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Investment Appraisal Template - lsc.gov.uk

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					                                                                                                                5/2/2013




                                 Capital Investment Appraisal - Guidance

1     GENERAL

         a    the underlying information needs for capital appraisal purposes have been kept to a minimum where
              at all possible.
         b    the capital appraisal uses two sheets
                 (i)   a summary page on which the sources of capital funding are shown; the summary also
                       records a few key indicators.

                (ii)   a cashflow sheet which spans 20 years and is used as the basis for calculating the NPV at
                       the test discount rate of 3.5% over the same period. There is space to record 11 years worth
                       of information (years 0 to 10 inclusive) however depending on the circumstances of the
                       project / timescales it may be more appropriate to record say, the first 5 years, with years 6
                       to 10 inclusive using the same numbers as year 5.      Whilst columns for Years 11 to 20 are
                       shown, all operating costs & income use the same numbers as in the column for year 10. It
                       would only be necessary to use columns 11 to 20 for lifetime capital costs (see point o below)


         c    In keeping with principles of investment appraisals, the revenue costs and income should be
              recorded as marginal costs. ie those costs and revenues incurred as a result of the project.

         d    If there is more than one variant of the project, then the spreadsheet (summary & cashflows) should
              be completed for each variant.

         e    Each appraisal / cashflow should be supported by assumptions used to compile the financials. If
              further working papers are considered necessary to support the data supplied then these should also
              be attached to the project application. Please indicate whether or not figures included / exclude VAT

         f    Cells shaded blue on the cashflow page contain formulae and do not need to be completed. On the
              summary & cashflow pages certain cells contain a help (comment) facility to assist completion of the
              forms.
2     COMPLETION OF SUMMARY SHEET

         g    Ref points 1 and 2 - record the name of the provider and project title. Completing points 1 & 2
              automatically feed through to the title lines on the Cashflow page.

         h    Ref point 3 - record the academic year end in which the project commences ( eg. Project
              commences in May 10- falls into the academic year ending 2010). This date automatically feeds
              through to year 0 column of the cashflow - cell D4 - and automatically creates subsequent year end
              dates for the remainder of the cashflow on row 4

          i   Ref point 4 - record the duration of the project - round up to the nearest number of complete years.
              (eg. 18 months = 2 years)

          j   Ref point 5 - provide a brief description of the project




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     k    Ref point 6 - record the estimated life of the asset as a result of the project. This is used to calculate
          the residual value of the non-land elements of the asset after 10 or 20 years.
      l   Ref point 7 - the total capital cost is driven from the cashflow page.
     m    Ref point 8 - record the various sources of project funding. If funding sources do not equal the
          project cost an error message is displayed in cell G35




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         n    The remaining ref. points 9 to 11 - NPV, Sensitivity analysis & value for money indicators - are
              automatically generated from the cashflow forecast.


3     COMPLETION OF CASHFLOW SHEET

         o    This page is split into four main section:-
                 (i)    capital costs of a project less any disposal proceeds (if any).

                (ii)    lifetime capital costs - costs of future major refurbishments to ensure buildings are brought up
                        to date / remain in a fit for purpose state. For capital appraisal purposes retaining buildings in
                        a fit for purpose state would not likely be achieved through routine maintenance

                (iii)   operating costs and savings derived from the projects
                (iv)    income derived from learners and any other sources


         p    Capital costs: In each line of the initial capital cost section record the type of cost - the majority of this
              information would be copied from the application form - from page 4 of Annex E entitled 'Building
              Elemental Cost Breakdown for Project'. This document is an excel worksheet.
                        Land acquisition/opportunity cost:-    Cost of land required for the project
                        Construction/refurbishment :-          Building sub-total (points 1 to 5)
                        External Works:-                       External works cost - - cell D47 on page 4
                        Preliminaries:-                        Preliminaries - point 6
                        Contingencies                          Contingencies - point 8. A contingency amount of
                                                               approx 5% of total build costs may be included to take
                                                               account of uncertainties.

                        Equipment                              Equipment - point 9
                        Professional Fees                      Professional fees - point 10
                        VAT                                    VAT - point 11. Institutions may or may not be able to
                                                               recover VAT. In this line show the amount of VAT
                                                               which would be incurred on the project.

         q    Land Sales:- record as a negative figure
         r    Lifetime capital costs: record estimates of likely costs of major refurbishment to ensure buildings are
              brought up to date / remain in a fit for purpose state. For capital appraisal purposes retaining
              buildings in a fit for purpose state would not likely be achieved through routine maintenance. The
              timing of major refurbishment programmes varies depending on types of buildings / location / usage
              etc. If major refurbishments are estimated to be every 5 years, record values in columns 5, 10, 15 &
              20; every 7 years then columns 7 & 14. etc.

         s    Premises costs and savings: These refer to additional costs and savings made to the day to day
              running costs of the building. Where savings are shown these should be recorded as a negative
              figure.




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     t    Staff Costs: covers teaching and support staff. In line 39 record the additional full time equivalent
          (FTE) members of staff required to support additional numbers of learners. Line 40 is an automated
          cell which calculates the cumulative FTEs per year. In line 41 record the average cost per post
          (basic +on costs). Figures in line 40 & 41 are used to calculate annual costs of teaching staff in line
          42. A similar process is adopted for calculating support staff costs in lines 43 to 46.




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     u    Total operating costs at line 49 are the summation of premises costs (line 35), and staffing costs (line
          47) minus premises savings (line 38)

     v    Income from learners/trainees uses the same principle as staffing cost mentioned in q above - by
          entering the increase in learner numbers on a yearly basis, assuming a funding rate per annum per
          learner will automatically calculate yearly income streams.

     w    Third Party Income - provide annual estimates of income through lettings, casual hire etc

     x    Net cashflow:- is Initial capital cost plus lifetime capital costs plus operating costs less income.

     y    Net Present Value is obtained by multiplying yearly net cashflows by the appropriate discount factor
          at the Treasury rate of 3.5%.




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                               Investment Appraisal Summary

Ref.
 1 Name of Provider:




 2   Name of Project




 3   Initial academic year of Investment                      2009

 4   Construction years                                        1

 5   Brief Description of project




 6   Estimated life of the asset (years)                      50

     APPROVAL REQUIRED FOR:                                    £
 7   Total Capital Cost                                              0

 8   Sources of Funds:                                                   % of total
     Skills Funding Agency                                           0   #DIV/0!
     College reserves (cash)                                         0   #DIV/0!
     Long term Loan                                                  0   #DIV/0!
     Another                                                             #DIV/0!
     Another                                                             #DIV/0!
                  PLEASE ENTER ANY OTHER SOURCES of FUNDING              #DIV/0!
                  PLEASE ENTER ANY OTHER SOURCES of FUNDING              #DIV/0!
                                                                     0


 9   NPV at 3.50% Test Discount Rate (TDR) over 20 years                              0
                                                               as at      2009

10 SENSITIVITY ANALYSIS                                                    NPV
     Capital costs increase by 20%                                                    0
     Revenue income decreases by 20%                                                  0
     Revenue expenditure increases by 20%                                             0

11 VALUE FOR MONEY INDICATORS
     Agency Contribution as % of total capital costs                     #DIV/0!
     NPV / Agency Contribution ratio                                     #DIV/0!
     NPV / Total Capital Cost ratio                                      #DIV/0!

 e5f3f08f-f969-492d-b48c-83fdf622536f.xls
 Summary
                                                                                                                                                                                                                                              5/2/2013




Name of Provider:             0
Name of Project               0
            Cost                          Year                           0           1             2             3             4             5              6            7             8             9             10          Totals @
        Classification            Financial Year ended                  2009        2010          2011          2012          2013          2014          2015          2016          2017          2018          2019          Yr 10
CAPITAL COST                                                             £            £             £             £             £             £             £             £             £             £             £             £
Initial Capital Cost          Land acquisition/opportunity cost                0             0             0             0             0             0             0             0             0             0             0              0
                              Construction/refurbishment                       0             0             0             0             0             0             0             0             0             0             0              0
                              External Works                                   0             0             0             0             0             0             0             0             0             0             0              0
                              Preliminaries                                    0             0             0             0             0             0             0             0             0             0             0              0
                              Contingencies                                    0             0             0             0             0             0             0             0             0             0             0              0
                              Equipment                                        0             0             0             0             0             0             0             0             0             0             0              0
                              Professional Fees                                0             0             0             0             0             0             0             0             0             0             0              0
                              VAT                                              0             0             0             0             0             0             0             0             0             0             0              0
                              Sub-total                                        0             0             0             0             0             0             0             0             0             0             0              0
LESS: Capital Receipts        Land sales                        -ve            0             0             0             0                           0             0             0             0             0             0              0
                              TOTAL-Initial Capital cost                       0             0             0             0             0             0             0             0             0             0             0              0
Lifetime Capital Costs        Superstructure                                   0             0             0             0             0             0             0             0             0             0             0              0
                              Finishes                                         0             0             0             0             0             0             0             0             0             0             0              0
                              Fixtures, Fittings, Furnishings                  0             0             0             0             0             0             0             0             0             0             0              0
                              Mechanical                                       0             0             0             0             0             0             0             0             0             0             0              0
                              Electrical                                       0             0             0             0             0             0             0             0             0             0             0              0
                              External Works                                   0             0             0             0             0             0             0             0             0             0             0              0
                              TOTAL-Lifetime Capital costs                     0             0             0             0             0             0             0             0             0             0             0              0

OPERATING COSTS
Premises Costs                Energy                                           0             0             0             0             0             0             0             0             0             0             0              0
(additional costs)            Responsive Repairs                               0             0             0             0             0             0             0             0             0             0             0              0
                              Cleaning & Refuse Collection                     0             0             0             0             0             0             0             0             0             0             0              0
                              Caretaking                                       0             0             0             0             0             0             0             0             0             0             0              0
                              Security                                         0             0             0             0             0             0             0             0             0             0             0              0
                              Water                                            0             0             0             0             0             0             0             0             0             0             0              0
                              Grounds Maintenance                              0             0             0             0             0             0             0             0             0             0             0              0
                              Remedial Repairs & Maint.                        0             0             0             0             0             0             0             0             0             0             0              0
                              Rates                                            0             0             0             0             0             0             0             0             0             0             0              0
                              Sub-total                                        0             0             0             0             0             0             0             0             0             0             0              0
Premises Savings              Project Operating Savings          -ve           0             0             0             0             0             0             0             0             0             0             0              0
(Project Operating Savings)   One off savings                    -ve           0             0             0             0             0             0             0             0             0             0             0              0
                              Sub-total                                        0             0             0             0             0             0             0             0             0             0             0              0
Staff Costs                   Addl no. of Teaching Staff FTEs                  0             0             0             0             0             0             0             0             0             0             0              0
(additional costs)            Cumulative inc. in Staff FTEs (No)               0             0             0             0             0             0             0             0             0             0             0              0
                              Cost per post                                    0             0             0             0             0             0             0             0             0             0             0
                              Total cost of Teaching Staff                     0             0             0             0             0             0             0             0             0             0             0              0
                              Addl no of Support Staff FTEs                    0             0             0             0             0             0             0             0             0             0             0              0
                              Cumulative inc. in Staff FTEs (No)               0             0             0             0             0             0             0             0             0             0             0              0
                              Cost per post                                    0             0             0             0             0             0             0             0             0             0             0
                              Total cost of Support Staff                      0             0             0             0             0             0             0             0             0             0             0              0
                              Sub-total - staff costs                          0             0             0             0             0             0             0             0             0             0             0              0

                              TOTAL OPERATING COSTS                            0             0             0             0             0             0             0             0             0             0             0              0


INCOME
Learners/Trainees             Increase in Learner/Trainee Numbers              0             0             0             0             0             0             0             0             0             0             0              0
                              Cumulative increase in Numbers                   0             0             0             0             0             0             0             0             0             0             0              0
                              Funding per Learner/Trainee                      0             0             0             0             0             0             0             0             0             0             0
                              Total Income from provision                      0             0             0             0             0             0             0             0             0             0             0              0

                              Other                                            0             0             0             0             0             0             0             0             0             0             0              0
Other Income
                              Other                                            0             0             0             0             0             0             0             0             0             0             0              0
                              Sub-total                                        0             0             0             0             0             0             0             0             0             0             0              0
                              TOTAL INCOME                                     0             0             0             0             0             0             0             0             0             0             0              0

NET CASHFLOW                                                                   0             0             0             0             0             0             0             0             0             0             0              0
                                     Discount factor           3.50%    1.00       0.96618       0.93351       0.90194       0.87144       0.84197       0.81350       0.78599       0.75941       0.73373       0.70892
NET PRESENT VALUE                                                              0             0             0             0             0             0             0             0             0             0             0              0

                              Net Present Value of Project             Year 10 =             0
                              (including Residual Values)              Year 20 =             0




           e5f3f08f-f969-492d-b48c-83fdf622536f.xls                                                                                                                                                                                           Cashflow
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CAPITAL COST               Increase in Capital Costs by 20%             0             0             0             0             0             0             0             0             0             0             0   0
                                                           20%          0             0             0             0             0             0             0             0             0             0             0   0
                                                                        0             0             0             0             0             0             0             0             0             0             0   0
LIFETIME CAPITAL COSTS                                                  0             0             0             0             0             0             0             0             0             0             0   0
OPERATING COSTS                                                         0             0             0             0             0             0             0             0             0             0             0   0
INCOME                                                                  0             0             0             0             0             0             0             0             0             0             0   0
                                                                        0             0             0             0             0             0             0             0             0             0             0   0
                                                                 1.00       0.96618       0.93351       0.90194       0.87144       0.84197       0.81350       0.78599       0.75941       0.73373       0.70892
                                                                        0             0             0             0             0             0             0             0             0             0             0   0


CAPITAL COST                                                            0             0             0             0             0             0             0             0             0             0             0   0
LIFETIME CAPITAL COSTS                                                  0             0             0             0             0             0             0             0             0             0             0   0
OPERATING COSTS        Increase in Rev Exp by 20%                       0             0             0             0             0             0             0             0             0             0             0   0
                                                           20%          0             0             0             0             0             0             0             0             0             0             0   0
                                                                        0             0             0             0             0             0             0             0             0             0             0   0
INCOME                                                                  0             0             0             0             0             0             0             0             0             0             0   0
                                                                        0             0             0             0             0             0             0             0             0             0             0   0
                                                                 1.00       0.96618       0.93351       0.90194       0.87144       0.84197       0.81350       0.78599       0.75941       0.73373       0.70892
                                                                        0             0             0             0             0             0             0             0             0             0             0   0


CAPITAL COST                                                            0             0             0             0             0             0             0             0             0             0             0   0
LIFETIME CAPITAL COSTS                                                  0             0             0             0             0             0             0             0             0             0             0   0
OPERATING COSTS                                                         0             0             0             0             0             0             0             0             0             0             0   0
INCOME                 Decrease in Rev Inc by 20%                       0             0             0             0             0             0             0             0             0             0             0   0
                                                           20%          0             0             0             0             0             0             0             0             0             0             0   0
                                                                        0             0             0             0             0             0             0             0             0             0             0   0
                                                                        0             0             0             0             0             0             0             0             0             0             0   0
                                                                 1.00       0.96618       0.93351       0.90194       0.87144       0.84197       0.81350       0.78599       0.75941       0.73373       0.70892
                                                                        0             0             0             0             0             0             0             0             0             0             0   0




         e5f3f08f-f969-492d-b48c-83fdf622536f.xls                                                                                                                                                                           Cashflow
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Name of Provider:             0
Name of Project               0
            Cost                          Year                       11            12            13            14            15            16            17            18            19            20          Totals @          Residual Values
        Classification            Financial Year ended              2020          2021          2022          2023          2024          2025          2026          2027          2028          2029          Yr 20         10 years     20 years
CAPITAL COST                                                          £             £             £             £             £             £             £             £             £             £             £
Initial Capital Cost          Land acquisition/opportunity cost              0             0             0             0             0             0             0             0             0             0              0           0               0
                              Construction/refurbishment                     0             0             0             0             0             0             0             0             0             0              0           0               0
                              External Works                                 0             0             0             0             0             0             0             0             0             0              0           0               0
                              Preliminaries                                  0             0             0             0             0             0             0             0             0             0              0           0               0
                              Contingencies                                  0             0             0             0             0             0             0             0             0             0              0           0               0
                              Equipment                                      0             0             0             0             0             0             0             0             0             0              0
                              Professional Fees                              0             0             0             0             0             0             0             0             0             0              0           0               0
                              VAT                                            0             0             0             0             0             0             0             0             0             0              0           0               0
                              Sub-total                                      0             0             0             0             0             0             0             0             0             0              0           0               0
LESS: Capital Receipts        Land sales                                                                                                                                                                                  0
                              TOTAL-Initial Capital cost                     0             0             0             0             0             0             0             0             0             0              0
Lifetime Capital Costs        Superstructure                                 0             0             0             0             0             0             0             0             0             0              0
                              Finishes                                       0             0             0             0             0             0             0             0             0             0              0
                              Fixtures, Fittings, Furnishings                0             0             0             0             0             0             0             0             0             0              0
                              Mechanical                                     0             0             0             0             0             0             0             0             0             0              0
                              Electrical                                     0             0             0             0             0             0             0             0             0             0              0
                              External Works                                 0             0             0             0             0             0             0             0             0             0              0
                              TOTAL-Lifetime Capital costs                   0             0             0             0             0             0             0             0             0             0              0

OPERATING COSTS
Premises Costs                Energy                                         0             0             0             0             0             0             0             0             0             0              0
(additional costs)            Responsive Repairs                             0             0             0             0             0             0             0             0             0             0              0
                              Cleaning & Refuse Collection                   0             0             0             0             0             0             0             0             0             0              0
                              Caretaking                                     0             0             0             0             0             0             0             0             0             0              0
                              Security                                       0             0             0             0             0             0             0             0             0             0              0
                              Water                                          0             0             0             0             0             0             0             0             0             0              0
                              Grounds Maintenance                            0             0             0             0             0             0             0             0             0             0              0
                              Remedial Repairs & Maint.                      0             0             0             0             0             0             0             0             0             0              0
                              Rates                                          0             0             0             0             0             0             0             0             0             0              0
                              Sub-total                                      0             0             0             0             0             0             0             0             0             0              0
Premises Savings              Project Operating Savings                      0             0             0             0             0             0             0             0             0             0              0
(Project Operating Savings)   One off savings                                0             0             0             0             0             0             0             0             0             0              0
                              Sub-total                                      0             0             0             0             0             0             0             0             0             0              0
Staff Costs                   Addl no. of Teaching Staff FTEs                0             0             0             0             0             0             0             0             0             0              0
(additional costs)            Cumulative inc. in Staff FTEs (No)             0             0             0             0             0             0             0             0             0             0              0
                              Cost per post                                  0             0             0             0             0             0             0             0             0             0
                              Total cost of Teaching Staff                   0             0             0             0             0             0             0             0             0             0              0
                              Addl no of Support Staff FTEs                  0             0             0             0             0             0             0             0             0             0              0
                              Cumulative inc. in Staff FTEs (No)             0             0             0             0             0             0             0             0             0             0              0
                              Cost per post                                  0             0             0             0             0             0             0             0             0             0
                              Total cost of Support Staff                    0             0             0             0             0             0             0             0             0             0              0
                              Sub-total - staff costs                        0             0             0             0             0             0             0             0             0             0              0

                              TOTAL OPERATING COSTS                          0             0             0             0             0             0             0             0             0             0              0


INCOME
Learners/Trainees             Increase in Learner/Trainee Numbers            0             0             0             0             0             0             0             0             0             0              0
                              Cumulative increase in Numbers                 0             0             0             0             0             0             0             0             0             0              0
                              Funding per Learner/Trainee                    0             0             0             0             0             0             0             0             0             0
                              Total Income from provision                    0             0             0             0             0             0             0             0             0             0              0

                              Other                                          0             0             0             0             0             0             0             0             0             0              0
Other Income
                              Other                                          0             0             0             0             0             0             0             0             0             0              0
                              Sub-total                                      0             0             0             0             0             0             0             0             0             0              0
                              TOTAL INCOME                                   0             0             0             0             0             0             0             0             0             0              0

NET CASHFLOW                                                                 0             0             0             0             0             0             0             0             0             0              0
                                     Discount factor               0.68495       0.66178       0.63940       0.61778       0.59689       0.57671       0.55720       0.53836       0.52016       0.50257
NET PRESENT VALUE                                                            0             0             0             0             0             0             0             0             0             0              0           0               0

                              Net Present Value of Project
                              (including Residual Values)




           e5f3f08f-f969-492d-b48c-83fdf622536f.xls                                                                                                                                                                                                       Cashflow
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                                                                                                                                                                                                             RV
CAPITAL COST               Increase in Capital Costs by 20%         0             0             0             0             0             0             0             0             0             0   0            0
                                                                    0             0             0             0             0             0             0             0             0             0   0
                                                                    0             0             0             0             0             0             0             0             0             0   0
LIFETIME CAPITAL COSTS                                              0             0             0             0             0             0             0             0             0             0   0
OPERATING COSTS                                                     0             0             0             0             0             0             0             0             0             0   0
INCOME                                                              0             0             0             0             0             0             0             0             0             0   0
                                                                    0             0             0             0             0             0             0             0             0             0   0
                                                          0.68495       0.66178       0.63940       0.61778       0.59689       0.57671       0.55720       0.53836       0.52016       0.50257           NPV inc RV
                                                                    0             0             0             0             0             0             0             0             0             0   0            0


CAPITAL COST                                                        0             0             0             0             0             0             0             0             0             0   0            0
LIFETIME CAPITAL COSTS                                              0             0             0             0             0             0             0             0             0             0   0
OPERATING COSTS        Increase in Rev Exp by 20%                   0             0             0             0             0             0             0             0             0             0   0
                                                                    0             0             0             0             0             0             0             0             0             0   0
                                                                    0             0             0             0             0             0             0             0             0             0   0
INCOME                                                              0             0             0             0             0             0             0             0             0             0   0
                                                                    0             0             0             0             0             0             0             0             0             0   0
                                                          0.68495       0.66178       0.63940       0.61778       0.59689       0.57671       0.55720       0.53836       0.52016       0.50257
                                                                    0             0             0             0             0             0             0             0             0             0   0            0


CAPITAL COST                                                        0             0             0             0             0             0             0             0             0             0   0            0
LIFETIME CAPITAL COSTS                                              0             0             0             0             0             0             0             0             0             0   0
OPERATING COSTS                                                     0             0             0             0             0             0             0             0             0             0   0
INCOME                 Decrease in Rev Inc by 20%                   0             0             0             0             0             0             0             0             0             0   0
                                                                    0             0             0             0             0             0             0             0             0             0   0
                                                                    0             0             0             0             0             0             0             0             0             0   0
                                                                    0             0             0             0             0             0             0             0             0             0   0
                                                          0.68495       0.66178       0.63940       0.61778       0.59689       0.57671       0.55720       0.53836       0.52016       0.50257
                                                                    0             0             0             0             0             0             0             0             0             0   0            0




         e5f3f08f-f969-492d-b48c-83fdf622536f.xls                                                                                                                                                                      Cashflow

				
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