TOPICS

Topics covered in both the 2½-Day and 4-Day sessions:

Monday: Time Value of Money, Discount Rates and Decision Criteria

Concepts of time value of money are developed and applied to calculating rate of return (internal rate of return), net present value, ratios and other criteria. Other topics include understanding spreadsheet functions, graphical approaches illustrating the meaning of rate of return and net present value as well as methods used to determine an appropriate discount rate. Evaluating service producing alternatives will be presented including cost analysis and incremental calculations.
Tuesday: Application of Decision Criteria, Inflation

The application of decision criterion to mutually exclusive and non-mutually exclusive alternatives will be reviewed. This discussion will also introduce related problems concerning cash flow streams exhibiting a cost-income-cost pattern and the subsequent dual rates of return and the meaning of economic results. Application of inflation as it relates to escalated (or current) and constant (or real) dollar analyses will be introduced.
Wednesday: Inflation, Risk, Sensitivity Analysis

Continued discussion on inflation will focus on understanding how this important parameter may impact the type of dollars and the appropriate discount rate in escalated and constant dollar calculations. Sensitivity analyses addressing uncertainty are explored along with an introduction to quantifying risk through expected value calculations.

Additional topics covered in the 4-Day sessions:

Wednesday: After-Tax Cash Flow

Development of after-tax cash flow will focus on related tax deductions including costs that may be expensed, expenditures that are capitalized and deducted by methods such as depreciation, depletion, amortization or write-off's and loss forward considerations.
Thursday: After-Tax Applications and Related Issues

The details of calculating after-tax cash flow and the related economics for a variety of investment scenarios. Other topics include the impact of an investor's financial position on economics and the handling of working capital. The conversion of before-tax operating cost savings into after-tax cash flow and the proper handling of sunk costs and opportunity costs will also be explored. Understanding the meaning of after-tax NPV in estimating before-tax market value of properties. Breakeven and basic differences in financial versus tax reporting will also be addressed.

Course Textbooks

The course text is a three-book set which is included in the registration fee. The textbook, Economic Evaluation and Investment Decision Methods, 16th Edition (2019), by F.J. Stermole, J.M. Stermole, and A.H. Pederson, and the accompanying Solutions Manual and Self-Teaching Manual are published and copyrighted by Investment Evaluations Corporation (IEC).

The Self-Teaching Manual will be made available to registered participants prior to the course for pre-reading. The textbook and the Solutions Manual will be handed out in class on Monday morning. However, all of these textbooks may also be purchased separately.

Pre-Course Study

Participants are strongly encouraged to become familiar with the material in the Self-Teaching Manual for Economic Evaluation and Investment Decision Methods. This manual will familiarize the participant with evaluation terminology and the "time value of money" concepts used in class.