Capital Budgeting & Investment Decision

The “Capital Budgeting & Investment Decision” course provides a comprehensive understanding of the principles and methods involved in evaluating investment opportunities and making effective capital budgeting decisions. Participants will gain the necessary knowledge and skills to assess the financial viability of projects and determine their potential value. The course begins with an introduction to capital budgeting, covering the basics of time value of money and the concepts of compounding, discounting, and present values. Participants will learn how to calculate net present value (NPV) and understand its significance as a decision-making tool.

The NPV method is explored in detail, including its meaning, decision rules, and practical limitations. Participants will analyze NPV profiles to gain insights into project sensitivity. The payback period method is introduced, highlighting its meaning, calculations, and drawbacks. Participants will understand the limitations of this method in assessing investment projects. The internal rate of return (IRR) is examined, including its meaning, calculation methods, and limitations. Participants will explore examples that demonstrate the calculation of NPV and IRR, as well as the potential for inconsistent results. The concept of multiple IRRs is discussed, and the modified internal rate of return (MIRR) is introduced as an attempt to address this issue.

Methods of choosing between different projects are covered, including how to choose between mutually exclusive projects, projects with different lifespans, and projects within budget constraints. In the final section, the course summarizes the key concepts and techniques covered, providing a comprehensive review of the course material. Through practical examples, case studies, and interactive exercises, participants will gain practical skills in capital budgeting and investment decision-making, enabling them to evaluate projects effectively and make informed financial choices. By the end of this course, participants will be equipped with the knowledge and tools necessary to assess investment opportunities, calculate financial metrics, and make sound capital budgeting decisions.

What Will You Learn?

• Gain a comprehensive understanding of capital budgeting and investment decision-making principles.
• Learn the basics of time value of money, including concepts of compounding, discounting, and present values.
• Understand the calculation and significance of net present value (NPV) in evaluating investment projects.
• Explore decision rules and practical limitations associated with the NPV method.
• Analyze NPV profiles to understand project sensitivity and risk.
• Learn the meaning and calculations of the payback period method, along with its drawbacks.
• Understand the internal rate of return (IRR) and its calculation methods, as well as its limitations.
• Explore examples demonstrating the calculation of NPV and IRR, including cases of inconsistent results.
• Discover the concept of multiple IRRs and the modified internal rate of return (MIRR) as a potential solution.
• Gain insights into methods for choosing between mutually exclusive projects, projects with different lifespans, and projects within budget constraints.
• Summarize and consolidate the key learnings of the course, reinforcing the concepts covered in capital budgeting and investment decision-making.

Who Should Take The Course?