Project Valuation and the Capital Budgeting Process from Coursera

This course describes the economic viability of an engineering project through the application of net present value, internal rate of return, and payback period analysis. The impacts of depreciation, taxes, inflation, and foreign exchange are addressed. The capital budgeting process is discussed, showing how companies make decisions to optimize their investment portfolio. Risk is mitigated through the application of quantitative techniques such as scenario analysis, sensitivity analysis, and real options analysis.

This course can be taken for academic credit as part of CU Boulder’s Master of Engineering in Engineering Management (ME-EM) degree offered on the Coursera platform. The ME-EM is designed to help engineers, scientists, and technical professionals move into leadership and management roles in the engineering and technical sectors. With performance-based admissions and no application process, the ME-EM is ideal for individuals with a broad range of undergraduate education and/or professional experience. Learn more about the ME-EM program at https://www.coursera.org/degrees/me-engineering-management-boulder.

What's inside

Syllabus

Complex Cash Flow Analysis

Considers more complex cash flow scenarios involving multiple cash flows, perpetuities, and the impact of multiple compounding interest periods per year. Many practical problems are worked both analytically and with spreadsheets.

Project Valuation Techniques

Project valuation determines whether the financial benefits are greater than the required investment. There are three primary valuation metrics used in business: the net present value, the payback period, and the internal rate of return. This module explores how to determine these metrics both analytically and using spreadsheet analyses.

Project Selection Techniques

Project valuation criteria such as the NPV and IRR determine whether a project’s financial benefits are greater than the required investment. Companies use these metrics to select projects for funding during the annual capital budgeting process. Technical managers also make investment decisions but are often constrained to select only one alternative from several good ones. This module covers several project selection techniques to ensure the best project is selected.

Depreciation, Taxes, and Inflation

Preparing a comprehensive cash flow analysis for any investment requires accounting for the depreciation of equipment and other assets and the taxes paid on the project’s profits. Inflation can also significantly impact future cash flows and therefore must be addressed as well. This module develops the concepts of depreciation, taxes, and inflation and shows how these are determined.

Building the Business Case

A critical element of a project’s business case is the financial justification – it needs to make good business sense for the company. This module focuses on the three primary components of a project’s cash flow statement: operations, net working capital, and capital spending. The project’s financial valuation is then conducted on the total cash flows, resulting in the NPV, IRR, and Payback Period to assess whether the project is financially worthwhile.

Good to know

Know what's good

, what to watch for

, and possible dealbreakers

Taught by Michael J. Readey, Ph.D., who has expertise in engineering project evaluation and optimization

Develops skills in project valuation and selection, which are essential for engineering managers and technical professionals

Provides hands-on practice in applying quantitative techniques like scenario analysis and sensitivity analysis to mitigate risk

Covers advanced concepts such as depreciation, taxes, inflation, and foreign exchange impacts on project cash flows

Requires students to have a strong foundation in engineering and financial analysis

Assumes familiarity with engineering software and data analysis tools

Activities

Be better prepared before your course. Deepen your understanding during and after it. Supplement your coursework and achieve mastery of the topics covered in Project Valuation and the Capital Budgeting Process with these activities:

Capital Budgeting: Planning and Analysis for the Future

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This book provides a comprehensive overview of capital budgeting techniques, which will supplement the materials in this course.

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Read each chapter
Complete the end of chapter questions
Write a summary of each chapter

Capital Budgeting Workshop

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Supplement your learning by attending workshops that offer hands-on practice and meet others in the field.

Browse courses on Capital Budgeting

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Find a workshop
Register for the workshop
Attend the workshop

NPV, IRR, and Payback Period Calculations

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Practicing financial engineering calculations will help improve your proficiency in them.

Browse courses on Net Present Value

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Find an online calculator
Plug in different values
Check your answers

Five other activities

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Study Group

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Collaborating with your peers in a dedicated study group will help you solidify your understanding of course material.

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Form a study group
Meet regularly
Discuss course material

Financial analysis project

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Start working on a project that will increase your understanding of the financial engineering skills you will learn in this course.

Browse courses on Financial Analysis

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Choose a project
Gather data
Analyze data
Write report

Mentor a Student

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Leading others as a mentor can help you deepen your understanding of the course material and strengthen your leadership skills.

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Sign up to be a mentor
Meet with your mentee
Provide guidance and support

Financial Engineering Blog

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Creating a blog that discusses topics of interest and relevance to this course will provide you with added knowledge beyond this course.

Browse courses on Financial Engineering

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Choose a topic
Research the topic
Write a blog post

Financial Model

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Developing a financial model that applies the concepts you will learn in this course will help you gain practical experience using these techniques.

Browse courses on Financial Modeling

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Choose a project
Gather data
Build the model

Career center

Learners who complete Project Valuation and the Capital Budgeting Process will develop knowledge and skills that may be useful to these careers:

Financial Analyst

Financial Analysts use their knowledge of finance and economics to evaluate companies and investments. They often work in the finance industry, but may also be employed by corporations, non-profits, or government agencies. This course can help Financial Analysts by providing a strong foundation in project valuation and the capital budgeting process. This knowledge can be used to make better investment decisions and to improve the financial performance of organizations.

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Portfolio Manager

Portfolio Managers manage investment portfolios for individuals and institutions. They make decisions about which investments to buy and sell, and how to allocate assets. This course can help Portfolio Managers by providing a strong foundation in project valuation and the capital budgeting process. This knowledge can be used to make better investment decisions and to improve the performance of investment portfolios.

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Investment Banker

Investment Bankers provide financial advice to companies and governments. They help clients raise capital, merge with other companies, and make other financial decisions. This course can help Investment Bankers by providing a strong foundation in project valuation and the capital budgeting process. This knowledge can be used to provide better advice to clients and to help them make better financial decisions.

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Risk Manager

Risk Managers identify and manage risks for organizations. They work in a variety of industries, including finance, insurance, and healthcare. This course can help Risk Managers by providing a strong foundation in project valuation and the capital budgeting process. This knowledge can be used to identify and manage risks more effectively and to improve the overall performance of organizations.

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Budget Analyst

Budget Analysts prepare and manage budgets for organizations. They work in a variety of industries, including government, healthcare, and education. This course can help Budget Analysts by providing a strong foundation in project valuation and the capital budgeting process. This knowledge can be used to develop more accurate and effective budgets.

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Consultant

Consultants provide advice to companies and organizations on a variety of topics, including finance, marketing, and operations. This course can help Consultants by providing a strong foundation in project valuation and the capital budgeting process. This knowledge can be used to provide better advice to clients and to help them make better decisions.

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Project Manager

Project Managers plan, execute, and close projects. They work in a variety of industries, including construction, engineering, and software development. This course can help Project Managers by providing a strong foundation in project valuation and the capital budgeting process. This knowledge can be used to make better decisions about project scope, budget, and schedule.

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Financial Planner

Financial Planners help individuals and families plan for their financial future. They provide advice on a variety of topics, including retirement, education, and investment. This course can help Financial Planners by providing a strong foundation in project valuation and the capital budgeting process. This knowledge can be used to provide better advice to clients and to help them make better financial decisions.

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Accountant

Accountants prepare and file financial statements for businesses. They also provide advice on tax and accounting matters. This course may be useful for Accountants who want to develop a stronger understanding of project valuation and the capital budgeting process. This knowledge can be used to provide better advice to clients and to help them make better financial decisions.

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Auditor

Auditors examine financial records to ensure that they are accurate and complete. They work in a variety of industries, including accounting, finance, and government. This course may be useful for Auditors who want to develop a stronger understanding of project valuation and the capital budgeting process. This knowledge can be used to conduct more effective audits and to provide better advice to clients.

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Operations Research Analyst

Operations Research Analysts use mathematical and analytical techniques to solve business problems. They work in a variety of industries, including manufacturing, logistics, and healthcare. This course may be useful for Operations Research Analysts who want to develop a stronger understanding of project valuation and the capital budgeting process. This knowledge can be used to develop more effective solutions to business problems.

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Statistician

Statisticians collect, analyze, and interpret data. They work in a variety of industries, including healthcare, finance, and marketing. This course may be useful for Statisticians who want to develop a stronger understanding of project valuation and the capital budgeting process. This knowledge can be used to conduct more accurate statistical analyses and to provide better advice to clients.

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Economist

Economists study the production, distribution, and consumption of goods and services. They work in a variety of industries, including government, academia, and business. This course may be useful for Economists who want to develop a stronger understanding of project valuation and the capital budgeting process. This knowledge can be used to conduct more accurate economic analyses and to provide better advice to policymakers.

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Data Scientist

Data Scientists use data to solve business problems. They work in a variety of industries, including technology, finance, and healthcare. This course may be useful for Data Scientists who want to develop a stronger understanding of project valuation and the capital budgeting process. This knowledge can be used to develop more accurate data-driven models and to provide better advice to clients.

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Software Engineer

Software Engineers design, develop, and maintain software systems. They work in a variety of industries, including technology, finance, and healthcare. This course may be useful for Software Engineers who want to develop a stronger understanding of project valuation and the capital budgeting process. This knowledge can be used to develop more efficient and effective software systems.

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