Capital Investment & Financial Decisions

1. Define capital investment and distinguish between various classes.
2. Compute the Accounting Rate of Return (ARR) and the Payback Period of Investments (PPI).
3. Compute the Net Present Value (NPV), Internal Rate of Return (IRR) and Profitability Index (PI) of projects.
4. Appraise capital investments based on both the traditional and discounted techniques.
5. Apply probabilities to compute the expected value, standard deviation and co-efficient of correlation of projects.
6. Conduct sensitivity analysis of investments.
7. Evaluate investments under inflationary condition.
8. Evaluate investments when capital is not adequate thus resulting to capital rationing.

13 weeks, about 28 hours in total. Yours will differ.

1. Week 1Module 1: Introduction

   • Unit 1: Conceptual Issues in Capital Investment · 2 hours

     Define investment and its types.. Identify basic features of investment.. Differentiate between investment and speculation.. Discuss the basis for classifying investments..

   • Unit 2: Decisions: Types, Features and Tools for Decision-Making · 2 hours

     Identify and use tools for decision making at various levels.. Define terms in Decision Analysis, such as relevant costs, differential costs, and opportunity costs.. Understand the management accountant's role in short-term decision making..

2. Week 2Module 1: Introduction

   • Unit 3: The Payback Period · 2 hours

     Define, apply, and compute the payback period.. Outline the merits and demerits of the payback period.. Calculate payback periods for different projects.. Advise companies based on the payback approach..

3. Week 3Module 1: Introduction

   • Unit 4: The Accounting Rate of Return · 2 hours

     Define Accounting Rate of Return (ARR).. State the formulae for ARR.. Identify the investment criteria for ARR.. State the advantages and disadvantages of ARR..

4. Week 4Module 1: Introduction

   • Unit 5: Compounding and Discounting · 2 hours

     Define compounding and discounting in investment decisions.. Compute the formulae for compounding and discounting.. Compute simple discounting factors and annuity factors.. Solve practical problems involving compounding and discounting..

5. Week 5Module 2: Investment Appraisal Techniques

   • Unit 1: The Net Present Value (NPV) · 2 hours

     Define Net Present Value (NPV).. Apply the formula for simple NPV.. Describe the investment criteria under NPV.. Calculate NPV for different projects and make investment decisions..

6. Week 6Module 2: Investment Appraisal Techniques

   • Unit 2: The Net Present Value (Annuity) · 2 hours

     Explain the concept of annuity.. Apply the annuity factor to net present value.. Solve practical questions involving annuity (lease rentals, hire purchase).. Compute NPV using annuity factors for projects with constant cash inflows..

7. Week 7Module 2: Investment Appraisal Techniques

   • Unit 3: The Internal Rate of Return I · 2 hours

     Define Internal Rate of Return (IRR).. State IRR formula and how to derive unknown values within a range.. Outline the investment criteria under the IRR.. State the merits and demerits of IRR..

8. Week 8Module 2: Investment Appraisal Techniques

   • Unit 4: Internal Rate of Return II · 2 hours

     Outline the steps to be adopted in order to find an alternative to pure trial and error in applying the IRR method.. Read the annuity table.. Apply the annuity table in solving IRR problems.. Explain that at times IRR could yield multiple rates..

9. Week 9Module 2: Investment Appraisal Techniques

   • Unit 5: The Profitability Index · 2 hours

     Explain the meaning of profitability index (PI).. State the formulae for PI.. Apply the formulae for PI.. Outline the merits and the demerits of PI.. Compare the IRR method with the NPV method..

10. Week 10Module 3: Advanced Topics

    • Unit 1: The Impact of Inflation on Investment Proposals · 2 hours

      Define inflation.. Explain the meaning of money and real cash flows.. Explain the effects of inflation on investment appraisal.. Evaluate investments under inflationary trends..

11. Week 11Module 3: Advanced Topics

    • Unit 2: Using Probability to Assess Impact of Risks on Capital Investments · 2 hours

      Define probability.. Explain the following terms, namely, expected value, standard deviation and co-efficient of variation as applied in investment appraisal.. Evaluate investments by applying probability estimates.. Calculate expected values, standard deviations, and coefficients of variation for project cash flows..

12. Week 12Module 3: Advanced Topics

    • Unit 3: Sensitivity Analysis · 2 hours

      Define sensitivity analysis.. Identify the key factors in any investment appraisal.. Evaluate investments by varying the key factors in turn, and assessing their effects on the investment.. Identify the advantages and disadvantages of sensitivity analysis..

13. Week 13Module 3: Advanced Topics

    • Unit 4: Capital Rationing · 2 hours

      Define capital rationing.. Evaluate projects and investments under capital rationing conditions.. Apply techniques for project selection under capital rationing.. Distinguish between single-period and multi-period capital rationing..