Financial Analysis

Basic Elements Estimate Whole Life Costs Forecast Business Benefits and/or Revenues Estimate financial return on project investment

Estimates required Initial Cost Estimate Option Cost Studies Budget Cost Estimate Milestone / Elemental Cost Plans

Benefit & Revenue Forecasts Realistic Forecasts Costs to achieve Revenues & Benefits Benefits, Revenues & Costs based on same assumptions

Establishing Revenues Place People Who/How many Price People (Staff) Process Promotion Determine Product/Market Revenue Cost of Sales

Estimating Benefits Headcount Reductions Other operational Cost Savings Productivity Improvement Determine Cost Savings Analyse Potential Indirect Revenues TranslateK.P.I.'s into Costs Savings Determine relevantK.P.I.'s Established Baseline (Current Performance) Determine/Describe targeted benefits

Investment Appraisal  What is the financial return for the project?  How quickly will we get the money back?  Is this a sound investment?  Which project or programme gives best return on investment?  What contribution does this customer project make?  How does this compare with other investment opportunities?

Discounted Cash Flow

Compound Growth Future Value of 12% Compound Growth Years

Discounted Cash Flow Years

Project 1 - NPV Net Present Value (NPV) – 7939 = 6060 Discount Rate = 12%

Project 2 - NPV Discount Rate = 12%

Project 1 - IRR

Payback Period