Investment Appraisal

The long-term growth of an organisation depends on the ability to make effective investment decisions.

Our course covers the process, criteria and methods that are applied to decide which projects to undertake. It focuses on tools and techniques for managing risk and uncertainty in capital projects.

Who should attend?

CFOs, finance business partners, investment managers, investment / financial / credit analysts, management accountants, project managers, internal auditors.

Capital investment

• Decision making model for capital expenditure decisions
• Types of capital investment projects
• Post-completion audit

Appraisal methods

• Traditional methods: payback period (PP), accounting rate of return (ARR)
• Time value of money and discounting
• Appraisal methods based on discounting: net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), discounted payback period (DPP), profitability index (PI), discounted payback profitability index (DPBI)

Capital investment

• Financial model templates
• Relevant cash flows
• Terminal value. Annuities and perpetuities
• Working capital
• Taxation (income tax, VAT)
• Inflation
• Cost of capital

Dealing with risk in investment decisions

• Sensitivity analysis
• Scenario analysis
• Monte Carlo simulation
• Stress testing
• Value at risk (VaR)
• Decision trees and multi-stage decision problems
• Real options
• Adding a risk premium to the discount rate

Further aspects of investment appraisal

• Capital rationing
• Capital assets replacement decisions
• Lease or buy decisions