BUSI3391: Strategic Investment Decisions, Options, and Valuation Under Uncertainty

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• To provide a critical understanding of making flexible strategic investment decisions, evaluating options and growth companies (including start-ups) in uncertain business conditions utilizing concepts from finance, management, strategy, innovation/entrepreneurship and real options theory.
• To apply contemporary valuation and decision concepts and tools to strategic investment projects and problems with embedded real options (managerial flexibility), as well as valuing growth companies, intangibles (e.g., patents, brand) and competitive strategies under uncertain business conditions.
• To enable students to think critically, flexibly and strategically about the design of strategic investments, and the factors influencing business development under uncertain conditions and competition.
• To apply advanced tools for growth company and business option modelling, such as binomial trees in excel and simulation.

• Making flexible decisions under uncertain business conditions
• Valuing investments and firms using Discounted Cash Flow/ Net Present Value
• The value of real options: examples and valuation principles
• Valuing complex projects with options using binomial trees in Excel
• Problem structuring and option modelling
• Using analytic models to value options to acquire (call) and switch resources
• Resource redeployment and MNCs option network of multinational operations
• Valuing options using binomial trees with two correlated assets
• Valuing start-ups/growth companies and intangibles (e.g., patents, brand)
• Competition and strategy: use of options and game theory
• Entrepreneurial strategy: innovator to compete or cooperate with incumbent

Subject-specific Knowledge:

• Understand the key concepts, valuation principles and modern tools for making optimal strategic investment decisions and valuing growth companies and intangibles under business uncertainty and competition.
• Understand the different role and impact of uncertainty and change on optional (compared to committed) business decisions and learn how to structure business decisions to contain risk and take fuller advantage of upside possibilities, turning uncertainty into an opportunity rather than business adversary.
• Have a critical appreciation and understanding of the complexities, challenges and role of demand and technological uncertainties in decision making and how to structure and evaluate complex business investment decisions under uncertainty.
• Have a deep and practical understanding of the role and application of contemporary specialized techniques for investment project and growth company valuation under demand, technological and competitive uncertainty.
• Apply business option modelling methods and tools, such as binomial trees in Excel.
• Evaluate complex investment project and company situations and appreciate the scope and process of making sequential decisions under uncertainty.
• Develop problem structuring and business option modelling skills, i.e., perform what-if-analysis and make recommendations with certain confidence.

Subject-specific Skills:

• Apply relevant conceptual frameworks and analytical tools to assess uncertain business situations, strategic options and competitive strategies.
• Apply analytical problem-solving skills to business situations and problems from finance, management, strategy and innovation in an uncertain business context.
• Work in small groups to apply the theories via the analysis of real project and company cases

Key Skills:

• Planning, organising and time management.
• Problem solving and analytical skills, particularly involving analysis of complex business situations under uncertainty.
• Using initiative, selecting, analysing, synthesizing and interpreting data and using them as inputs for rational decision making.

• Learning outcomes will be met using workshop-based delivery, involving a combination of lectures, problem solving exercises, small group work, case studies (or analysis of new start-up businesses) and discussions, aimed to provide opportunities for experiential learning, supported by guided reading.
• The summative assessment comprises a comprehensive final exam focused on problem solving with a 100% weighting.
• The summative assessment will test students' understanding of key concepts and tools and their ability to critically apply those and interpret what they have learned within the business context.

In-class problem-solving (quantitative) exercises during the workshops and encouraging students to work in small groups on analysing and discussing real company cases, developing skills needed to apply the theories and undertake the summative assignment.

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