By mobilizing the funds made available by investors to finance its projects, the company pledges to generate future cash flows that will make it possible to repay them “principal and interest”, by remunerating them, at a minimum, at a rate equivalent to what the market promises, the cost of capital. This finding founds a widely used process in finance, discounting. Indeed, it is the discounting of future cash flows that makes it possible to reconcile the amount invested today and the profits generated tomorrow.

From a simple example, the module builds the battery of financial concepts related to the choice and management of investments: net present value, internal rate of return, payback and break-even point (“accounting” vs. “project” breakeven point). ).

It focuses on the managerial dimension of the evaluation process that develops from the sensitivity analysis and shows the potential for value creation resulting from a fruitful interaction between finance and operations.

Exercise related to the video

Once you’ve watched the video, you can do an exercise to practice what you’ve just learned and assess your understanding of investment analysis and value creation.