Investment Appraisal Techniques I

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Overview

2.5 Credits
ONLINE

Capital investment decisions normally represent the most important decisions that an organization makes. One characteristic of all capital expenditure projects is the need to consider the time value of money. This CPE course explores the time value of money and expands on the three main reasons for it: consumption preferences, impact of inflation, and risk. It explains compound interest and discounting and includes exercises to apply your knowledge on those topics. It also includes information on the net present value, and the internal rate of return, as well and the advantages and disadvantages of both. In addition, this course explores the capital investment process, the post-completion audit, and project abandonment.

Objectives

  • Calculate the net present value of cash flows, internal rate of return, and payback period to support decision-making related to project investments.
  • Recognize the financial consequences of dealing with long-term projects and the time value of money.
  • Identify non-financial factors in long-term decisions.
  • Identify decision-making processes and decision options based on appraisal of capital investment performance.

Major Topics

  • The time value of money
  • Compound interest
  • Discounting
  • Capital investment appraisal
  • Net present value (NPV)
  • Internal rate of return (IRR)
  • NPV versus IRR
  • The modified IRR
  • The payback period
  • Accounting rate of return (ARR)
  • NPV and IRR with equal cash flows
  • Changing discount rates
  • Dealing with non-annual periods
  • The capital investment process
  • Post-completion audit
  • Project abandonment

Designed For

Management accountants wanting to develop skills in financial performance management CGMA exam candidates
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