Kanenus College

Department of Accounting and Finance

Course Information
Course code AcFn 3044
Course Title Financial Modeling
Degree BA Degree in Accounting and Finance
Program
Module Finance
Module Code AcFn-M3040
Lecturer Tefera B. (PhD Candidate)
ETCTS Credits 3
Contact Hours 2
(per week)
Course After successfully completing this course, the students should be able to:
Objectives/C  Explain financial modeling; valuation techniques and basic financial
ompetences to calculations using spread sheet like excel.
be Acquired  Perform corporate valuation be applying various methods to determine
business value
 Model pro forma financial statements and determine business value;
Course The course is designed to enable students understand financial models and
Description develop valuation financial model to ascertain the values of assets and
business.
WEEKS Course Contents Reading
4WEEKs 1. Introduction to Financial Modeling and Valuation
{1ST – 4th} 1.1 Introduction to financial modeling
1.2. Overview of excel functions for modeling
1.3. Basic Financial Calculations using excel
1.4. Present value and Net Present Value
1.5. The IRR and Loan Tables
1.6. Future values and Applications
7.7. Introduction to valuation and valuation standards
3WEEKs 2. Corporate Valuation
{5th - 7 TH} 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
4WEEKs 3. Determining the value of the firm
{8 TH - 11TH} 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)
4WEEKs 4. Pro-Forma Financial Statement Modeling
{12TH - 4.1. How Financial Models Work: Theory and an Initial
14TH} 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
5.5. Alternative Modeling of Fixed Assets
6.6. Sensitivity Analysis
Teaching & The teaching and learning methodology include lecturing, discussions,
Learning problem solving, and analysis. Take-home assignment will be given at the
Methods/strat end of each chapter for submission within a week. Solution to the
egy 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 room. The full and active participation of students is highly
encouraged.
Assessment The evaluation scheme will be as follows:
/Evaluation Test Test Test Quiz1 Assignment Final Total
1 2 3 1
10% 10% 10% 10% 10% 50% 100%
Roles of the He/she will come to the class regularly on time and deliver the lecture
Instructor in a well-organized manner. Besides, at the end of each class he/she
gives reading assignment for the next class. He/she will make sure
that proper assessments is given. He/she is also responsible to give
feedback for each assessment.
Roles of the The success of this course depends on the students‟ individual and collective
students contribution to the class discussions. Students are expected to participate
voluntarily, or will be called upon, to contribute to set exercises and
problems. Students are also expected to read the assigned readings and
prepare the cases before each class so that they could contribute effectively
to class discussions. Students must attempt assignments by their own.
Proficiency in this course comes from individual knowledge and
understanding. Copying the works of others is considered as serious offence
and leads to disciplinary actions.
Text and Text Book:
reference Simon Benninga, Financial Modeling, 4th ed., 2014, MIT Press
books 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
Kanenus College
Department of Accounting and Finance
Course Information
Course code AcFn3112
Course Title Econometrics for Finance
Degree Program BA Degree in Accounting and Finance
Lecturer
ETCTS Credits 6
Contact Hours (per week) 4
Course Description This course builds upon Applied Statistics. Familiarity with the material,
particularly sampling distributions, estimation, and hypothesis testing will
be of much help. You will not be able to appreciate the course unless you
have good grasp of those topics.
WEEKS Course Contents Reading
4WEEKs Chapter 1: Introduction
{1ST – 4th} 1.1 The econometric approach
1.2 Economic models and econometric models
1.3 Different types of data for econometric analysis
3WEEKs Chapter 2: Simple Linear Regression
{5th - 7 TH} 2.1 Concept of regression function
2.2 Method of Moments & Method of least
squares 2.3 Residuals and goodness of fit
2.4 Properties of LS estimates and Gauss-Markov
theorem
2.5 Maximum Likelihood Estimation
2.6 Confidence Intervals and Hypothesis Testing
2.7 Predictions with Simple Linear Regression
Model
4WEEKs Chapter 4: Multiple Regression Analysis with
{8 TH - 11TH} Qualitative Information: Binary (or Dummy
Variables)
4.1 Describing Qualitative Information
4.2 Dummy as Independent Variables
4.3 Dummy as Dependent Variable
4.3.1 The Linear Probability Model (LPM)
4.3.2 The Logit and Probit Models
4.3.3 Interpreting the Probit and Logit Model
Estimates
4WEEKs Chapter 5: Violations of the Assumptions of
{12TH - 14TH} Classical Model
5.1 Multicollinearity
5.2 Heteroscedasticity- tests and weighted least
squares
5.3 Autocorrelation-tests and feasible generalized
least squares estimation
5.4 Specification Errors: Omission of Variables
5.5 Tests of Parameters Stability
Chapter 6: Basic Regression Analysis with Time
Series Data: Basic Concepts
6.1 The nature of Time Series Data
 6.2 Stationary and non-stationary stochastic
Processes
6.3 Trend Stationery and Difference Stationary
Stochastic Processes
6.4 Integrated Stochastic Process
6.5 Tests of Stationarity: The Unit Root Test
6.6 Cointegration and ECM

Chapter 7: Introduction to simultaneous

equationmodels (Optional)
7.1 The Nature of Simultaneous Equation Models
7.2 Simultaneity bias
7.3 Order and rank conditions of identification
(without proof)
7.4 Recursive models
7.5 Indirect squares and 2SLS estimation of
structural equations

The teaching and learning methodology include lecturing, discussions,

Teaching & Learning problem solving, and analysis. Take-home assignment will be given at the
Methods/strategy 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 room. The full and active participation of students is
highly encouraged.
Assessment/ Students will be evaluated using different mechanisms and their weights
Evaluation as indicated in the table below:
Assessment Assignment Tests Final Total Total
(individual and Exam
and group) quizzes
Weight 20% 30% 50 100% 100%
%
Course Policy  Late coming is not allowed and no student is allowed to enter after class
has started.
 Duplication of assignments is strictly forbidden; it entails serious penalty.
 Assignments are required to be submitted before or on the deadline.
 Cheating during exam sessions results in a minimum of “F “grade while
cheating in quizzes and tests is subjected to a zero mark. All cheating
cases will be reported to the department for further considerations.
 Students should switch off their cell phones while they are in class and
must keep their cell phones switched off during all kinds of exam
sessions.
 Students must attend 80% of the class for the course. Failure to attend
80% of the class will not allow the student to sit for the final exam.
 Missing a quiz without convincing evidences will earn the students a
grade of zero marks in that specific quiz
Text and reference books References
Gujarati, D. N. and D. C. Proter (2009). Basic Econometrics, 5th edition,
McGraw-Hill
Maddala, G. S. (1992). Introduction to Econometrics, 2nd edition,
Macmillan.
Wooldridge, J. (2013). Introductory Econometrics: A Modern Approach,
5th Ed.
Enders, W. (2014). Applied Econometric Time Series, John Wiley &
Sons:, 4th ed.,Singapore.
Koutsoyiannis, A. (2001). Theory of Econometrics, Palgrave: New York.
Johnston, J. and J.Dinardo (1997)Econometric Methods, 4th edition.
Kmenta, J. Elements of Econometrics, 2nd edition.
Intrilligator M.D, R.G. Bodkin, and D. Hsiao (1996). Econometric Models,
Techniques and Applications.
Verbeek (2004), A Guide to Modern Econometrics. New York: John Wiley
& Sons, Ltd.
Pindyck, R. and D. Rubinfeld (1991), Econometric Models and Economic
Forecasts, 3rd edition, New York: McGraw-Hill.