Large capital-intensive projects require substantial – and often risky – investments in the acquisition and subsequent operation and maintenance of new organizational assets.

Of paramount importance is the systematic and comprehensive appraisal of potential alternatives, and the development of detailed cash-flow analyses to determine as accurately as possible, the expected returns to the organization under varying conditions of uncertainty over the expected productive life of the project.

This requires the development of a sound, realistic, and carefully structured financing plan, reflecting both the initial capital expenditures required for the acquisition of the asset, as well as the operational expenditures required for successful operation and maintenance of the asset over its anticipated productive life.

World-wide an alarming number of large capital projects fail to meet the overrun their planned budgets, failing to realize both the financial and strategic goals of the organization – the very reason for their being undertaken in the first place - often with sizable increases in capital and operational expenditures, and with substantial financial losses to the organization

Upon successful completion of this course, the delegates will be able to:

• Perform detailed appraisals of potential capital projects to ensure project success
• Understand and apply the principles and methods of modern financial engineering
• Protect the investment of the organization in capital-intensive assets Apply discounted cash flow analysis to project evaluations
• Perform Present and Annual Value calculations
• Determine the Internal Required Rate of Return of the project as the basis for sensitivity analyses to establish the risk exposure to the organization
• Evaluate and rank various project alternatives using tools such as NPV, IRR, BCR, and Equivalent Annual Value/Cost
• Develop a comprehensive spreadsheet model (Excel) of project cash flow projections and requirements
• Prepare a detailed and realistic Financing Plan
• Determine the borrowing capacity of the organization in terms of the anticipated project
• Manage project cash flows

This course is designed for program and project professionals, project leaders, project engineers, cost engineers, and other middle - senior project control and business services professionals who are responsible for or involved in securing project financing and managing cash flow on projects

Day 1:

·         Fundamentals of Asset-Based Financial Engineering

·         Introduction to Project Financing

·         Project Financing versus Direct Financing

·         Analysis of Project Viability

·         Risk and uncertainty

·         Implications of Risk for Project Financing

·         Aligning Projects with Corporate Strategy

·         Security arrangements

·         Legal structures

·         Basic Tools for Economic Appraisal

·         Simple Project Payback Period

·         Time Value of Money

·         Simple and Compound Interest

·         Nominal and Effective Interest Rates

·         Appraisal Methods – Discounted Cash Flow Projections

·         Net Present Value Analysis (NPV)

·         Internal Rate of Return Analysis (IRR)

·         Comparing NPV and IRR Analyses

·         Interpolation and Non-linearity

·         Time Equivalence

·         Comparing Projects with Equal Lives

·         Comparing Projects with Unequal Lives

Day 2:

·         Project Risk Exposure and the Cost of Capital

·         Rate of Return Computations (IRR)

·         Determining the Internal Rate of Return (IRR)

·         IRR for a Single Project

·         IRR for a Single Project Using Present Worth

·         IRR for a Single Project Using Annual Worth

·         Incremental Analysis

·         Mutually Exclusive Projects

·         Using IRR to Analyze Options with Different Lives

·         Benefit-Cost Ratio (BCR)

·         Costs, Benefits, and Non-benefits

·         Estimating the Benefit-Cost Ratio for a Single Project

·         Comparing Mutually Exclusive Projects Using Incremental Benefit-Cost Ratios

·         Cost of Capital Computations

·         Estimating the Cost of Capital for a Project

·         The Cost of Debt Capital

·         The Cost of Equity Capital

·         Weighted Average Cost of Capital (WACC)

·         Financial Gearing (Structuring)

·         Capital Asset Pricing Model (CAPM)

·         Determining the Project Risk Beta

·         Cost of Capital with All-Equity Financing

Day 3:

·         Financial Modeling and Project Evaluation

·         Preparing Cash Flow Projections

·         Accounting Years and Tax Years

·         Incremental Costs and Benefits

·         Working Capital Requirements and Operating Costs

·         Forecasting Cash Flows

·         How to Deal with Inflation

·         How to Deal with Uncertainty and Risk

·         Risk Premiums

·         Pessimistic and Optimistic Forecasts

·         Decision Tree Analysis

·         Opportunity Costs and Sunk Costs

·         Determining the Economic Life of a Project

·         Quantifying the Effects of Inflation

·         Effects of Inflation on Working Capital

·         Effects of Inflation on Taxation

·         Effects of Inflation of Cost of Capital

·         Estimating Future Rates of Inflation

·         Variable Inflation Rates over the Life of the Project

·         Relevant Cash Flows over Differing Time Horizons

·         Depreciation:

·         Straight-Line Method

·         Declining Balance Method

·         Depreciation versus Amortization

·         Interest, Insurance and Tax Costs

·         Taxation

·         Corporation Tax Rates

·         Taxable Profit

·         Capital Allowances

·         Tax Payments

·         Incorporating Tax in Cash Flow Models

·         Assessing the Terminal (Salvage) Value of a Project

·         Perpetuity (Annuity) Method

·         Price/Earnings Ratio Method

·         Book Value Method

·         Cash Flows for a Replacement Project

·         Preparing Projected Financial Statements

·         Sensitivity Analysis

Day 4:

·         Project Ranking and Comparison of Alternative Solutions

·         Equivalent Annual Worth (Value) Computations

·         Pattern of Capital Recovery

·         Including Salvage Value

·         Evaluating a Single Project

·         The Comparison Process

·         Equal Life Projects

·         Lease or Buy

·         Projects with Different Lives

·         Replacement Analysis

·         Reasons for replacement analysis

·         Factors to be considered in replacement analysis

·         Determining the economic life of a new asset

·         Determining the economic life of an existing asset

·         Comparisons in which the economic life of the new and the existing asset differs

·         Retirement without replacement (Abandonment)

Day 5:

·         Preparing the Financial Plan

·         Project Financing

·         Long-term Financing

·         Tax Considerations

·         Estimating the Borrowing Capacity of a Project

·         Loan Repayment Parameters

·         Borrowing Capacity: Full Drawdown

·         Borrowing Capacity: Periodic Draw-downs

·         Owner Financing Using Bonds

A variety of methodologies will be used during the course that includes:

·         (30%) Based on Case Studies

·         (30%) Techniques 

·         (30%) Role Play

·         (10%) Concepts

·         Pre-test and Post-test

·         Variety of Learning Methods

·         Lectures

·         Case Studies and Self Questionaires

·         Group Work

·         Discussion

·         Presentation

This rate includes participant’s manual, Hand-Outs, buffet lunch, coffee/tea on arrival, morning & afternoon of each day.

Daily Course Timings:

    08:00 - 08:20       Morning Coffee / Tea

    08:20 - 10:00       First Session

    10:00 - 10:20       Coffee / Tea / Snacks

    10:20 - 12:20       Second Session

    12:20 - 13:30       Lunch Break & Prayer Break

    13:30 - 15:00       Last Session