Course Outline
Introduction to CAPEX and the Investment Approach
- Defining capital expenditure within the manufacturing sector.
- The significance of financial assessment in operational choices.
- Typical challenges faced by non-finance managers.
- Connecting CAPEX decisions to broader strategic goals.
Time Value of Money, Discount Rates, and WACC
- Grasping the concepts of present and future value.
- Deriving and choosing suitable discount rates.
- Weighted Average Cost of Capital (WACC) and project-adjusted rates.
- Practical tasks focused on cash flow discounting.
Net Present Value (NPV), IRR, MIRR, and Payback Period
- Computing NPV as the primary benchmark for investment.
- Utilizing IRR as a supplementary filtering mechanism.
- Addressing reinvestment assumptions through Modified IRR (MIRR).
- Employing Discounted Payback Period as a liquidity criterion.
Economic Value Added (EVA) and Shareholder Value
- Calculating EVA: NOPAT less (Capital Invested x WACC).
- Aligning CAPEX budgets with the creation of shareholder value.
- Benchmarking EVA against conventional accounting measures.
- Case study exploring value-based management in manufacturing.
Constructing the CAPEX Business Case
- Organizing cash flow forecasts for capital initiatives.
- Distinguishing between operating and capital cash flows.
- Considerations regarding 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.
- Recognizing key value drivers and critical assumptions.
- Practical exercises conducted in Excel.
CAPEX Workflows, Templates, and Capex Cards
- Stage-gate approval mechanisms for capital projects.
- Developing one-page Capex Cards that reflect strategic alignment.
- Incorporating financial metrics, risk scores, and schedules.
- Standardizing documentation for funding requests.
Risk Analysis, Monte Carlo Simulation, and Real Options
- Implementing Monte Carlo simulation using spreadsheet add-ins and Python.
- Addressing uncertainty in manufacturing investment decisions.
- Real options analysis for production adaptability and expansion.
- Determining when to employ probabilistic versus deterministic models.
ESG, Sustainability, and Regulatory Factors
- Incorporating ESG and sustainability indicators into cash flows.
- Carbon expenses, energy efficiency, and green capex incentives.
- Modifying risk premiums for environmental compliance.
- Conveying sustainability advantages to financial stakeholders.
Executive Narrative, Storytelling, and Funding Requests
- Formulating a concise executive summary for CAPEX proposals.
- Structuring the request and tying it to strategic worth.
- Storytelling methods tailored for non-finance audiences.
- Evaluating and critiquing example funding submissions.
Post-Investment Review and Benefit Realization
- Setting up post-investment review (PIR) structures.
- Monitoring actual versus forecasted benefits.
- Feedback mechanisms to enhance future CAPEX proposals.
- Fostering a culture of accountability in capital spending.
Requirements
- Familiarity with manufacturing operations and facility oversight
- Proficiency with spreadsheet tools, such as Microsoft Excel
Target Participants
- Manufacturing managers and plant supervisors lacking a finance background
- Engineering leaders preparing capital expenditure submissions
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.
