Course Outline
Introduction to CAPEX and the Investment Perspective
- Defining capital expenditure within the manufacturing sector.
- The impact of financial evaluation on operational choices.
- Typical errors made by managers without finance expertise.
- Aligning CAPEX with broader strategic business goals.
Time Value of Money, Discount Rates, and WACC
- Grasping the concepts of present and future value.
- Determining and choosing suitable discount rates.
- Weighted Average Cost of Capital (WACC) and project-specific rates.
- Hands-on exercises involving the discounting of cash flows.
Net Present Value (NPV), IRR, MIRR, and Payback Period
- Computing NPV as the primary benchmark for investment decisions.
- Employing IRR as a supplementary screening method.
- Mitigating reinvestment assumption pitfalls through Modified IRR (MIRR).
- Utilizing Discounted Payback Period as a liquidity checkpoint.
Economic Value Added (EVA) and Shareholder Value
- Calculating EVA: NOPAT reduced by (Capital Invested multiplied by WACC).
- Aligning CAPEX budgeting strategies with shareholder value generation.
- Contrasting EVA with conventional accounting measures.
- Case study exploring value-based management in manufacturing.
Constructing the CAPEX Business Case
- Organizing cash flow forecasts for capital projects.
- Distinguishing between operating and capital cash flows.
- Considering working capital and terminal value.
- Assembling a full investment case from operational data.
Scenario and Sensitivity Analysis
- Creating three scenarios: Base, Optimistic, and Pessimistic.
- Generating tornado diagrams for sensitivity ranking.
- Pinpointing value drivers and critical assumptions.
- Practical exercises conducted in Excel.
CAPEX Processes, Templates, and Capex Cards
- Stage-gate approval mechanisms for capital projects.
- Designing one-page Capex Cards with strategic alignment.
- Incorporating financial metrics, risk ratings, and timelines.
- Standardizing Requests for Funding documentation.
Risk Analysis, Monte Carlo Simulation, and Real Options
- Implementing Monte Carlo simulation using spreadsheet add-ins and Python.
- Addressing uncertainty in manufacturing investment choices.
- Real options analysis for production flexibility and expansion.
- Determining when to employ probabilistic versus deterministic models.
ESG, Sustainability, and Regulatory Factors
- Incorporating ESG and sustainability metrics into cash flow models.
- Carbon costs, energy efficiency, and green capex incentives.
- Modifying risk premiums for environmental compliance.
- Conveying sustainability advantages to financial stakeholders.
Executive Narrative, Storytelling, and Requests for Funding
- Developing a clear executive summary for CAPEX proposals.
- Structuring the funding request and connecting it to strategic value.
- Storytelling techniques tailored for non-finance audiences.
- Analyzing and critiquing sample funding requests.
Post-Investment Review and Benefit Realization
- Establishing post-investment review (PIR) frameworks.
- Monitoring actual outcomes against projected benefits.
- Implementing feedback loops to refine future CAPEX proposals.
- Fostering a culture of accountability in capital spending.
Requirements
- Familiarity with manufacturing operations and plant oversight
- Proficiency with spreadsheet applications, such as Microsoft Excel
Target Audience
- Manufacturing managers and plant supervisors lacking a finance background
- Engineering managers responsible for developing capital expenditure proposals
Testimonials (4)
How to manage business financials
surprise mtileni - Hatima Holdings (Pty) ltd
Course - Learning Xero
Good communication, open for discussion, kept it interesting and engaging
Ahmet Keyman - Keytrade AG
Course - Management Accounting and Finance for Non-Finance Professionals
Experience of the trainer and his way of conveying the content
Roggli Marc - Bechtle Schweiz AG
Course - FinOps
The trainer did not leave a single minute unexploited! He was up a storm throughout every lesson and provided much material for whatever he dealt with.
