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Projects can fail or succeed based on cash flow. Yet many chemical engineers don’t truly understand cash flow or its role in project evaluation. In this course, you’ll learn the principles of cash flow, ways to assess its value based on the concept of the time value of money (TVM), and how to use this knowledge to determine the value of projects.
You’ll begin with a discussion of what cash flow is and the concepts of compounding and discounting. You’ll also explore capital and capital structure, present value and rate of return. By the end of the course, you’ll have a basic understanding of cash flow principles and how to apply them to any plant-related project.
After taking this course, you'll be able to:
- Define cash flow.
- Explain the principles of compounding and discounting.
- Discuss the importance of capital, capital structure and the weighted average cost of capital (WACC).
- Calculate present value and rate of return.
- Apply cash flow concepts to project evaluation.
Who Should Attend:
Course is recommended for all engineers involved in project evaluation and/or recommendations.
Lecture 1
• Introduction and Goal of the course
• What actually Is “Cash Flow”
• Importance of Cash Flow
• Financial Statements
– Three major reporting statements:
• Balance Sheet – assets, liabilities and shareholders’ equity
• Income Statement (profit & loss) - net income, EPS
• Cash Flow Statement – sources and uses of cash; change in cash balance
• Project Cash Flow
• Time Value of Money
– Compounding
– Discounting
– Timing of the cash flow
– Type of compounding / discounting
• Modeling issues
– Cash Flow Timing
– Discrete and Continuous Compounding/Discounting
• Discrete Annual Discount Factors
• Continuous Discount Factors
– Class Exercise
• Cash Flow Modelling
– Present Value
– Cost of Capital
• “Weighted average cost of capital” or WACC
Lecture 2
• Introduction and Re-cap of Lecture 1
• Net Present Value
– Definition
– Examples
• Internal Rate of Return
– NPV versus Discount Rate
• Modeling in Excel
• IRR, MIRR, XIRR
• Profitability Index (PI)
• Payback
• Using Discounted Cash Flows to Value Companies
• Conclusions and Wrap-up
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