Modelling Financing Options
This course will enable you to:
- Recognise what capital expenditure is and identify the key components to include in your financial model
- Understand how capital expenditure and other funding requirements are expected to be financed
- Incorporate and present funding sources into your financial model appropriately
- Consider the time value of money and how it can be used to assess options in your financial model
No financial model is complete unless it addresses the issue of capital expenditure and financing, but all too often, this is forgotten.
This course will enable you to incorporate financing issues and their implications into your model. It also provides the tools to help you use financial models to assess investment options, for example, when comparing projects with different investments and levels of certainty on expected returns.
Modelling capital expenditure
- What is capital expenditure?
- What is required to calculate the capital expenditure requirement?
- How is the calculation block for the capital expenditure constructed?
- What real-life factors might need to be considered?
- What do we mean by financing?
- Why do businesses seek finance?
- What is the finance likely to be used for?
- From what sources might finance be obtained?
- Where in the model should the funding calculations be placed?
- How accurately do the cash flows associated with the funding need to be predicted?
Funding from internal or external sources
- Why and when might funding be sought from internal or external sources?
- What is "circularity" in a financial model?
- Which ingredients are required to calculate the funding requirement?
- How do I build a calculation to show the loan balance?
- What is the structure of the calculation block loan interest?
- What is the structure of the calculation block for the loan repayments?
Time value of money
- What is time value of money?
- What is the importance of time value of money in relation to different financing options?
- Which ingredients are required to calculate the discounted cash flow?
- What is the structure of the calculation block for the discounted cash flow?
- What other methods are used to compare cash flows?
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