Economic Evaluation and Investment Decision Methods

24-26 October 2011

Colorado School of Mines

John Stermole

Andy Pederson

The Economic Evaluation and Investment Decision Methods course covers industry standard techniques to determine monetary positives or negatives of large scale industrial projects. The calculation and interpretation of Net Present Value (NPV) and Internal Rate of Return (IRR) are studied in depth. This session of the course was taught by John Stermole, President of Investment Evaluations Corporation. John was assisted in teaching the course by Andy Pederson, Operations Manager for Investment Evaluations Corporation.

The course provided several economic calculations to determine present, future or amortized worth of an investment given the other two as well as interest rate and number of compounding periods. These calculations are impressive and are imperative to calculating present value by hand. To the present mining engineer, the use of a spreadsheet will be incredibly useful. I know that excel has all the formulas you could ever want, but I like to have the period by period calculations available to me. The most useful of the economic calculations is the one for present value given future value (=1/((1+interest rate)^period). To use this all you need to do is set out all the periods as a column and reference the period cash flows. The sum of the results is the NPV.

Having the results in this format instead of as the results of a cell calculation is that they are available to be used in charts on a period by period basis (you are also unlikely to forget to add back in the initial investment, a shortcoming of the function in excel). These charts can be very helpful in illustrating the cash flows.

Cumulative Net Present Value shows the cash returns and final present value as well as the break-even point (the point where the initial investment is paid back).

Cumulative Cash Position shows how much cash is invested at each period including interest. This chart is usually shown at the IRR interest rate so that the final cash position is zero.

My favorite part of having all the calculations shown is that it is so easy and self-evident to show the Internal Rate of Return. Just set the sum of the NPV values to zero by changing the interest rate. The resulting interest rate is where you would be making no money on this project compared to investing money elsewhere at the given interest rate.

I learned a lot from John and Andy and would recommend this course to anyone in the mining industry who wanted to know more about the time value of money. I also need to apologize to Dr. Felipe Calizaya for not paying enough attention when he tried to teach me this same course at the University of Utah.

Great Article

ReplyDeleteIEEE Projects for Engineering Students

JavaScript Training in Chennai

IEEE Project Ideas for CSE

JavaScript Training in Chennai

Positive site, where did u come up with the information on this posting? I'm pleased I discovered it though, ill be checking back soon to find out what additional posts you include. deutschebroker.net

ReplyDeleteAlways so interesting to visit your site.What a great info, thank you for sharing. this will help me so much in my learning 统计学补习

ReplyDeleteA venture is a salary producing significant. It is significant that you observe each word in the definition since they are significant in understanding the genuine importance of speculation. Expert Network

ReplyDeleteI wanted to thank you for this great read!! I definitely enjoying every little bit of it I have you bookmarked to check out new stuff you post. how to track and recover stolen bitcoin

ReplyDeleteThe issue many people face with review sites, however, is knowing whether the reviews are actually real. Safer Reviews

ReplyDeleteThe services offered by investment management advisors are not given for free. The usual rate charged by these advisors varies depending on the project, the monetary investment involved, or the current standing of whom they advise. Investment Management Calculators

ReplyDeleteThe services offered by investment management advisors are not given for free. The usual rate charged by these advisors varies depending on the project, the monetary investment involved, or the current standing of whom they advise..FXGM

ReplyDeleteHave you heard of the 7 deadly deal breakers you must avoid in naming? Learned this from this brand naming agency through their new online course.Also heard about their step-by-step process in generating new names. Would like to try this! business people

ReplyDeleteThis is very intriguing articles! We have carefully appreciated studying the items and possess arrive at in conclusion that you will be proper concerning many. You might be fantastic. Caribbean countries that offer citizenship by investment

ReplyDeleteNice article. Visit this link to build your passive income portfolio Top cryptocurrency hedge fund broker

ReplyDeleteI was surprised a little more finding such well-valued stuff rich with highly crucial and effective investment plans. This was too cool and super conducive. I just dived into your 'The economic evaluation and investment decision methods' and excited think me as a lucky one as I was hanker after an investing plan "Put gold and silver in my retirement account" by certified gold exchange and was able to explore your thoughtful and authentic expressions. The Data chart shown cumulative NPV and cash position were also very admirable. OF course love to drop my cordial thanks for this brilliant post.

ReplyDeleteI have been checking out a few of your stories and i can state pretty good stuff. I will definitely bookmark your blog Juan Pablo Carrasco Degroote narcotráfico

ReplyDeleteYour article has piqued a lot of positive interest. I can see why since you have done such a good job of making it interesting. Empresarios Amcham Guatemala

ReplyDelete