Summary of Investment Project Analysis

  • Reference: FN-630-E

  • Number of pages: 2

  • Publication Date: Jul 10, 2017

  • Source: IESE (España)

  • Type of Document: Technical Note

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Description

Summary sheet (two sides) of the steps to follow for analyzing and deciding on investment projects (capital budgeting). Examples of investment projects: new product launch, investment in a new factory, etc. Steps 1. What am I investing in?: analysis of the business and of its future P&L and balance sheet. 2. How much can I expect to make? Calculation of cash flows (free cash flow and cash flow for the shareholder). Expected rate of return (IRR). 3. How much can I lose? Risks. 4. Other decision criteria, other than the rate of return and the risk.

Learning Objective

This is a summary to be handed out in class, once the module on investment decisions has been completed. It serves as a guide for the participants to apply the methodology learned.

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