AFMP4

Syllabus B1. Discounted Cash Flow Techniques 4 / 17

Project modelling should include explicit treatment and discussion of:
iii) Single period and multi-period capital rationing. Multi-period capital rationing to include the formulation of programming methods and the interpretation of their output
v) Risk adjusted discount rates
vi) Project duration as a measure of risk.

b) Outline the application of Monte Carlo simulation to investment appraisal. Candidates will not be expected to undertake simulations in an examination context but will be expected to demonstrate an understanding of:
i) The significance of the simulation output and the assessment of the likelihood of project success
ii) The measurement and interpretation of project value at risk.
Discounted Cash Flow Techniques