Investment Decisions - 48% OFF now

On completion of this module you will able to implement investment decision analysis by running simulations based on:

• Cash flows for four years of operations of the firm
• The Time Value of Money – in theory and practice
• Present Value (PV)
• Net present value (NPV)
• Internal rate of return (IRR)
• Payback period
• Break-even point (B/E)

“What if” scenarios for key variables under different levels of market share, unit prices, and cost reduction, all set up for achieving the above financial targets. The learning methodology is carried out by using the Financial Simulator applied to working and mastering “What if” scenarios, make your own case study.

Study investment decision analysis techniques to analyse the quality of investments by looking into the “future” streams of costs and benefits on the operating life of the company so to ascertain whether the investment is worthy to be implemented or not.

These future streams of costs and benefits happen in the planning horizon of a financial plan, say, one, two, three, four years, or more. The time horizon depends on each type of investment. For an infrastructure project as a road, or an airport, or a dam, the time horizon could be as long as 10 years or even more as the recovery of the investment and the profitability of the project will take those many years to be realised.

An investment decision analysis may be thought of as a cost-benefit analysis. We are asking a very simple question: “If I invest in the firm, will the benefits I receive greater than the value of the investment?” In essence, we compare the cash inflows and outflows to see which is greater. If the inflows are greater than the outflows then the investment is worthy as it provide a benefit greater than the cost.

A complicating factor is that the inflows and outflows may not be comparable: cash outflows (costs) are typically concentrated at the time of the purchase, while cash inflows (benefits) may be spread over many years. The ‘time value of money’ principle states that money today is not the same as money in the future (because we prefer to have money today than to receive the same amount of money in the future).

Therefore, we must make sure that costs and benefits are comparable. We do this by calculating the present value of each, which restates all of the cash flows into “today’s money”.
Once all of the cash flows are on a comparable basis, then we would be able to see if the benefits exceed the costs.

The course covers also:

• Projected Financial Statements
• Cash flows for four years of operations of the firm
• The Time Value of Money – in theory and practice
• Present value
• Net present value (NPV)
• Internal rate of return (IRR)
• Payback period
• Break-even point (B/E)

Entrepreneurs

Investors

Business Owners

Managers

There are no pre-requisites to study this course.

Managers and owners of small-and-medium businesses:

• will run meaningful commitments of resources and rely on skills rather than on luck
• master Business Plans to obtain funding for long term investments

Currently there are no Q&As for this course. Be the first to ask a question.

Certificate of completion

Digital certificate - Included