This document discusses various techniques for evaluating project profitability, including net present value estimates, scenario analysis, break-even analysis, operating leverage, and capital rationing. It provides examples and explanations of how to conduct sensitivity analysis on variables, analyze best-case and worst-case scenarios, calculate accounting, cash, and financial break-even points, determine degree of operating leverage, and assess capital rationing constraints. The goal is to understand risks and potential outcomes of projects through quantitative analysis before making investment decisions.
Investment Decision — Capital Budgeting Techniques — Pay Back Method — Accounting Rate Of Return — NPV — IRR — Discounted Pay Back Method — Capital Rationing — Risk Adjusted Techniques Of Capital Budgeting. — Capital Budgeting Practices
Investment Decision — Capital Budgeting Techniques — Pay Back Method — Accounting Rate Of Return — NPV — IRR — Discounted Pay Back Method — Capital Rationing — Risk Adjusted Techniques Of Capital Budgeting. — Capital Budgeting Practices
Project finance is the financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure, in which project debt and equity used to finance the project are paid back from the cash flow generated by the project. Project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights and interests held as secondary security or collateral. Project finance is especially attractive to the private sector because companies can fund major projects off balance sheet.
risk and return. Defining Return, Return Example, Defining Risk,Determining Expected Return , How to Determine the Expected Return and Standard Deviation, Determining Standard Deviation (Risk Measure), Portfolio Risk and Expected Return Example, Determining Portfolio Expected Return, Determining Portfolio Standard Deviation, Summary of the Portfolio Return and Risk Calculation, Total Risk = Systematic Risk + Unsystematic Risk,
Project finance is the financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure, in which project debt and equity used to finance the project are paid back from the cash flow generated by the project. Project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights and interests held as secondary security or collateral. Project finance is especially attractive to the private sector because companies can fund major projects off balance sheet.
risk and return. Defining Return, Return Example, Defining Risk,Determining Expected Return , How to Determine the Expected Return and Standard Deviation, Determining Standard Deviation (Risk Measure), Portfolio Risk and Expected Return Example, Determining Portfolio Expected Return, Determining Portfolio Standard Deviation, Summary of the Portfolio Return and Risk Calculation, Total Risk = Systematic Risk + Unsystematic Risk,
For more content from the same event, including a discussion of Customer Profitability Analysis and Big Data tools, please see:
meetup.com/Analytics-and-Data-in-Financial-Services/pages/Big_Data_meet_Customer_Profitability_Analytics/
West Red Lake Gold Mines Inc. - Initiating Coverage - JV with Goldcorp in the...Michael Dehn
Investment Highlights
West Red Lake Gold Mines Inc.’s goal (“company”, “RLG”) is to advance their West Red Lake project to a multi-million ounce gold project over the next two to three years. An initial resource estimate on the project, announced in February 2016, showed a high grade inferred resource of 4.45 Mt at 7.57 gpt for 1.09 Moz of gold.
The project, which hosts three historic gold mines, is located in the Red Lake Gold District of Northwestern Ontario, Canada - one of the richest gold producing regions in the world.
The company has a 60:40 joint venture (“JV”) partnership with Goldcorp Inc. (TSX: G).
The region has several toll milling options, offering the company the potential to quickly advance to production at a significantly low capital budget. Goldcorp’s Red Lake mine is 20 km from the West Red Lake project.
The company has identified several opportunities to expand the resource along strike and to depth. The next phase of drilling commenced in late January.
Management’s background in M&A (mergers and acquisitions), and Ontario based gold projects, is a key advantage.
We are initiating coverage on RLG with a fair value estimate of $0.51 per share.
Customer and Product Profitability for Distributors3C Software
Learn how distributors can use ImpactECS to calculate detailed customer and product profitability results, analyze unlimited scenarios, and make better business decisions.
Does your company have any unprofitable customers? How much money do you leave on the table with your customers? What profit does each of your customer add or destroy to your companies profit? How much profit do you make or lose with activities performed for your customers? We can help you to answer all of those questions
Monte Carl Simulation is a powerful and effective tool when used properly helps to navigate the expected Net Present Value NPV. This presentation helps to improve the pattern to ackowlege onthe Odessa Investment by Decision Dres.
Decision Making with Excel for ManagersAsen Gyczew
As a manager you will be tempted to trust your guts and use your experience to decide what and how to do it. Quite often this approach may be misleading. It is much better to use data driven approach and before you make the decision look at the potential consequences. In this course I will show you how to make more rational choices as a manger using Excel. We will go through a lot of case studies that will help you master this skill.
In the course you will learn the following things:
1. How to be data driven in solving problems
2. How to make better decisions using Excel
3. How to handle uncertainty when you are making decisions
4. Which method, framework you should use in a specific situation
You will learn how to make decisions using make or buy analysis, voting system, simulations, rankings, how to analyze the costs of different investments (aiming at cost reduction, removing bottlenecks, requested by the customers). We will also how to apply the portfolio decision making, value proposition alignment, strategic alignment frameworks.
For more check my course: https://bit.ly/DecisionMakingExcel
Presentación con Temas Relacionados a la Ingeniería Económica.
Valor Presente, Valor Neto, Tasa Interna de Retorno, Análisis Costo Beneficio, Inversión Social , Inversión Privada
Slide 1
8-1
Capital Budgeting
• Analysis of potential projects
• Long-term decisions
• Large expenditures
• Difficult/impossible to reverse
• Determines firm’s strategic direction
When a company is deciding whether to invest in a new project, large sums of money can be at stake. For
example, the Artic LNG project would build a pipeline from Alaska’s North Slope to allow natural gas to
be sent from the area. The cost of the pipeline and plant to clean the gas of impurities was expected to be
$45 to $65 billion. Decisions such as these long-term investments, with price tags in the billions, are
obviously major undertakings, and the risks and rewards must be carefully weighed. We called this the
capital budgeting decision. This module introduces you to the practice of capital budgeting. We will
consider a variety of techniques financial analysts and corporate executives routinely use for the capital
budgeting decisions.
1. Net Present Value (NPV)
2. Payback Period
3. Average Accounting Rate (AAR)
4. Internal Rate of Return (IRR) or Modified Internal Rate of Return (MIRR)
5. Profitability Index (PI)
Slide 2
8-2
• All cash flows considered?
• TVM considered?
• Risk-adjusted?
• Ability to rank projects?
• Indicates added value to the firm?
Good Decision Criteria
All things here are related to maximize the stock price. We need to ask ourselves the following
questions when evaluating capital budgeting decision rules:
Does the decision rule adjust for the time value of money?
Does the decision rule adjust for risk?
Does the decision rule provide information on whether we are creating value for the firm?
Slide 3
8-3
Net Present Value
• The difference between the market value of a
project and its cost
• How much value is created from undertaking
an investment?
Step 1: Estimate the expected future cash flows.
Step 2: Estimate the required return for projects of
this risk level.
Step 3: Find the present value of the cash flows and
subtract the initial investment to arrive at the Net
Present Value.
Net present value—the difference between the market value of an investment and its cost.
The NPV measures the increase in firm value, which is also the increase in the value of what the
shareholders own. Thus, making decisions with the NPV rule facilitates the achievement of our
goal – making decisions that will maximize shareholder wealth.
Slide 4
8-4
Net Present Value
Sum of the PVs of all cash flows
Initial cost often is CF0 and is an outflow.
NPV =∑
n
t = 0
CFt
(1 + R)t
NPV =∑
n
t = 1
CFt
(1 + R)t
- CF0
NOTE: t=0
Up to now, we’ve avoided cash flows at time t = 0, the summation begins with cash flow zero—
not one.
The PV of future cash flows is not NPV; rather, NPV is the amount remaining after offsetting the
PV of future cash flows with the initial cost. Thus, the NPV amount determines the incremental
value created by unde.
This presentation is an overview of my past professional and academic experience in the banking industry with regards to controlling and finance functions in various divisions from 2008 to 2010.The topics mentioned here all purely based on my experience and knowledge of how the retail banking functions, what are its main activities, tools and techniques and what I learnt from their implementation in day to day working life during my tenure in the retail banking area as an Analyst/Branch officer
A Guide to capital budgeting and need for valuationArpit Amar
How a finance manager takes investment and financing decision and why and under what circumstances valuation of business in necessary is described in this presentation.
This presentation was made during my MBA program in Germany
Controlling and organization of international businessArpit Amar
When we talk about International Business we think of certain concepts like strategy, planning, marketing, finance and so on. This presentation certainly focus on aspects which includes how to control and organize these functions and which instruments and application should be used for them.
This was a presentation made by me during MBA program in Germany under the supervision of Dr.Prof. Schminke.
Mergers and acquisition (A study on main elements and their behavior)Arpit Amar
This presentation is a brief explanation about mergers and acquisition from Indian perspective and was presented by me during my tenure at Bank of America continuums, Indian.
Intercultural competence in international bankingArpit Amar
This is a comparison between German and Indian banking system considering mostly behavioral aspects. This was a part of a curriculum presented by me during my MBA program at Georg Simon Management Institute, Nuremberg under the supervision of Professional Intercultural Trainer Ms. Emily Slate from Munich
Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Buy Verified PayPal Account | Buy Google 5 Star Reviewsusawebmarket
Buy Verified PayPal Account
Looking to buy verified PayPal accounts? Discover 7 expert tips for safely purchasing a verified PayPal account in 2024. Ensure security and reliability for your transactions.
PayPal Services Features-
🟢 Email Access
🟢 Bank Added
🟢 Card Verified
🟢 Full SSN Provided
🟢 Phone Number Access
🟢 Driving License Copy
🟢 Fasted Delivery
Client Satisfaction is Our First priority. Our services is very appropriate to buy. We assume that the first-rate way to purchase our offerings is to order on the website. If you have any worry in our cooperation usually You can order us on Skype or Telegram.
24/7 Hours Reply/Please Contact
usawebmarketEmail: support@usawebmarket.com
Skype: usawebmarket
Telegram: @usawebmarket
WhatsApp: +1(218) 203-5951
USA WEB MARKET is the Best Verified PayPal, Payoneer, Cash App, Skrill, Neteller, Stripe Account and SEO, SMM Service provider.100%Satisfection granted.100% replacement Granted.
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...PaulBryant58
This article provides a comprehensive guide on how to
effectively manage the convert Accpac to QuickBooks , with a particular focus on utilizing online accounting services to streamline the process.
2. Understand forecasting risk and sources of value
Understand and be able to do scenario and sensitivity
analysis
Understand the various forms of break-even analysis
Understand operating leverage
Understand capital rationing
3. Evaluating NPV Estimates
Scenario and Other What-If Analyses
Break-Even Analysis
Operating Cash Flow, Sales Volume, and Break-Even
Operating Leverage
Capital Rationing
4. NPV estimates are just that – estimates
A positive NPV is a good start – now we need to take a closer look
Forecasting risk – how sensitive is our NPV to changes in the cash flow
estimates; the more sensitive, the greater the forecasting risk
Sources of value – why does this project create value?
5. What happens to the NPV under different cash flow scenarios?
At the very least look at:
Best case – high revenues, low costs
Worst case – low revenues, high costs
Measure of the range of possible outcomes
Best case and worst case are not necessarily probable, but they can still
be possible
6. Consider the project discussed in the text
The initial cost is $200,000 and the project has a 5-year life. There is no
salvage. Depreciation is straight-line, the required return is 12%, and
the tax rate is 34%
The base case NPV is 15,567
7. Scenario Net Cash Flow NPV IRR
Income
Base case 19,800 59,800 15,567 15.1%
Worst -15,510 24,490 -111,719 -14.4%
Case
Best Case 59,730 99,730 159,504 40.9%
8. What happens to NPV when we vary one variable at a time
This is a subset of scenario analysis where we are looking at the effect
of specific variables on NPV
The greater the volatility in NPV in relation to a specific variable, the
larger the forecasting risk associated with that variable, and the more
attention we want to pay to its estimation
9. Scenario Unit Sales Cash NPV IRR
Flow
Base case 6000 59,800 15,567 15.1%
Worst 5500 53,200 -8,226 10.3%
case
Best case 6500 66,400 39,357 19.7%
10. Simulation is really just an expanded sensitivity and scenario analysis
Monte Carlo simulation can estimate thousands of possible outcomes
based on conditional probability distributions and constraints for each
of the variables
The output is a probability distribution for NPV with an estimate of the
probability of obtaining a positive net present value
The simulation only works as well as the information that is entered
and very bad decisions can be made if care is not taken to analyze the
interaction between variables
11. Beware “Paralysis of Analysis”
At some point you have to make a decision
If the majority of your scenarios have positive NPVs, then you can feel
reasonably comfortable about accepting the project
If you have a crucial variable that leads to a negative NPV with a small
change in the estimates, then you may want to forego the project
12. Common tool for analyzing the relationship between
sales volume and profitability
There are three common break-even measures
Accounting break-even – sales volume at which net income = 0
Cash break-even – sales volume at which operating cash flow = 0
Financial break-even – sales volume at which net present value =
0
13. There are two types of costs that are important in breakeven analysis:
variable and fixed
Total variable costs = quantity * cost per unit
Fixed costs are constant, regardless of output, over some time period
Total costs = fixed + variable = FC + vQ
Example:
Your firm pays $3000 per month in fixed costs. You also pay $15 per unit to
produce your product.
What is your total cost if you produce 1000 units?
What if you produce 5000 units?
14. Average Cost
TC / # of units
Will decrease as # of units increases
Marginal Cost
The cost to produce one more unit
Same as variable cost per unit
Example: What is the average cost and marginal cost under each
situation in the previous example
Produce 1000 units: Average = 18,000 / 1000 = $18
Produce 5000 units: Average = 78,000 / 5000 = $15.60
15. The quantity that leads to a zero net income
NI = (Sales – VC – FC – D)(1 – T) = 0
QP – VQ – FC – D = 0
Q(P – v) = FC + D
Q = (FC + D) / (P – v)
16. Accounting break-even is often used as an early stage
screening number
If a project cannot break even on an accounting basis, then
it is not going to be a worthwhile project
Accounting break-even gives managers an indication of
how a project will impact accounting profit
17. We are more interested in cash flow than we are in accounting
numbers
As long as a firm has non-cash deductions, there will be a positive
cash flow
If a firm just breaks even on an accounting basis, cash flow =
depreciation
If a firm just breaks even on an accounting basis, NPV < 0
18. Consider the following project
A new product requires an initial investment of $5 million and will
be depreciated to an expected salvage of zero over 5 years
The price of the new product is expected to be $25,000 and the
variable cost per unit is $15,000
The fixed cost is $1 million
What is the accounting break-even point each year?
Depreciation = 5,000,000 / 5 = 1,000,000
Q = (1,000,000 + 1,000,000)/(25,000 – 15,000) = 200 units
19. What is the operating cash flow at the accounting break-even point
(ignoring taxes)?
OCF = (S – VC – FC - D) + D
OCF = (200*25,000 – 200*15,000 – 1,000,000 -1,000,000) + 1,000,000 =
1,000,000
What is the cash break-even quantity?
OCF = [(P-v)Q – FC – D] + D = (P-v)Q – FC
Q = (OCF + FC) / (P – v)
Q = (0 + 1,000,000) / (25,000 – 15,000) = 100 units
20. Accounting Break-even
Where NI = 0
Q = (FC + D)/(P – v)
Cash Break-even
Where OCF = 0
Q = (FC + OCF)/(P – v) (ignoring taxes)
Financial Break-even
Where NPV = 0
Cash BE < Accounting BE < Financial BE
21. Consider the previous example
Assume a required return of 18%
Accounting break-even = 200
Cash break-even = 100
What is the financial break-even point?
Similar process to that of finding the bid price
What OCF (or payment) makes NPV = 0?
N = 5; PV = 5,000,000; I/Y = 18; CPT PMT = 1,598,889 = OCF
Q = (1,000,000 + 1,598,889) / (25,000 – 15,000) = 260 units
The question now becomes: Can we sell at least 260 units per year?
22. Operating leverage is the relationship between sales and operating
cash flow
Degree of operating leverage measures this relationship
The higher the DOL, the greater the variability in operating cash flow
The higher the fixed costs, the higher the DOL
DOL depends on the sales level you are starting from
DOL = 1 + (FC / OCF)
23. Consider the previous example
Suppose sales are 300 units
This meets all three break-even measures
What is the DOL at this sales level?
OCF = (25,000 – 15,000)*300 – 1,000,000 = 2,000,000
DOL = 1 + 1,000,000 / 2,000,000 = 1.5
What will happen to OCF if unit sales increases by 20%?
Percentage change in OCF = DOL*Percentage change in Q
Percentage change in OCF = 1.5(.2) = .3 or 30%
OCF would increase to 2,000,000(1.3) = 2,600,000
24. Capital rationing occurs when a firm or division has
limited resources
Soft rationing – the limited resources are temporary, often self-
imposed
Hard rationing – capital will never be available for this project
The profitability index is a useful tool when a manager is
faced with soft rationing
25. What is sensitivity analysis, scenario analysis and simulation?
Why are these analyses important and how should they be used?
What are the three types of break-even and how should each be
used?
What is degree of operating leverage?
What is the difference between hard rationing and soft rationing?