Course Number AcFn 3044
Course Title Financial Modelling course outline
Degree Program BA Degree in Accounting and Finance
Contact Hours 2
Lecturer: Garedew. G
Course Objectives & After successfully completing this course, the students should be able to:
Competences to be • Explain financial modeling; valuation techniques and basic financial
Acquired 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.
Chapter one 1 Introduction to Financial Modeling and Valuation
1 .1. Introduction to financial modeling
1.2 2. Overview of excel functions for modeling
1.3. Basic Financial Calculations using excel
1.3.1 Present value and Net Present Value
1.3.2 The IRR and Loan Tables
1.3.3 Future values and Applications
1.4. Introduction to valuation and valuation standards
Chapter two 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
Chapter three 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
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)
Chapter four 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 The teaching and learning methodology include lecturing, discussions,
Methods/strategy 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
Text and reference Text Book:
book 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
