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Project Management Skills #1 - Financial Appraisal with NPV
Rating: 4.3 out of 5(866 ratings)
6,365 students

Project Management Skills #1 - Financial Appraisal with NPV

How to decide whether your project is worth doing from a financial perspective
Created byGary Lloyd
Last updated 1/2026
English

What you'll learn

  • Decide whether a project is financial viable by calculating Net Present Value.
  • Evaluate the key assumptions that underly the calculation and hence business case.
  • Challenge Return on Investment (ROI) and Internal Rate of Return (IRR) calculation.

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Course content

3 sections • 15 lectures • 1h 9m total length

  • Introduction2:09

    This lecture introduces the course and ends with a question to be answered in the quiz that follows it.

    The lecture says the decision to go ahead with a project may depend on factors other than just financial appraisal. The course includes, therefore, two lectures on other types of value, extracted from my Lean Project Management Course, which is also on Udemy.

    Aside from those lectures, however, this course will solely address financial appraisal.

  • Is this project financially viable?
  • What's tomorrow's money worth today?8:54

    This lecture introduces the core concept that money in future years (Future Value) is less than it's value today (Present Value).

    Thus, given an annual interest rate of 5% at a bank, I can invest $1,000 and in a year's time I will have $1,050.

    However, that effectively means that $1,050 in a years time, is only worth $1,000 this year.

  • Next year's value today #1
  • Answers to quiz0:01

    Here is a spreadsheet with the answers from the quiz.

  • How to calculate Net Present Value for a project10:36

    This lecture will explain how to calculate Present Value from Future Value for both individual values and a series of future cash flows, without using a spreadsheet function.

    Although you will probably never have to do this, it's important to see how the Future Value decreases as it is discounted from future years, step-by-step. This will help you develop an intuitive grasp of present value, when looking at future cashflows, to allow you to do a reasonable check on the result, rather than simply trust that the spreadsheet and NPV function have been coded an used correctly.

  • Using a spreadsheet to calculate project Net Present Value6:50

    This lecture begins with a recap of how to calculate the Net Present Value step-by-step and then goes on to explain how to calculate it using a spreadsheet function. In doing so, I'll answer the question about the payback period for our example project.

  • NPV Exercise 1 - calculate the Net Present Value for these cashflows0:10

    Exercise to calculate NPV from a given set of cashflows

  • NPV Exercise 2 - calculate the Net Present Value for these cashflows0:18

    Exercise to calculate NPV from a given set of cashflows

  • NPV Exercise 3 - calculate the Net Present Value for these cashflows0:18

    Exercise to calculate NPV from a given set of cashflows

  • What Interest Rate to use? ... and other assumption8:14

    This lecture discusses the appropriate interest rate to use for the NPV calculation and introduces the concept of Weighted Average Cost of Capital.

    The lecture also discusses the other key assumptions upon which the calculation depends, before closing with some important advice about business cases and then a suggested exercise, to examine your own project.

  • Course summary2:39

    This lecture summarises the key learning points for the course.

Requirements

  • Students will need to know how to use a spreadsheet.
  • Students need a very basic grasp of how to manipulate a simple equation.
  • Students will need to know how to apply percentages to financial sums.

Description

If a project costs $1.2 million in year 1 and generates revenue of $400,000 in each subsequent year, how many years does it take to break even?

If you answered 5 years (including year 1) then you probably need to take this course because it's likely that this project loses money over that five year period. 

The problem with break-even analysis and Return on Investment (ROI) calculation is that they usually ignore the fact that $1,000 in one year's time is not equivalent to the same amount today, That's because the money could be invested in a different way, brining interest rates into play.

The only sound way to determine whether a project is financially viable, is by calculating the project's Net Present Value. This project will teach you:

  1. Why Future Value does not equate to Present Value.

  2. How to Calculate Present Value.

  3. How to calculate Net Present Value across a number of year.

  4. Why Return on Investment, Break-even and Internal Rate of Return can be misleading

  5. What other types non-monetary value you can consider.

If you already have a good grasp of Net Present Value, Discounted Cashflow or Time Value of Money then this course is not for you. If, however, any of the terms make your stomach feel queasy then this course is for you.

Net Present Value is one of this things that is obvious when you understand but baffling until that moment when the "penny drops". This course aims to get that penny to drop for you.

Net Present Value is explained in 4 short, core videos (not including introductory and summary videos) using examples and exercises. Each exercise has a downloadable spreadsheet, containing the calculations to get the answers.

In addition, there are 2 additional optional videos, one covering Internal Rate of Return and Return on Investment, and another video on the treatment of inflation.

And there are a further two bonus videos, taken from my Lean Project Management course, that discuss non-financial types of value and the role of emotion in value.



Who this course is for:

  • For those who are starting out on their Project Management journey and currently steer clear of financial matters.
  • For project managers who are not confident about how projects should be justified financially.
  • For business owners, without financial skills, who need to determine if a project is worth doing.
  • It is not for anyone who already knows how to calculate Net Present Value.

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