Investment Appraisal (Capital Budgeting) Workshop

21^st-23^rd April, 2025                                               9^th-11^th July, 2025

15^th-17^th September, 2025                                   12^th-14^th November, 2025

Introduction

Appraisal simply means the act of examining someone or something in order to judge their or its qualities, success, or needs. Investment Appraisal is a technique used to evaluate planned investment by a business and measure it’s potential value to the business. There are several different Investment Appraisal methods used to compare projects that may be competing for a business’ investment capital. The methods of investment appraisal are payback, accounting rate of return and the discounted cash flow methods of net present value (NPV) and internal rate of return (IRR). Appraising techniques like Net Present Value (NPV) and Internal Rate of Return (IRR) are essential tools for businesses and investors to evaluate the profitability of potential investments or projects.

Investments carry risk for businesses as all investments require a financial commitment. Investments involve taking risks in the hope of a possible reward, or profit. Investment appraisal allows businesses to decide whether any potential return is worth the risk associated with an investment. To that effect, investment risk may be defined as the probability that the actual return from an investment will be less than the expected return. These three days training will expose the participants to the nitty- gritty of all techniques of appraising investment.

Contents

Identifying, Constructing, and Evaluating Investment Proposals

• Proposing and constructing a range of projects that fit our strategic objectives
• Setting up the accounting spreadsheet for ARR calculations
• Calculating the ARR and comparing with company ROCE
• Incorporating the Time Value of Money – compounding and discounting
• Estimating the company Cost of Debt, Cost of Equity, and Weighted Average Cost of Capital
• Setting-up the relevant cashflow spreadsheets for Payback, NPV and IRR calculations

• Calculating the Payback period, NPV and IRR from the cashflow spreadsheet
• Adjusting the Spreadsheets for the Effect of Inflation and Taxation
• Identifying the Optimal Mix of Projects where funds are limited
• Employing Linear Programming for Optimal Investment Mix
• Incorporating the Effect of Risk using Probability Analysis Applications
• Measuring the impact of Forecasting Error, using Sensitivity Analysis
• Compensating for environmental uncertainty, using the Risk Premium, Finite Horizon, and certainty equivalent methods

Duration: Three (3) days        Fee: N250,000