Investment Analysis
Investment Analysis Tool [IAT] Instruction
This memo is intended as a help manual for users of the Investment Analysis Tool. It is my hope that this document will be sufficient to guide a new user through the functions of the IAT and even to feel comfortable enough to create new ways in which to use it for hospital investment decisions.
For ease of use, the memo is divided into the following sections:
I. Overview of Investment Analysis Tool II. Instructions III. Potential Uses IV. Review of Investment Appraisal Methods
I. OVERVIEW
The Investment Analysis Tool [IAT] is a simple and straightforward pair of financial spreadsheets that can facilitate, streamline, and perhaps even standardize the capital budgeting process.
The IAT evaluates the attractiveness of a potential investment by analyzing its associated cash flows [i.e. inflows and outflows]. A user need only enter a few key variables regarding the investment and the spreadsheet automatically analyzes its attractiveness.
Three traditional investment appraisal methods are used by the IAT. They include: • Pay-back Period • Internal Rate of Return (IRR) • NPV
Included in the IAT are two spreadsheets with slightly different functionality. They are named: 1). Automated 2). Manual
The main difference between these two worksheets lies in the way each creates future cash flows. The Automated worksheet does the projection of future cash flows automatically; while Manual requires the user to hand enter each data point [e.g. cash flow] for the life of the investment [i.e. investment analysis period]. Clearly, Manual is more complicated and time intensive than Automated. However, Manual is also more flexible, allowing for a greater variety of investments to be analyzed.
Regardless of which spreadsheet is used, the end goal of the tool remains the same: Analyzing investments using the same method to determine which investments
This memo is intended as a help manual for users of the Investment Analysis Tool. It is my hope that this document will be sufficient to guide a new user through the functions of the IAT and even to feel comfortable enough to create new ways in which to use it for hospital investment decisions.
For ease of use, the memo is divided into the following sections:
I. Overview of Investment Analysis Tool II. Instructions III. Potential Uses IV. Review of Investment Appraisal Methods
I. OVERVIEW
The Investment Analysis Tool [IAT] is a simple and straightforward pair of financial spreadsheets that can facilitate, streamline, and perhaps even standardize the capital budgeting process.
The IAT evaluates the attractiveness of a potential investment by analyzing its associated cash flows [i.e. inflows and outflows]. A user need only enter a few key variables regarding the investment and the spreadsheet automatically analyzes its attractiveness.
Three traditional investment appraisal methods are used by the IAT. They include: • Pay-back Period • Internal Rate of Return (IRR) • NPV
Included in the IAT are two spreadsheets with slightly different functionality. They are named: 1). Automated 2). Manual
The main difference between these two worksheets lies in the way each creates future cash flows. The Automated worksheet does the projection of future cash flows automatically; while Manual requires the user to hand enter each data point [e.g. cash flow] for the life of the investment [i.e. investment analysis period]. Clearly, Manual is more complicated and time intensive than Automated. However, Manual is also more flexible, allowing for a greater variety of investments to be analyzed.
Regardless of which spreadsheet is used, the end goal of the tool remains the same: Analyzing investments using the same method to determine which investments