Principles of Finance

Module code: EC2022

Module co-ordinator: Dr Andre Stenzel

  • How often should you replace your car?
  • Should you lease a car or purchase it outright?
  • Should you undertake further investments in your education?

In this module you will learn techniques which can help with decisions such as these. The same technique can be easily extended to business decisions such as the replacement, leasing and investment of fleets of vehicles or aircraft. If a company makes a decision to invest, under what conditions would it make a difference whether the investment is financed by issues of bonds or equity? Such decisions lie at the heart of corporate finance.

One of the surprising insights we will discuss in this module is that all investors should hold the same portfolio of financial assets and their portfolios should only differ in the proportion of the risk free asset. You will learn how this is derived and why, despite this result, a multitude of distinct investment vehicles, such as commodity funds and emerging market funds, are offered to investors. 

Topics covered

  • Project appraisal and capital budgeting
  • The determinants of the cost of capital
  • Portfolio theory


  • 20 one-hour lectures
  • 5 one-hour tutorials


  • Mid-term test (20%)
  • Exam, 2 hours (80%)