LV EN RU DE FR

Investment Management

Course developer

Course abstract

The course provides in-depth knowledge of the theoretical and practical issues of investment management. Students gain skills and abilities in financing investment projects and applying project economic evaluation methods. During the study course, students gain an understanding of the balance between profitability and risk, the implementation of a diversified investment policy and ability to apply knowledge and practical skills in accordance with the economic situation - changes in inflation, financial risks and uncertainty.

Learning outcomes and their assessment

1. Demonstrate the understanding of potential sources of financing projects and their suitability, cash flow and its management. Discussions in classes.
2. Demonstrate the understanding of balancing risk and profitability and implementing a diversified investment policy in a dynamic economic environment. 1st test with calculations.
3. Demonstrate the knowledge of project profitability assessment methods and how to apply them in various situations. 1st test with calculations.
4. Demonstrate the knowledge of how to apply the most important asset valuation methods and assess financial investments economically. 2nd test with calculations.
5. Choose the most appropriate kind of financing a project and assess the efficiency of a financial investment, as well as plan and assess the cash flow of a project, the effects of inflation and financial risks. 1st test with calculations, independent work, discussions in classes and presentation.
6. Perform calculations, analyse the results obtained, understand causes and make proposals for enhancing an investment portfolio. 2nd test with calculations, an examination, calculations during classes.
7. Is able to analyse information about financial market developments and transactions with various financial instruments and manage the financial investment portfolio. Independent work, an examination.
8. Responsibly plan the completion of the assignments given. Independent work.
9. Select information, present the calculations performed and proposals made. Independent work, presentation.

Course Content(Calendar)

1. Management of the company's investment activities (lectures 2 hours). Understanding of the concept of investment and the main categories: investment volume, investment cash flow, investment life cycle. Understanding of investment classification and types of classification: investments to increase efficiency, “forced investments” to ensure the requirements of regulatory enactments, investments for production development, investments for the establishment of new production facilities, investments in research and innovation.
2. Breakdown of real investment (lecture 1 hour). Independent investments, alternative investments, successive investments.
3. Types of investors by risk attitude (lecture 1 hour). Risk-neutral. Risk averters. Risk lovers.
4. The essence of the concept of investment project. Different methods of classification of investment projects (lectures 2 hours). Characteristics of the classification of investment projects: according to the amount of required investments: large, traditional, small; by the type of expected income, if it consists of: reduction of costs, income from expansion, exit to new markets, acquisition of new business areas; reduction of production and sales risks; social effect; by type of cash flow: ordinary and non-ordinary; by type of relationship: independent, alternative, complementary, substitutable. Types of investment decisions. Formalized description of the investment project.
5. Financial calculations of investment projects and analysis of projected cash flow (lectures 4 hours, practical work 4 hours). Calculation of the future value of cash. Future value of the annuity. Calculation of the present value of cash. Present value of the annuity. The concept of projected cash flows. Factors influencing projected cash flows. Forecast possible errors and methods of their elimination. Techniques for compiling projected cash flows.
6. Investment project evaluation indicator system and their calculation methods (lectures 6 hours, practical work 4 hours). Methods based on accounting estimates, their advantages and disadvantages. Return on investment method (PP method). Accounting margin method (AAR method). Methods using the discount procedure: Net reduced value method (NPV method); Internal rate of return method (IRR method); Modified internal rate of return method (MIRR method); Profitability index calculation method (PI method); Discounted payback period calculation method (DPI method); Special methods of investment project evaluation.
7. Sensitivity analysis of investment projects (lectures 2 hours, practical work 4 hours). Cash flow assessment of investment projects, taking into account risks; Risk measurement and risk accounting methods. Project sensitivity analysis. Influence of inflation in the evaluation of project capital investment projects. Project financing. Self - financing. Test on topics 1-7.
8. Stages of financial investment management (lectures 2 hours, practical work 2 hours). Classification of financial investments. Analysis of the financial investment situation. Financial investment policy making. General indicators of financial investment efficiency. Forms of financial investment, principles of their selection.
9. Asset valuation methods (lectures 2 hours, practical work 6 hours). Fair value models for financial investment instruments. Bond valuation base model and related financial calculations. General principles of stock valuation models. Analysis of financial performance of joint stock companies, key indicators and ratios. Options, options and valuation methods.
10. CAPM (Capital Asset Price method) model. Risk and return (lectures 2 hours, practical work 4 hours). Objectives of creating a financial investment portfolio. Income portfolios, growing portfolios. Portfolio theory. Portfolio management stages. Portfolio optimization options. Basic principles of CAPM (Asset Valuation Method) theory and related financial calculations. Determination of portfolio risk and return and related financial calculations. Test on topics 8-10.

Requirements for awarding credit points

1. Theoretical aspects of project financing and assessment. Cash flow discounting and the use of project assessment indicators: NPV, DPP, IRR, ARR. Ranking of the results assessed by project assessment methods. 1st test – a multiple choice test and problem calculations (20%)
2. Capital asset pricing model CAMP, portfolio risk and profitability balancing. 2nd test – a multiple choice test and problem calculations (20%)
3. Analysis of the financial instrument market and investment opportunities for various financial market segments. Analysis of a securities portfolio. Presentation of a report, discussion (20%)
4. Exam (written, all the topics) (40%)

Description of the organization and tasks of students’ independent work

Preparation for tests, exam. Develop and present independent work. Topics: Research of investment opportunities in different market segments. Transactions with fund instruments in Latvia, the Baltic and global financial markets.

Criteria for Evaluating Learning Outcomes

All work must be completed. Each work is evaluated with a mark. The evaluation of the study course depends on the evaluation of tests, independent nature and presentations, exam. 10% corresponds to one point on the 10-point assessment scale.

Compulsory reading

1. Brigham E.F., Ehrhardt M.C. Financial Management, Theory and Practice, 2010. 1184 p.
2. Brigham Eugene F., Houston Joel F. Fundamentals of Financial Management. Wiley, 2013. Pieejams: http://books.google.com
3. Finnerty John D. Project Financing: Asset-Based Financial Engineering. Third ed., Wiley, 2013. 543 p. Pieejams: http://books.google.com Ir LNB
4. Gatti S. Project Finance in Theory and Practice: Designing, Structuring, and Financing Private and Public Projects. Elsiever, 2013. 464 p. Pieejams: http://books.google.com
5. Yescombe E.R. Principles of Project Finance. Second ed. Wiley, 2013. 559 p. Pieejams: http://books.google.com
6. Praude V. Finanšu instrumenti 1. Ieguldījumi, darījumi, analīze. Rīga: Burtene, 2009. 446 lpp.
7. Praude V. Finanšu instrumenti 2. Ieguldījumi, darījumi, analīze. Rīga: Burtene, 2010. 488 lpp.
8. Saksonova S. Finanšu informācijas un pārskatu praktiskā izmantošana uzņēmumu finanšu lēmumu pieņemšanā. Rīga: I.K. “INFO TILTS”, 2012. 313 lpp.
9. Sharpe W.S., G.J.Alexander, J.V.Bailey. Investments. 5th ed. M.Infra-M, 2009. 1028 p.

Further reading

1. Alsiņa R., Gertners G. Uzņēmējdarbības plānošanas principi un metodes: Mācību līdzeklis ekonomikas profila bakalauru un profesionālo programmu studijām. 2. pārstr. un papild. izd. Rīga: RTU, 2007. 230 lpp.
2. Bodmer E.dward Corporate and Project Finance Modeling., Wiley. 2014. 599 p. Pieejams: http://books.google.com
3. Brealey R.A., Myers S.C., Marcus A.J. Fundamentals of Corporate Finance. Boston: McGraw-Hill/Irwin, 2007.
4. Gupta Ambrish. Project Appraisal and Financing. (ch. No 5-6) 2017. Pieejams: http://books.google.com
5. Kozlovs V. Investīciju projektu ekonomiskais novērtējums. Rīga: Hipotēku un zemes banka, 2005. 139 lpp.

Periodicals and other sources

1. Finanšu ministrija. Pieejams: http://www.fm.gov.lv
2. International Journal of Managerial Finance. Pieejams: International Journal of Managerial Finance / Emerald Insight Pieejams: https://www.emerald.com/insight/publication/issn/1743-9132
1. Journal of Corporate Finance. Pieejams: Journal of Corporate Finance - Journal – Elsevier Pieejams LLU FB datubāzē ScienceDirect journals ar LLU lietotājkontu (e-studiju parolēm): https://www-sciencedirect-com.ezproxy.llu.lv/journal/journal-of-corporate-finance
3. Journal of Financial Stability. Pieejams: Journal of Financial Stability / ScienceDirect.com by Elsevier Pieejams LLU FB datubāzē ScienceDirect journals ar LLU lietotājkontu (e-studiju parolēm): https://www-sciencedirect-com.ezproxy.llu.lv/journal/journal-of-financial-stability
4. Latvijas Investīciju un attīstības aģentūra. Pieejams: https//www.liaa.lv
5. Lauku atbalsta dienests. Pieejams: https//www.lad.gov.lv
6. LR ekonomikas ministrija. Pieejams: https//www.em.gov.lv
7. Riska vadības rokasgrāmata. J. Šuškeviča ... [u.c.] Lietišķās informācijas dienests. Rīga, 2005.
LLU ESAF Studiju un zinātnes informācijas centrs - Skaits: 1 eks.
8. The Journal of Risk Finance. Pieejams: Journal of Risk Finance / Emerald Insight Pieejams: https://www.emerald.com/insight/publication/issn/1526-5943
9. Žurnāls: IFinanses un elektroniskais žurnāls. Pieejams: https//www.iFinanses.lv