ClearCFO learning guide · Updated 27 September 2026 · Educational information
Model incremental cash
Include cash changes caused by the project, including implementation, working capital, tax, maintenance and eventual disposal where relevant. Separate sunk costs from future cash consequences. Avoid counting financing costs twice when the discount rate already reflects financing.
Understand the measures
NPV expresses value in today’s money at an assumed discount rate. IRR is a rate that sets NPV to zero. Simple payback measures recovery time but ignores later cash flows and the time value of money.
Watch for misleading rankings
Different project scales, timing and unconventional cash flows can make IRR comparisons unreliable or create multiple IRRs. Review NPV profiles, constraints and the strategic context rather than approving the highest headline percentage.
Stress the business case
Test delays, lower benefits, higher costs and a plausible discount-rate range. Assign a benefit owner and compare actual outcomes with the approval case after implementation.
Further reading: ACCA: investment appraisal.
Examples are illustrative and simplified. Apply definitions and assumptions appropriate to your business; obtain professional review for material decisions. Read the financial disclaimer.