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Financial Analysis of Projects I Course Outline

Course Description
Rising energy prices, dwindling resources and environmental impacts are headline news for
today’s business owners. Energy efficiency projects have been shown to be low risk, high return
investments. Financial analysis is key to getting your project approved by decision makers. If
your project is presented using the language and terms they recognize, you will be off to a good
start. Therefore energy managers require a thorough grasp of how economic analysis is used to
evaluate return on investment. This enables you to compare and prioritize projects, and gain
management approval. This course stresses the use of simple financial terminology when
presenting projects for approval. In addition, we will learn to determine simple return on
investment and payback period of a project and construct a cash flow table and obtain the
discounted payback, net present value and internal rate of return of a project. We will end with
an explanation of lifecycle costing and its importance when attempting to gain project approval.
Course Content
Objectives
• Use simple financial terminology when presenting projects for approval
• Determine simple return on investment and payback period of a project
• Construct a cash flow table and obtain the discounted payback, net present value and
internal rate of return of a project
• Explain the importance of lifecycle costing

1. Introduction
2. How Does a CFO Make Decisions?
a. Financial Analysis
i. Steps
1. Assess the relative value of an investment over time
2. Make choices among the ideas and methods available
3. Conduct an analysis appropriate to the decision at hand
ii. Process
1. Determine financial metric used to analyze investments
2. Determine the acceptable threshold for that metric
3. Obtain all costs of the project
4. List all benefits
5. Determine the total impact
3. Financial Terms
 
 
©2012 Schneider Electric. All rights reserved. All trademarks provided are the property of their respective owners.
a. CAPEX and OPEX
i. Money to buy or upgrade physical assets
b. Return on Investment (ROI)
c. Cash Flow
i. Net cash coming in or going out each year
1. Positive cash flow =cash received
2. Negative cash flow =cash paid out
d. Payback Period
e. Cost of Capital
f. Present Value
g. Discounted Present Value
h. Discounted Payback
i. Net Present Value (NPV)
j. Internal Rate of Return (IRR)
k. Hurdle Rate
l. Life Cycle Costing
m. Salvage Value
4. Using Interest Tables
a. Initial investment (P)
b. Annual return (A)
c. Interest rate (i)
d. Project lifetime (n)
5. Obtain Approval
a. Understand capital budgeting process
b. Find key numbers
c. Find out decision criteria and thresholds
d. Include the life cycle costs
e. Include non-financial benefits
f. Investigate utility rebates or other incentives
g. Keep a copy of the financial analysis
6. Summary