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ACI – CFO SUMMIT Denver, CO
June 17-18, 2014
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ACI – CFO SUMMIT Denver, CO June 17-18, 2014
Roundtable Session 7: Capital Assets
Dave Armstrong, Spokane Robert Thomson, Indianapolis
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Acknowledgments Andy Roundtree, Borgan Anderson, Tatiana
Starosina, Walt Matwijec, Liying Gu, all those that started this
project a few years back
Draft Paper Comments appreciated by July 31
Hurdle Rate as a Component Of Capital Planning
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Concepts Not a “One size fits all” Financial justification
Non-Prioritized pool of projects
Tools to assist a user
Hurdle Rate as a Component Of Capital Planning
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Definition Number determined by the airport Opportunity costs
Expected minimum rate of return
Quantifiable and non-quantifiable components
Hurdle Rate as a Component Of Capital Planning
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Benefits Simplifies decision making process Objective framework
Attempts to save time in reviewing
projects prior to including in CIP discussion
Hurdle Rate as a Component Of Capital Planning
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Most time consuming portion of project Assumptions Estimates
Simulations
ACRP Report 106
HURDLE RATE and RISK
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Biases Unintentional (or intentional ) influences o Comfort Zone
o Perception o Motivation o Flawed Reasoning o Groupthink
http://www.maxwideman.com/guests/portfolio/reason1.htm
OTHER CONSIDERATIONS
http://www.maxwideman.com/guests/portfolio/reason1.htmhttp://www.maxwideman.com/guests/portfolio/reason1.htmhttp://www.maxwideman.com/guests/portfolio/reason1.htm
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Health, Safety & Security
Environmental
Regulatory
Funding opportunities
Replacement of existing infrastructure
OTHER CONSIDERATIONS
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Payback period
Discounted payback period
Average accounting rate of return
Profitability index
NPV
IRR
MIRR
CALCULATIONS
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Evaluate implemented projects
Provides
Accountability
History
Can be time consuming
POST MORTEM DISCUSSION
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Examples of policies
Links to resources
This report MIRR / IRR Excel template Post-Mortem analysis
example
APPENDICES
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Formal or Informal Hurdle Rate Policy?
Formal or Informal Capital Planning Process?
What do you use for a capital planning device?
Links to resources
DISCUSSION
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Password = aci@dc
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ACI – CFO SUMMIT Denver, CO June 17-18, 2014
Conclusion
Comments on Paper by July 31st
[email protected] [email protected]
