Version 2 14th Feb 06

Capital Investment Appraisal - 16 - 19 Capital Fund 1

GENERAL a b
the underlying information needs for capital appraisal purposes have been kept to a minimum where at all possible. the capital appraisal uses two sheets

(i)

a summary page on which the amount of LSC grant is shown, together with any other sources of capital funding; the summary also records a few key indicators. 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)

(ii)

c d e

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

COMPLETION OF SUMMARY SHEET g h

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. Ref point 3 - record the academic year end in which the project commences ( eg. Project commences in May 07- falls into the academic year ending 2007). 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 Ref point 4 - record the duration of the project - round up to the nearest number of complete years. (eg. 18 months = 2 years) Ref point 5 - provide a brief description of the project Ref point 6 - The total capital cost is driven from the cashflow page. Ref point 7 - record the various sources of project funding. If funding sources do not equal the project cost an error message is displayed in cell G35

i j k l

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Notes

Version 2 14th Feb 06

The remaining ref. points 8 to 10 - NPV, Sensitivity analysis & value for money indicators - are automatically generated from the cashflow forecast.

COMPLETION OF CASHFLOW SHEET j

This page is split into four main section:(i) (ii) capital costs of a project less any disposal proceeds (if any). 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 operating costs including general facilities costs, other costs and staffing costs, income derived from learners and any other sources

(iii) (iv)

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 LSC's 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:Construction/refurbishment :External Works:Preliminaries:Contingencies Cost of land required for the project Building sub-total (points 1 to 5) External works cost - - cell D47 on page 4 Preliminaries - point 6 Contingencies - point 8. A contingency amount of approx 5% of total build costs may be included to take account of uncertainties. Equipment - point 9 Professional fees - point 10 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.

Equipment Professional Fees VAT

n o

Land Sales:- record as a negative figure 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. Facilities management costs & other costs: These costs refer to day to day running costs of the building 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.

p q

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Notes

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r s

Total operating costs at line 49 are the summation of facilities management costs (line 35), other costs (line 38) and staffing costs (line 47) Income from learners 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 FTE learner will automatically calculate yearly income streams. Third Party Income - provide annual estimates of income through lettings, casual hire etc Net cashflow:- is Initial capital cost plus lifetime capital costs plus operating costs less income. Net Present Value is obtained by multiplying yearly net cashflows by the appropriate discount factor at the Treasury rate of 3.5%.

t u v

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Notes

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LSC INVESTMENT APPRAISAL SUMMARY FOR 16-19 CAPITAL FUND

Ref. 1 Name of Provider:

Name of Project

3 4 5

Initial academic year of Investment Construction years Brief Description of project

2006 1

APPROVAL REQUIRED FOR: 6 7

Total Capital Cost Sources of Funds: LSC Local Authority Another Another Another
PLEASE ENTER ANY OTHER SOURCES of FUNDING PLEASE ENTER ANY OTHER SOURCES of FUNDING

0
% of total

0 0

#DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

NPV at 3.50% Test Discount Rate (TDR) over 20 years as at 2006 NPV

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

0 0 0

10 VALUE FOR MONEY INDICATORS

LSC Contribution as % of total capital costs NPV / LSC Contribution ratio NPV / Total Capital Cost ratio

#DIV/0! #DIV/0! #DIV/0!

Page 4 of 6 Summary

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Name of Provider:
Name of Project
Cost Classification

0
0
Year Financial Year ended Land acquisition/opportunity cost Construction/refurbishment External Works Preliminaries Contingencies Equipment Professional Fees VAT Sub-total Land sales -ve TOTAL-Initial Capital cost Superstructure Finishes Fixtures, Fittings, Furnishings Mechanical Electrical External Works TOTAL-Lifetime Capital costs 0 2006

1 2007

2 2008

3 2009

4 2010

5 2011

6 2012

7 2013

8 2014

9 2015

10 2016

Totals @ Yr 10

CAPITAL COST
Initial Capital Cost

LESS: Capital Receipts Lifetime Capital Costs

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 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 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 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 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

OPERATING COSTS
Facilities Man. Costs
(additional costs)

Other Costs
(additional costs)

Staff Costs
(additional costs)

Energy Responsive Repairs Cleaning & Refuse Collection Caretaking Security Water Grounds Maintenance Remedial Repairs & Maint. Rates Sub-total General Insurance Other Sub-total Addl no. of Staff FTEs Cumulative inc. in Staff FTEs (No) Cost per post Total cost of Staff FTEs Addl no of Support Staff FTEs Cumulative inc. in Staff FTEs (No) Cost per post Total cost of Support staff FTEs Sub-total - staff costs TOTAL OPERATING COSTS

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 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 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 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 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 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 0 0 0 0

INCOME
FTE Learners Increase in FTE Learners (No.) Cumulative increase in FTEs (No) Funding per FTE Total Income from provision Lettings Other Sub-total TOTAL INCOME 0 0 0 0 0 0 0 0 0 Discount factor 3.50% 1.00 0 0.97 0 0 0 0 0 0 0 0 0 0 0.93 0 0 0 0 0 0 0 0 0 0 0.90 0 0 0 0 0 0 0 0 0 0 0.87 0 0 0 0 0 0 0 0 0 0 0.84 0 0 0 0 0 0 0 0 0 0 0.81 0 0 0 0 0 0 0 0 0 0 0.78 0 0 0 0 0 0 0 0 0 0 0.75 0 0 0 0 0 0 0 0 0 0 0.73 0 0 0 0 0 0 0 0 0 0 0.70 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Third Party Income

NET CASHFLOW NET PRESENT VALUE Net Present Value of Project

Year 10 = Year 20 =

0 0

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Cashflow Ver1-9th Jan 2006

Version 2 14th Feb 06

Name of Provider:
Name of Project
Cost Classification

0
0
Year Financial Year ended Land acquisition/opportunity cost Construction/refurbishment External Works Preliminaries Contingencies Equipment Professional Fees VAT Sub-total Land sales TOTAL-Initial Capital cost Superstructure Finishes Fixtures, Fittings, Furnishings Mechanical Electrical External Works TOTAL-Lifetime Capital costs 11 2017

ACL-Version 3 -14th Feb 2006 12 2018

13 2019

14 2020

15 2021

16 2022

17 2023

18 2024

19 2025

20 2026

Totals @ Yr 20

CAPITAL COST
Initial Capital Cost

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 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 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 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

LESS: Capital Receipts Lifetime Capital Costs

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

OPERATING COSTS
Facilities Man. Costs
(additional costs)

Other Costs
(additional costs)

Staff Costs
(additional costs)

Energy Responsive Repairs Cleaning & Refuse Collection Caretaking Security Water Grounds Maintenance Remedial Repairs & Maint. Rates Sub-total General Insurance Other Sub-total Addl no. of Staff FTEs Cumulative inc. in Staff FTEs (No) Cost per post Total cost of Staff FTEs Addl no of Support Staff FTEs Cumulative inc. in Staff FTEs (No) Cost per post Total cost of Support staff FTEs Sub-total - staff costs TOTAL OPERATING COSTS

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 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 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 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 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 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
FTE Learners Increase in FTE Learners (No.) Cumulative increase in FTEs (No) Funding per FTE Total Income from provision Lettings Other Sub-total TOTAL INCOME 0 0 0 0 0 0 0 0 0 Discount factor 0.68 0 0.65 0 0 0 0 0 0 0 0 0 0 0.63 0 0 0 0 0 0 0 0 0 0 0.61 0 0 0 0 0 0 0 0 0 0 0.59 0 0 0 0 0 0 0 0 0 0 0.57 0 0 0 0 0 0 0 0 0 0 0.55 0 0 0 0 0 0 0 0 0 0 0.53 0 0 0 0 0 0 0 0 0 0 0.51 0 0 0 0 0 0 0 0 0 0 0.49 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Third Party Income

NET CASHFLOW NET PRESENT VALUE Net Present Value of Project

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Cashflow Ver1-9th Jan 2006