Course Outline
Introduction to CAPEX and the Investment Mindset
- Defining capital expenditure within a manufacturing context.
- The significance of financial evaluation in operational decision-making.
- Common pitfalls faced by non-finance managers.
- Aligning CAPEX with strategic business objectives.
Time Value of Money, Discount Rates, and WACC
- Understanding the concepts of present value and future value.
- Calculating and selecting appropriate discount rates.
- An overview of Weighted Average Cost of Capital (WACC) and project-specific rates.
- Practical exercises on discounting cash flows.
Net Present Value (NPV), IRR, MIRR, and Payback Period
- Calculating NPV as the primary criterion for investment decisions.
- Utilizing IRR as a secondary screening mechanism.
- Addressing reinvestment assumption challenges through Modified IRR (MIRR).
- Applying the Discounted Payback Period as a liquidity check.
Economic Value Added (EVA) and Shareholder Value
- Calculating EVA: NOPAT minus (Capital Invested multiplied by WACC).
- Aligning CAPEX budgeting with the creation of shareholder value.
- Comparing EVA against traditional accounting metrics.
- Case study on value-based management in manufacturing.
Building the CAPEX Business Case
- Structuring cash flow projections for capital projects.
- Distinguishing between operating and capital cash flows.
- Considering working capital and terminal value implications.
- Constructing a complete investment case from operational data.
Scenario and Sensitivity Analysis
- Developing three key scenarios: Base, Optimistic, and Pessimistic.
- Creating tornado diagrams to rank sensitivity factors.
- Identifying value drivers and critical assumptions.
- Practical exercises using Excel.
CAPEX Processes, Templates, and Capex Cards
- Understanding stage-gate approval processes for capital projects.
- Designing one-page Capex Cards that align with strategic goals.
- Incorporating financial metrics, risk ratings, and timelines.
- Standardizing documentation for Requests for Funding.
Risk Analysis, Monte Carlo Simulation, and Real Options
- Implementing Monte Carlo simulation using spreadsheet add-ins and Python.
- Managing uncertainty in manufacturing investment decisions.
- Applying real options analysis for production flexibility and expansion.
- Determining when to use probabilistic versus deterministic models.
ESG, Sustainability, and Regulatory Considerations
- Integrating ESG and sustainability metrics into cash flow analyses.
- Accounting for carbon costs, energy efficiency, and green CAPEX incentives.
- Adjusting risk premiums for environmental compliance.
- Communicating sustainability benefits to financial stakeholders.
Executive Narrative, Storytelling, and Requests for Funding
- Crafting a clear executive summary for CAPEX proposals.
- Structuring the request and linking it to strategic value.
- Employing storytelling techniques tailored for non-finance audiences.
- Reviewing and critiquing sample funding requests.
Post-Investment Review and Benefit Realization
- Establishing post-investment review (PIR) frameworks.
- Tracking actual performance versus projected benefits.
- Implementing feedback loops to enhance future CAPEX proposals.
- Fostering a culture of accountability in capital spending.
Requirements
- Familiarity with manufacturing operations and plant management.
- Proficiency in spreadsheet software, particularly Microsoft Excel.
Audience
- Manufacturing managers and plant supervisors lacking a financial background.
- Engineering managers responsible for preparing 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.
