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80 certified financial controller cfc 40 singlesingle

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Unformatted text preview: e of “what-if” Analysis type of what uncertainty analysis in which variables or assumptions are changed from a base case in order to determine their impact on a project’s measured results (such as NPV or IRR). • Allows us to change from “single-point” (i.e., revenue, installation cost, salvage, etc.) estimates to a “what if” analysis if • Utilize a “base-case” to compare the impact of individual variable changes • E.g., Change forecasted sales units to see impact on the project’s NPV 81 Certified Financial Controller CFC PostPost-Completion Audit Post-completion Audit Audit A formal comparison of the actual costs and benefits of a project with original estimates. • Identify any project weaknesses • Develop a possible set of corrective actions • Provide appropriate feedback Result: Making better future decisions! 82 Certified Financial Controller CFC 41 Multiple IRR Problem Let us assume the following cash flow us assume the following cash flow pattern for a project for Years 0 to 4: –$100 +$100 +$900 –$1,000 How many potential IRRs could this potential project have? project have? Two!! There are as many potential IRRs as there are sign changes. 83 Certified Financial Controller CFC NPV Profile – Multiple IRRs Net Present Value ($000s) 75 50 25 0 –100 84 Multiple IRRs at k = 12.95% and 191.15% 12.95% 191.15% 0 40 80 120 160 Discount Rate (%) Certified Financial Controller CFC 42 200...
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