contribute to set exercises and problems.
Students are also expected to read the assigned readings and prepare the cases before each class so that they could
contribute effectively to class discussions. Students must attempt assignments by their own. Proficiency in this
course comes from individual knowledge and understanding. Copying the works of others is considered as serious
offence and leads to disciplinary actions.
Text and reference Text Book:
books Simon Benninga, Financial Modeling, 4th ed., 2014, MIT Press
Reference Books
 Tom Y. Sayer, Financial Modeling for Business owners and Entrepreneurs,
Developing Excel Models to Raise Capital, Increase Cash Flows, Improve
Operations Plan Project and Make decisions., Apress

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