The world-famous investment guru Warren Buffett once said: “Beware of geeks bearing formulas.” He was referring to the danger of investing based on impressive-sounding formulas and scientific-sounding labels without fully comprehending the information they provide. The same goes for investments made by businesses! 

As a finance professional, you need to gain a full understanding of the risks and rewards of an opportunity and interpret data carefully, making sure you understand what it is telling you. An additional challenge for finance professionals is that there is a whole suite of different investment appraisal methods that are commonly used. Each has its own complexities, drawback and benefits, making each appropriate for different situations. 

In this course, we’ll take you step-by-step through how to use the key investment appraisal methods used in business, including their benefits and limitations so that you can choose the right one for the situation and use it appropriately.

• Five key investment appraisal methods: net present value, internal rate of return, payback period, return on capital employed and accounting rate of return, to determine which investments provide the best returns 

• The benefits and limitations of each of the above methods, so that you can choose the most appropriate one for the decision being made

• Profitability indices for comparing all of an organisation’s investment opportunities and identifying those that will make the best use of limited funds

• Real options and how they can be used to determine whether to delay, abandon or expand on an investment to ensure it is as cost-effective as possible in the long run

• The key qualitative, non-financial factors that must also be considered to ensure it is a fully informed investment decision – numbers don’t always show the full picture!

• How to determine when is the optimal time to replace an asset and what it should be replaced with, helping the organisation to make cost-effective decisions