EC50D1: ADVANCED CORPORATE FINANCE FOR ENERGY (2024-2025)

The main aim of the course is to equip students with good analytical skills in order to understand the implications of corporate financing decisions and to enable students to understand the theoretical underpinnings of corporate finance theory.

After completing the course students should acquire not only a sound knowledge about corporate finance theory but also practical skills of using that knowledge for solving practical problems within the corporate finance theme.

Special attention in this course is given to Oil&Gas companies and the discussed topics are referred to the companies from this sector.

This course introduces students to basic concepts of corporate finance such as: the financing decisions of the firm, the capital structure, the risk and return of stock investments, the cost of capital, investment appraisal and budgeting decisions for levered companies. Studying this course students obtain a broad theoretical and practical knowledge of these topics as well as the understanding for why the companies behave the way they do with respect to their financing decisions and how this interacts with real world markets.

The main course objectives are:

• To develop knowledge and understanding of the theoretical underpinnings of corporate finance theory.
• To develop the practical skills that equip students with the ability to think rigorously, quickly and logically through a corporate financing problem.
• To develop intellectual skills by understanding why companies behave the way they do with respect to financing choices and how this interacts with financial markets.
• To develop communication, problem solving and time management skills through the study of the theory and practice of corporate finance.

The specific topics covered in this course include:

• The optimal portfolio choice and the Capital Asset Pricing Model. This topic gives the students sound theoretical underpinnings for the explanation of the behaviour of stock investors who are the main provides of the equity capital for any company; their behaviour has a fundamental influence on the cost of equity capital from the perspective of the company.
• The overview of the two main sources of the capital for a company: debt and equity. Students obtain practical skills how to estimate the cost of equity (using among others the Capital Asset Pricing Model) and the cost of debt. Finally, students learn how to determine the total cost of capital (WACC) for a company. This is a fundamental element of the process of the appraisal of any investment project that is undertaken by a company.
• The discussion of the risk factors within the Oil&Gas industry that influence the risk and return of the companies from this sector. This has an important implication for the cost of capital within the Oil&Gas Industry.
• The theories of capital structure. Students acquire a deep and comprehensive knowledge of various theories of capital structure and their implications for financing decisions. This topic has fundamental consequences for the reality of corporate finance as the theories give direct indications for the rules governing the financial decisions made by the company managers as well as point for the factors that influence those decisions and consequently have a crucial impact on the value of the company
• Financing decisions in reality. We overview the practice of capital structure and discuss how the choice of financing sources in made in reality, in the light of various theories of capital structure. Specifically, we identify the determinants of debt ratios for various industries and companies and link them to the existing theories of capital structure. Students develop then a practical skill of deducting the factors which are important for the financing choices, from the theoretical models of capital structure. In the practical aspect a special focus is given to the Oil&Gas industry.
• Capital budgeting and valuation with leverage. This topic further develops the investment analysis and project appraisal as it considers a more real-world situation where the projects undertaken by companies are financed by both debt and equity capital. Students gain a practical knowledge of assessing investment projects financed by these two types of capital.

Information on contact teaching time is available from the course guide.

More Information about Week Numbers

There are no assessments for this course.