Course Outline
Introduction to CAPEX and the Investment Mindset
- Defining capital expenditure within a manufacturing environment.
- The role of financial evaluation in operational decision-making.
- Common pitfalls faced by non-finance managers.
- Linking CAPEX to strategic business objectives.
Time Value of Money, Discount Rates, and WACC
- Understanding concepts of present value and future value.
- Calculating and selecting appropriate discount rates.
- 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.
- Using IRR as a secondary screening tool.
- Avoiding reinvestment assumption issues with Modified IRR (MIRR).
- Applying the Discounted Payback Period as a liquidity gate.
Economic Value Added (EVA) and Shareholder Value
- Calculating EVA: NOPAT minus (Capital Invested x WACC).
- Aligning CAPEX budgeting with the creation of shareholder value.
- Comparing EVA with 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 scenarios: Base, Optimistic, and Pessimistic.
- Creating tornado diagrams to rank sensitivity factors.
- Identifying value drivers and critical assumptions.
- Practical exercises conducted in Excel.
CAPEX Processes, Templates, and Capex Cards
- Stage-gate approval processes for capital projects.
- Designing one-page Capex Cards that align with strategic goals.
- Including financial metrics, risk ratings, and timelines.
- Standardizing Requests for Funding documentation.
Risk Analysis, Monte Carlo Simulation, and Real Options
- Applying Monte Carlo simulation using spreadsheet add-ins and Python.
- Managing uncertainty in manufacturing investment decisions.
- Analyzing real options 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 flows.
- Addressing 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
- Drafting a clear executive summary for CAPEX proposals.
- Structuring the request and linking it to strategic value.
- Employing storytelling techniques for non-finance audiences.
- Reviewing and critiquing sample funding requests.
Post-Investment Review and Benefit Realization
- Establishing Post-Investment Review (PIR) frameworks.
- Tracking actual benefits against projections.
- Implementing feedback loops to enhance future CAPEX proposals.
- Fostering a culture of accountability in capital spending.
Requirements
- A working knowledge of manufacturing operations and plant management
- Proficiency with spreadsheet software like Microsoft Excel
Target 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.
