Capital Budgeting

Instructor: Nisar Ahmed, Assistant Professor, AIUB.

Contact no: 0171-59-6161 E-Mail: nisarsn@aiub.edu.bd, nisarsn@yahoo.com
Course no: 00247
Class Hours: M, W (2:30-4:00 P.M)
Course Description: Examine the firm's investment decisions in projects within the context of value
creation. Covers investment decision making under certainty and under risk. Certainty equivalent, CAPM
and risk-adjusted return, sequential decision making, and sensitivity models are discussed. Problems and
cases are assigned for analysis and class presentation.
Course Objectives: To learn about various aspects of capital budgeting including risk-adjustments in
project analysis, the cost of capital, project and firm valuation, and more sophisticated project analysis
techniques.
Evaluation of Students: There will be 2 exams given during the semester, each of which will count 25%
of your course grade. 20% will be for a Capital Budgeting Project. The remaining 30% is for assignments,
class exams and attendance.
Textbook:

Capital Budgeting and Long-Term Financing Decisions,

Seitz & Ellison, 3rd Ed.

Papers and other relevant materials will be provided by the instructor and will be available in the faculty
webpage.
The instructor may alter the course content or structure if he finds it necessary.
Calculator:

Financial calculator (e.g. HP 10BII).

Topics to be covered

Chapters

Foundations for Capital Budgeting

Capital Investments evaluation tools
Marginal cash flow identification and taxes
Inflation, foreign exchange movements & Investments analysis

1-4
5-7
8-9
10

Risk Analysis
Cost of Capital
Interaction between investments & financing decisions
Capital Rationing

11-14
16
20
22

Policies & Course Requirements:

1. Attendance you are expected to attend and participate at all class meetings, as well as group
research project meetings. Irregular attendance will not be permitted. More than 5 absences
will lead to an automatic F grade in the course
2. There will be no Make-ups for any missed exams.
3. Assigned chapters and reading should be read prior to their discussion/review in class. It is
the students responsibility to identify, prior to class, that material which he/she does not fully
understand so that he/she can direct questions in class toward the clarification of that material.
4. Participation in class discussion is required. Participation is defined (for this course) as
constructive contributions to the development of topics as they are discussed in class. Quality
of participation is a significant factor to be included in the assessment of final grade.
5. Each student is expected to complete a group project. Full details of the project assignment
will be given in the class. Maximum group size will depend on class size though it should not
exceed 3.

The Code of Academic Integrity of AIUB addresses cheating, fabrication of submitted work,
plagiarism, and other forms of dishonesty. Students are strictly prohibited from indulging in any
such activities.