What you'll learn:
- Decide whether a project is financial viable by calculating Net Present Value.
- Evaluate the key assumptions that underly the calculation and hence business case.
- Challenge Return on Investment (ROI) and Internal Rate of Return (IRR) calculation.
If a project costs $1.2 million in year 1 and generates revenue of $400,000 in each subsequent year, how many years does it take to break even?
If you answered 5 years (including year 1) then youprobably need to take this course because it's likelythat this project loses money over that five year period.
The problem with break-even analysis and Return on Investment (ROI) calculation is that theyusually ignore the fact that $1,000in one year's time is not equivalent to the same amount today, That's because the money could be invested in a different way, brininginterest rates into play.
The only sound way to determine whether a project is financially viable, isby calculating the project's Net Present Value. This project will teach you:
Why Future Value does not equate to Present Value.
How to Calculate Present Value.
How to calculate Net Present Value across a number of year.
Why Return on Investment, Break-even and Internal Rate of Return can be misleading
What other types non-monetary value you can consider.
If you already have a good grasp of Net Present Value, Discounted Cashflow or Time Value of Money then this course is not for you. If, however, any of the terms make your stomach feel queasy then this course is for you.
Net Present Value is one of this things that isobvious when you understand but baffling until that moment when the "penny drops". This course aims to get that penny to drop for you.
NetPresent Value is explained in 4 short,core videos (not includingintroductory and summary videos)using examples and exercises. Each exercise has a downloadable spreadsheet, containing the calculations to get the answers.
In addition, thereare 2 additional optional videos, one covering Internal Rate of Return and Return on Investment, and another video on the treatment of inflation.
And there are a further two bonus videos, taken from my Lean Project Management course, that discuss non-financial types of value and the role of emotion in value.
