Code Date Venue Fees
WS009 04 - 05 Feb 2018 Dubai - UAE $2,400 Register
Home » Interactive Workshops » Investment Appraisal Workshop

Introduction

In today’s challenging environment it is important for businesses to maintain their competitive position. They need to ensure that they are offering attractive, up-to-date, high quality products to their customers. A company that was successful in 2016 cannot assume that their success will continue through to 2020, unless they are prepared to make new investments on a regular basis.

This workshop builds on the skills and knowledge acquired in the Investment Appraisal Workshop to incorporate two important additional factors. The first is how to incorporate the change in risk when a company diversifies into new activities, using the Capital Asset Pricing Model.  The second is how to incorporate the effect of different financing structures, and their tax consequences, on the value and acceptability of the project. The workshop will comprise the following key elements:

  • Overview of the basic principles of Net Present Value and Weighted Average Cost of CapitaI (WACC) calculations, as used in normal investment appraisal
  • Explanation of the Modigliani and Miller theory, that ‘ WACC will be the same at all levels of gearing’ and why this should be modified to incorporate the benefit of tax savings
  • How to identify the risk level of a diversification project, incorporate its effect into an adjusted WACC, and calculate a risk-adjusted NPV
  • Identifying and calculating the present value of tax savings relating to term loans, instalment loans, and subsidized loans, and incorporating these into Adjusted Present Value (APV) evaluations
  • Separating the project cash flows into ‘risky’ and ‘risk-free’, assessing the value of ‘unused debt capacity’, and applying suitable discount rates to produce the APV

Objectives

By the end of this workshop, participants will be able to:

  • Understand why it is important for us to consider, and accurately evaluate, all of the consequential effects of investing in new projects
  • Break down any new investment project into all of the significant elements that should be separately evaluated to produce an accurate summary of the value created – the Adjusted Present Value
  • Accurately measure the beta risk value of a diversification project from available market information, and make necessary ungearing and regarding calculations to produce a risk-adjusted WACC
  • Identify and evaluate the tax benefits of different forms of debt finance, and unused debt capacity, and incorporate these into an Adjusted Present Value calculation
  • Distinguish risky from risk-free operating cash flows, and apply suitable discount rates to each, in producing the Adjusted Present Value

Training Methodology

This workshop will utilize a variety of proven adult learning techniques to ensure maximum understanding, comprehension and retention of the information presented. This includes:

  • Clearly presented case study material to illustrate important techniques
  • Opportunities for delegates to input personal knowledge and experience into group discussion sessions
  • Use of Excel spreadsheets for collection and forecasting of data, and application of evaluation techniques
  • Regular exercises and quizzes to check progress
  • Groupwork and group presentations, with guided research

Who Should Attend?

This workshop is suitable to a wide range of professionals but will greatly benefit:

  • Management accounting staff
  • Strategic planners
  • Management consultants
  • Senior managers of any non-financial discipline
  • Entrepreneurs

Workshop Outline

Identifying and constructing investment proposals 

  • Review of the models for calculating Ke, Kd, and WACC
  • Review of the Net Present Value calculation method
  • Some more methods of dealing with risk in investment projects; expected value, maximin, minimax regret, standard deviation, co-efficient of variation, risk premium, payback period, finite horizon, certainty equivalent
  • Measuring project risk by beta value, by ungearing company beta value
  • Why using debt finance is good, according to traditional theory?
  • Why using debt finance brings no cost benefit, according to Modigliani and Miller (M&M)?

Evaluating the investment proposals

  • Why using debt finance brings a tax saving benefit, according to Modigliani and Miller(M&M) theory 2?
  • Identifying the interest payment cash flows of different forms of debt capital – term loan, instalment loan, and the present value of tax savings on this
  • Calculating the after-tax saving in interest due to subsidized loans
  • Identifying which operating cash flows are risky and which are risk-free
  • What is debt capacity? What is its value? If debt capacity is unused does it still have value?
  • Putting everything together in the Adjusted Present Value summary

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Investment Appraisal Workshop


Upcoming Dates

Code Date Venue Fees
WS009 04 - 05 Feb 2018 Dubai - UAE $2,400

Introduction

In today’s challenging environment it is important for businesses to maintain their competitive position. They need to ensure that they are offering attractive, up-to-date, high quality products to their customers. A company that was successful in 2016 cannot assume that their success will continue through to 2020, unless they are prepared to make new investments on a regular basis.

This workshop builds on the skills and knowledge acquired in the Investment Appraisal Workshop to incorporate two important additional factors. The first is how to incorporate the change in risk when a company diversifies into new activities, using the Capital Asset Pricing Model.  The second is how to incorporate the effect of different financing structures, and their tax consequences, on the value and acceptability of the project. The workshop will comprise the following key elements:

  • Overview of the basic principles of Net Present Value and Weighted Average Cost of CapitaI (WACC) calculations, as used in normal investment appraisal
  • Explanation of the Modigliani and Miller theory, that ‘ WACC will be the same at all levels of gearing’ and why this should be modified to incorporate the benefit of tax savings
  • How to identify the risk level of a diversification project, incorporate its effect into an adjusted WACC, and calculate a risk-adjusted NPV
  • Identifying and calculating the present value of tax savings relating to term loans, instalment loans, and subsidized loans, and incorporating these into Adjusted Present Value (APV) evaluations
  • Separating the project cash flows into ‘risky’ and ‘risk-free’, assessing the value of ‘unused debt capacity’, and applying suitable discount rates to produce the APV

Objectives

By the end of this workshop, participants will be able to:

  • Understand why it is important for us to consider, and accurately evaluate, all of the consequential effects of investing in new projects
  • Break down any new investment project into all of the significant elements that should be separately evaluated to produce an accurate summary of the value created – the Adjusted Present Value
  • Accurately measure the beta risk value of a diversification project from available market information, and make necessary ungearing and regarding calculations to produce a risk-adjusted WACC
  • Identify and evaluate the tax benefits of different forms of debt finance, and unused debt capacity, and incorporate these into an Adjusted Present Value calculation
  • Distinguish risky from risk-free operating cash flows, and apply suitable discount rates to each, in producing the Adjusted Present Value

Training Methodology

This workshop will utilize a variety of proven adult learning techniques to ensure maximum understanding, comprehension and retention of the information presented. This includes:

  • Clearly presented case study material to illustrate important techniques
  • Opportunities for delegates to input personal knowledge and experience into group discussion sessions
  • Use of Excel spreadsheets for collection and forecasting of data, and application of evaluation techniques
  • Regular exercises and quizzes to check progress
  • Groupwork and group presentations, with guided research

Who Should Attend?

This workshop is suitable to a wide range of professionals but will greatly benefit:

  • Management accounting staff
  • Strategic planners
  • Management consultants
  • Senior managers of any non-financial discipline
  • Entrepreneurs

SEMINAR OUTLINE

Identifying and constructing investment proposals 

  • Review of the models for calculating Ke, Kd, and WACC
  • Review of the Net Present Value calculation method
  • Some more methods of dealing with risk in investment projects; expected value, maximin, minimax regret, standard deviation, co-efficient of variation, risk premium, payback period, finite horizon, certainty equivalent
  • Measuring project risk by beta value, by ungearing company beta value
  • Why using debt finance is good, according to traditional theory?
  • Why using debt finance brings no cost benefit, according to Modigliani and Miller (M&M)?

Evaluating the investment proposals

  • Why using debt finance brings a tax saving benefit, according to Modigliani and Miller(M&M) theory 2?
  • Identifying the interest payment cash flows of different forms of debt capital – term loan, instalment loan, and the present value of tax savings on this
  • Calculating the after-tax saving in interest due to subsidized loans
  • Identifying which operating cash flows are risky and which are risk-free
  • What is debt capacity? What is its value? If debt capacity is unused does it still have value?
  • Putting everything together in the Adjusted Present Value summary

Quality Logo

GLOMACS is registered with NASBA as a sponsor of Continuing Professional Education (CPE) on the National Registry of CPE Sponsors. NASBA have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org.

 

All Training Seminars delivered by GLOMACS by default are eligible for CPE Credit.



© 2017. Material published by GLOMACS shown here is copyrighted.
All rights reserved. Any unauthorized copying, distribution, use, dissemination, downloading, storing (in any medium), transmission, reproduction or reliance in whole or any part of this course outline is prohibited and will constitute an infringement of copyright.

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P.O. Box 74653, Dubai, United Arab Emirates
Tel : +971 - 04 - 425 0700, Fax : +971 (04) 425 0701, Email : info@glomacs.ae

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