Financial Models for Business Decisions

Catalog description

While finance provides clear guidelines on corporate and investor decision-making in theory, applying these ideas to real-world settings is difficult because real data is noisy and outcomes often depend on implementation choices. We begin by examining complications in calculating the present value of uncertain future cash flows, a key input to valuations and project go/no-go decisions. We study how to forecast future financial statements and cash flows, incorporate uncertainty in growth assumptions using scenarios and Monte Carlo simulations, and implementation choices in calculating discount rates. We then study decisions that investors make: how to build optimal portfolios and assess mutual fund performance.