Lessons

TOPIC 50 · APPLIED CAPSTONE

Integrated strategy checkpoint

Deliver and defend a sourced cross-disciplinary recommendation.

APPLIED CAPSTONE · TOPIC 50

Challenge an investment recommendation

A fictional committee can choose one of two mutually exclusive investments or defer. Option A costs A$6 million at time zero and returns A$2 million net operating cash flow at each year-end for four years. Option B costs A$4.5 million and returns A$1.4 million on the same schedule. Use an 8% annual discount rate. Assess value, downside and delivery risk without treating NPV as proof of technical feasibility.

1. Establish the evidence pack

  • A: A$6m upfront; A$2m/year for years 1–4.
  • B: A$4.5m upfront; A$1.4m/year for years 1–4.
  • 8% discount rate; zero terminal value; no taxes, financing, inflation or additional construction costs.
  • Downside: every operating cash flow falls 25%. Delay: unchanged capex at time zero, receipts move to years 2–5. Test each separately, then combine. All inputs are synthetic.

2. Produce the deliverables

  1. A versioned workbook with A/B/base/downside/delay/combined NPVs and explicit timing.
  2. A break-even annual net cash flow for each option and a comparison with the assumed flows.
  3. A two-page committee paper comparing A, B and defer; include capital-at-risk and non-modelled technical, commercial and delivery evidence.
  4. A challenge log: three plausible reviewer objections, your responses, and the evidence needed to resolve each.

3. Review the work, not just the answer

For each dimension, record 0 — Not yet, 1 — With guidance, or 2 — Independent. Explain your rating. Correct material physical or numerical errors before sharing; do not average them away.

Accuracy

Use time-zero capex and correct discounted year-end flows; distinguish independent sensitivities from the combined scenario.

Traceability

Keep the cash-flow schedule, discount convention, model version and any external evidence traceable.

Judgement

Explain the ranking, downside, break-even values and decision gates without interpreting simplified NPV as investment advice.

Communication

Provide a concise committee recommendation with conditions, owners, alternatives and a trigger for reconsideration.

Use the Self-review tab to rate your evidence against all four dimensions. A quiz does not complete this capstone. No automatic marking, tutor review or credential is provided; arrange qualified feedback separately.

Check the numerical anchors after doing your own working

NPV anchors in A$ million (rounded; retain full precision in your workbook):

OptionBase25% downside1-year delayCombined
A0.624-1.0320.134-1.400
B0.137-1.022-0.207-1.280

Break-even annual net flows: A$ 1.812m for A and A$ 1.359m for B. These simplified NPVs omit financing, tax and technical feasibility.

Supporting lesson and optional data practice

Background study is separate from the decision pack. Do not combine unrelated teaching datasets as if they describe one real site.

The lesson

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    4. Draft the decision pack

    Keep the decision memo within 800 words, or the shorter limit in your brief. State the recommendation, three decision-driving numbers with sources or assumptions, one rejected alternative, and the largest risk with its owner and review trigger. Separate facts, modelled results and missing evidence. Keep your calculation workbook separately and record its filename, version and key results here. Do not enter confidential information.

    Draft notes are saved in this browser when storage is available; they are not submitted or synced.