Investment project, concept and purpose
An investment project (IP) is a justification of the economic feasibility, volume and timing of capital investments, including the necessary design and estimate documentation, developed in accordance with the legislation of the Russian Federation and standards (norms and rules) approved in accordance with the established procedure, as well as a description of practical actions to implement investment(business plan).
An investment project is a plan or program of measures related to the implementation of capital investments and their subsequent reimbursement and receipt arrived. The term "investment project" can be understood in two senses:
as a set of documents containing the formulation of the goal of the forthcoming activity and the definition of a set of actions aimed at achieving it;
as this complex of actions (works, services, acquisitions, management operations and decisions) aimed at achieving the formulated goals.
A properly designed investment project ultimately answers the question: is it worth investing at all money into this business and will it bring income, which will recoup all the costs of manpower and resources? It is very important to draw up an investment project on paper in accordance with certain requirements and carry out special calculations - this helps to see future problems in advance and understand whether they are surmountable and where it is necessary to insure in advance.
The purpose of the investment project is to help entrepreneurs and economists to solve four main problems:
examine capacity and future prospects market sales;
estimate the costs that will be necessary for the manufacture and sale of the products necessary for this market, and compare them with those prices where you can sell your goods to determine the potential profitability of the business conceived;
to find all possible "pitfalls" that lie in wait for a new business;
to determine those signals and those indicators, on the basis of which it will be possible to regularly evaluate the activities of an enterprise.
Classification of investment projects When deciding on investment, it is advisable to determine where it is more profitable to invest capital: in production, securities, the purchase of goods for resale, in real estate or currency. Therefore, when investing, it is recommended to take into account the following main points, for example, capital investments with long payback periods must be financed through long-term borrowed funds. Investments with a significant degree of risk are recommended to be financed using own funds (net profit and depreciation charges). It is necessary to choose such investments that provide the investor with the achievement of the maximum (marginal) profitability. The return on investment should always be higher than the inflation index. The methodological recommendations also imply the use of a number of important principles in the development, analysis and examination of investment projects, the main of which are the use of the principle of alternativeness; development and examination of the project in a number of mandatory sections or aspects, such as technical commercial, institutional, environmental, social, financial (micro-level) and economic (macro-level); the use of internationally accepted criteria for assessing the effectiveness of projects on the basis of determining the effect by comparing the forthcoming integral results and costs with an orientation towards achieving the required rate of return on capital and other indicators and bringing forthcoming costs and incomes to the conditions of their commensurability, taking into account the theory of the value of money in time; consideration of uncertainty and risks associated with the implementation of the project, etc. There are various classifications of investment projects. Depending on the characteristics underlying the classification, the following types of investment projects can be distinguished: I In relation to each other: · Independent allowing simultaneous and separate implementation, and the characteristics of their implementation do not affect each other; · Mutually exclusive i.e. not allowing simultaneous implementation. In practice, such projects often fulfill the same function. Of the totality of alternative projects, only one can be implemented; · Complementary, the implementation of which can only occur jointly. II By terms of implementation (creation and functioning):
short-term (up to 3 years);
medium-term (3-5 years);
long-term (over 5 years).
Short-term projects involve tight deadlines. The cost of a short-term project may increase in the course of its implementation. The customer is going to increase the cost of the project in order to gain time to maintain priority in the competition in the sales market. Short-term (high-speed) projects, as a rule, are typical for enterprises with a rapidly updating range of products, in refurbishment work, when creating pilot plants, etc. Long-term projects are usually those that implement capital-intensive investments (for example, investments in the construction and reconstruction of real estate objects). III By scale (most often the scale of the project is determined by the size of the investment): · small projects, the action of which is limited to the framework of one small company implementing the project. Basically, they represent plans to expand production and increase the range of products. They are distinguished by relatively short implementation times. Small projects usually do not require a special study of the feasibility study and related issues. At the same time, mistakes made during the formation of projects can seriously affect their effectiveness. The creation of objects of the social and cultural sphere can also be attributed to small projects. · medium projects- these are, most often, projects for the reconstruction and technical re-equipment of the existing production of products. They are implemented in stages, for individual industries, in strict accordance with pre-developed schedules for the receipt of all types of resources, including financial; · major projects- projects of large enterprises, which are based on a progressively "new idea" of the production of products necessary to meet the demand in the domestic and foreign markets; · megaprojects are targeted investment programs containing many interconnected final projects. Such programs can be international, state and regional. Megaprojects have the following distinctive features - they have a high cost - from $ 1 billion; funds for the implementation of such projects usually exceed financial reserves, additional sources of financing are needed, for example, bank loans, export loans, mixed lending. Megaprojects require a large total amount of work in man-hours: 2 million man-hours for design, 15 million man-hours - for the construction of facilities; and the implementation period is 5-7 years or more. Megaprojects have an impact on the social and economic spheres of the region and even the countries where it is being implemented. To classify a project as small, medium or megaprojects, the following indicators are used: · the volume of capital investments; · Labor costs; · Duration of implementation; · The complexity of the management system; · Attracting foreign participants; · Influence on the socio-economic environment of the region, etc. IV By main focus:
commercial projects , the main purpose of which is to make a profit;
social projects focused, for example, at solving the problems of unemployment in the region, reducing the level of crime, etc .;
environmental projects which are based on the improvement of the living environment;
other
V Depending on the degree of influence of the results of the implementation of the investment project on internal or external markets for financial, material products and services, labor, as well as environmental and social conditions :
global projects , the implementation of which significantly affects the economic, social or environmental situation on Earth;
national economic projects , the implementation of which significantly affects the economic, social or environmental situation in the country, and when assessing them, one can be limited to taking into account only this influence;
large-scale projects the implementation of which significantly affects the economic, social or environmental situation in a particular country;
local projects , the implementation of which does not have a significant impact on the economic, social or environmental situation in certain regions and (or) cities, on the level and structure of prices in commodity markets.
VI A feature of the investment process is its conjugation with uncertainty, the degree of which can vary significantly, therefore, depending on the magnitude of the risk, investment projects are subdivided as follows:
reliable projects characterized by a high probability of obtaining guaranteed results (for example, projects carried out on a government order);
risky projects , which are characterized by a high degree of uncertainty of both costs and results (for example, projects related to the creation of new industries and technologies).
Vii From the point of view of the project participants, the most significant is the consideration of the following participants: · State enterprises; · Joint ventures; · Foreign investors. In practice, this classification is not exhaustive and can be further detailed. 1.3
1.2. Static methods for evaluating the effectiveness of investment projects. The simple, static criteria for the effectiveness of investment projects include the payback period and the simple rate of return. The payback period is understood as the expected period of recovery of the initial investment from net income (cash receipts minus expenses). The economic meaning of the indicator is to determine the period for which the investor can return the invested capital. If the income stream is uneven, the calculation of the indicator involves the determination of the amount of cash receipts from the project on an accrual basis, i.e. as a cumulative value (step-by-step summation of annual amounts of cash receipts until the investment amount is reached). The advantage of the method lies in the ease of its calculation, sufficient simplicity for understanding and acceptability as a subjective criterion in assessing project risk (with a long payback period, we can talk about a significant degree of uncertainty in obtaining the expected investment results). The disadvantage is that it does not take into account the time value of money, ignores cash flows beyond the payback period, and can only be used if the compared projects are of equal duration and the initial investment is one-time. A simple rate of return (an indicator of the accounting return on investment, an investment efficiency ratio, an estimated rate of return) is the ratio of the average amount of an enterprise's income in the accounting statements to the average amount of investment. The average investment amount is found by dividing the original investment amount by 2, provided that after the expiration of the project implementation period, all costs will be written off. If the presence of residual or liquidation value is allowed, its value is excluded. The use of the indicator is based on comparing its calculated level with the organization's standard profitability levels. Only those projects that increase the level of efficiency of production and economic activities achieved earlier at the enterprise are subject to approval. The main advantage of the criterion lies in the ease of calculations and ease of use, and the disadvantage is that it does not take into account the time value of money, and also accounting profit is used to determine it, while in the process of long-term investment, decisions made on the basis of monetary -stream analysis.
1.4. Dynamic methods for evaluating the effectiveness of investment projects. The criteria based on the technique of calculating the time value of money are called discounted criteria. In world practice, the following are most commonly used: 1. Net Present Value (NPV) is the discounted value of a project, defined as the sum of discounted revenues minus costs received in each year over the life of the project. 
РV - present value of project cash flows, I - initial investment costs, CF (1, n) - net cash flow in period t, n - planned period of investment project implementation, r - project discount rate. For a project to be recognized as effective from the investor's point of view, its NPV must be positive; when comparing alternative projects, preference is given to a project with a large NPV (provided that it is> 0). 2. The index of profitability PI characterizes the return of the project on the funds invested in it. It is the ratio of the sum of the elements of cash flow from operating activities to the absolute value of the discounted amount of elements of cash flow from investing activities. The criterion is very convenient when choosing one project from a number of alternative ones that have approximately the same NPV values (if two projects have equal NPV, but different volumes of required investments, then the one that provides greater investment efficiency is more profitable), or when completing an investment portfolio in order to maximize the total NPV values. H. The discounted payback period is equal to the duration of the shortest period after which the net present value becomes and continues to be non-negative. 4. Internal rate of return IRR - represents the interest rate r that makes the present value of the project cash flows equal to the initial investment cost, ie r = IRR if NPV = 0. This is the discount rate at which the project breaks even. There are four ways to find IRR: - trial and error; - using a simplified formula; - using a financial calculator; - applying the standard values of the present value of the annuity at a constant value of the net cash flow. The practical application of this method is reduced to a sequential iteration, with the help of which a discount factor is found that ensures the equality NPV = 0. Based on the interest rates on loan capital existing at the time of analysis, two values of the discount coefficient are selected<
таким
образом, чтобы в интервале от
до
функция
NPV меняла свое значение с + на - или
наоборот. Далее используют
формулу:
Точность вычислений обратна длине
интервала, поэтому наилучшая апроксимация
достигается в случае, когда длина
интервала принимается минимальной
(1%).
Преимущества использования IRR,
заключаются в следующем: прост в понимании
менеджера, учитывает временную ценность
денежных вложений, показывает рисковый
край (предельные значения процентной
ставки и срок окупаемости), для его
расчета не требуется предварительно
определять величину проектной дисконтной
ставки. Недостатки связаны с неоднозначностью
математического определения IRR в случае
нетрадиционных денежных потоков и
некорректной оценкой взаимоисключающих
проектов с разными масштабами
капиталовложений.
Критерии IRR, NPV и
PI являются фактически разными версиями
одной и той же концепции, поэтому их
результаты связаны друг с другом.
Таким
образом, можно ожидать выполнения
следующих математических отношений
для одного проекта:
если NPV >0, then PI> 1, IRR> r; if NPV< 0, то PI <1,
IRR< r;
если NPV = 0, то PI =1, IRR = r.
Для
того, чтобы проект мог быть признан
эффективным, необходимо и достаточно
выполнение одного из следующих
условий:
1. NPV >= 0. 2. IRR> = r 3. PI> = 1. 4. RVd< Т.
The main definitions concerning the concept of "Investment project" are given in the Federal Law "On investment activities in the Russian Federation carried out in the form of capital investments" dated February 25, 1999 No. 39-FZ with subsequent additions and changes, and in cases where The law lacks the necessary definitions, based on its meaning. Let's consider the basic concepts that are given in the "Recommendations", and then analyze them in more detail from the point of view of an applied nature.
Project. This term can be understood in two senses:
as a set of documents containing the formulation of the goal of the upcoming activity and the definition of a set of actions aimed at achieving it,
as this complex of actions (works, services, acquisitions, management operations and decisions) aimed at achieving the stated goal,
those. as documentation and as an activity. In the "Recommendations for evaluating the effectiveness of investment projects" in all cases, except as otherwise specified, the term "project" is used in the second sense, in the sense of activity.
Public significance (scale) of the project is determined by the impact of the results of its implementation on at least one of the (internal or external) markets: financial, products and services, labor, etc., as well as on the environmental and social situation.
Depending on the significance (scale), projects are subdivided into:
global, the implementation of which significantly affects the economic, social or environmental situation on Earth;
national economic, the implementation of which significantly affects the economic, social or environmental situation in the country, and when assessing them, one can restrict oneself to taking into account only this influence;
large-scale, the implementation of which significantly affects the economic, social or environmental situation in certain regions or sectors of the country, and when assessing them, one can ignore the impact of these projects on the situation in other regions or sectors;
local, the implementation of which does not have a significant impact on the economic, social and environmental situation in the region and does not change the level and structure of prices in commodity markets.
Investments- funds (cash, securities, other property, including property rights that have a monetary value) invested in objects of entrepreneurial and (or) other activities in order to make a profit and (or) achieve another useful effect.
funds generated during the implementation of the project. They can be used as investments (in cases where investment continues after the funds are put into operation) and generally include profits and depreciation of production assets. The use of these funds is called self-financing project.
funds external to the project, which include:
funds investors see below (including own funds of an operating enterprise - a project participant), generators share capital project. These funds are non-refundable: the individuals and / or legal entities that provided them are co-owners of the created production assets and consumers of the funds received through their use. net income ",
subsidies- funds provided on a gratuitous basis: allocations from budgets of various levels, funds for supporting entrepreneurship, charitable and other contributions from organizations of all forms of ownership and individuals, including international organizations and financial institutions;
borrowed funds(loans, borrowings) subject to repayment on predetermined conditions (repayment schedule, interest rate);
funds in the form of property provided for rent (leasing). The conditions for the return of these funds are determined by the lease (leasing) agreement.
Subsidies, monetary borrowed funds, funds provided for rent (leasing) are not included in the share capital of the project and do not give the right to participate in the income of the project.
Capital investments- investments in fixed assets (fixed assets), including the costs of new construction, expansion, reconstruction and technical re-equipment of existing enterprises, the acquisition of machinery, equipment, tools, inventory, design and survey work (R&D) and other costs.
Capital investment- investments, consisting of capital investments, working capital, as well as other funds required for the project. Everywhere in the Recommendations, except for Sec. A4.6 of Appendix 4, the word "investment" means "capital investment".
Investment project (IP)- justification of the economic feasibility, volume and timing of capital investments, including the necessary design and estimate documentation developed in accordance with the legislation of the Russian Federation and standards (norms and rules) approved in accordance with the established procedure, as well as a description of practical actions for making investments (business plan). An investment project is always generated by some project(understood in the sense of the second definition), the rationale for the feasibility and characteristics of which it contains. In this regard, under certain properties, characteristics and (or) parameters of an IP (duration, implementation, cash flows, etc.) in the Recommendations we mean the corresponding properties, characteristics and (or) parameters the project generated by it.
Investment project efficiency- a category reflecting the compliance of the project that generates this IP, goals and interests project participants(see below). To assess the effectiveness of an IP, it is necessary to consider the project that generates it for the entire period of the life cycle - from pre-design study to termination. Therefore, the term "investment project efficiency" ("IP efficiency") is understood in the Recommendations as "project efficiency". The same applies to performance indicators.
Financial feasibility of an investment project - ensuring such a structure of cash flows, in which at each step of the calculation there is a sufficient amount of money for the implementation of the project that generates this IP. The terms "financial feasibility of an investment project" ("financial feasibility of an IP") and "financial feasibility of a project" in the Recommendations act as synonyms. Similarly, we can talk about "cash flows (inflows, outflows, payments and receipts) of IP", meaning, respectively, cash flows (inflows, outflows, payments and receipts) of the project associated with this IP.
Design materials- a document (system of documents) containing a description and justification of the project. This term covers both documents that are mandatory in the design of capital construction projects, and additional materials developed by project participants during the examination, preparation for implementation and in the process of project implementation. Design materials must contain the information necessary to assess the effectiveness of the IP (the composition of such information is disclosed in Section 3 and Appendix 2 of the “Recommendations”). It is assumed that the design materials contain all the necessary information about the technical, technological and organizational characteristics of the project.
Organizational and economic mechanism for project implementation- the form of interaction between the project participants, recorded in the design materials (and in some cases in the statutory documents) in order to ensure the feasibility of the project and the ability to measure the costs and results of each participant associated with the implementation of the project.
The organizational and economic mechanism for the implementation of the project generally includes:
normative documents on the basis of which the participants interact;
obligations assumed by the participants in connection with their joint actions to implement the project, guarantees of such obligations and sanctions for their violation;
conditions for financing investments, in particular - the main conditions of loan agreements (loan terms, interest rate, frequency of interest payments, etc.);
special conditions for the turnover of products and resources between the participants (for example, the use of barter exchange, preferential prices for mutual settlements, the provision of commodity loans free transfer of fixed assets for permanent or temporary use, etc.);
a project implementation management system that ensures (in case of possible changes in the project implementation conditions) the proper synchronization of the activities of individual participants, the protection of the interests of each of them and the timely adjustment of their subsequent actions in order to successfully complete the project;
measures for mutual financial, organizational and other support (provision of temporary financial assistance, loans, deferred payments, etc.), including measures of state support;
the main features of the accounting policy of each Russian enterprise-participant, as well as foreign firms-participants, receiving income on the Russian territory from participation in the project.
The need to use information about the organizational and economic mechanism of project implementation arises primarily when assessing its commercial effectiveness (for each project participant, the most important elements of this mechanism will be those elements that affect its costs and revenues
Certain elements of the organizational and economic mechanism at the stage of project implementation can be fixed and concretized in statutory documents and agreements between the participants.
Project participant- the subject of investment activities for this project. The participants in the project include the subjects of investment activity listed in the Federal Law on Investment Activity, as well as society as a whole.
Shareholder- an investor holding shares in an enterprise (organization) implementing the project.
Creditor(lender) - an investor providing borrowed funds for the implementation of the project. The lender can simultaneously obtain rights to a certain share of profits or manufactured products, for example, acting as a shareholder of the established enterprise or borrowing company.
It is recommended to assess the feasibility and effectiveness of the project taking into account the factors uncertainties and risk (The methods of such accounting are detailed in Section 10 and Appendix 9 of the Recommendations).
Uncertainty- incompleteness and / or inaccuracy of information about the conditions for the implementation of the project, the costs incurred and the results achieved.
Risk - uncertainty associated with the possibility of adverse situations and consequences arising during the implementation of the project. In contrast to uncertainty, the concept of "risk" is more subjective - the consequences of a project, unfavorable for one of the participants, may be favorable for another.
The Recommendations consider the impact on the implementation of IP of such elements of the economic environment as various manifestations of inflation, participation in the implementation of IP of various currencies, interest rates, and the taxation system.
Inflation (inflation) - an increase in the general (average) price level over time. It is characterized by the general inflation index - the index of changes in the general (average) price level in the country and the price levels for certain types of goods, works and services, counted from the initial moment - the moment of development of design materials.
The essence of investment contains a combination of two aspects of investment activity: the cost of resources and the results obtained.
Investments are made with the aim of obtaining a result - quantitative (income) or qualitative (for example, in the field of education - the construction of a school and an increase in the number of educated people), they are useless if they do not bring results.
For the case of making a decision at the enterprise level, costs can be attributed to investment costs if, as a result of making a decision:
the structure, composition and volume of assets of an enterprise or a certain company change;
the return on the solution is mainly expected over a long period of time;
requires, as a rule, significant costs.
Investment theory is traditionally viewed by Western economic science as a central problem, solved from both micro- and macroeconomic positions.
The microeconomic theory of investment focuses on the process of making investment decisions at the enterprise level, providing entrepreneurs with specific scientifically-based methods of forming an optimal investment policy.
Macroeconomic theory of investment, the founder of which is D. Keynes, considers the problem of investment from the standpoint of the entire economy as a whole, focusing on public investment policy, income and employment policy.
To make a decision on long-term capital investment, it is necessary to have information that confirms two main assumptions:
Firstly , the invested funds will be fully reimbursed;
Secondly , the profit received from this operation will be large enough to compensate for the temporary abandonment of the use of funds, as well as the risk arising from the uncertainty of the final result.
Thus, the problem of making a decision on investments comes down to analyzing the adequacy of the plan for the expected development of events and the likely consequences of its implementation to the expected result.
In the most general sense, investment project- This is an investment of capital for the subsequent receipt of income.
The methodological basis of the project analysis is the system concept "project".
Project is a holistic object, the essence of which is multifaceted:
firstly, from the moment the idea of a project was born to the stage of its materialization in real objects (whether it be industrial enterprises or social infrastructure facilities engaged in the production of products or services), a certain time is required, which makes up the life cycle of the project;
secondly, before investing money in a project, it is necessary to conduct a comprehensive examination of it in order to prove its feasibility and feasibility of implementation, as well as assess its effectiveness in technical, commercial, social, institutional, environmental, financial and economic aspects.
We have already reviewed the basic concepts that are used in the "Methodological recommendations for assessing the effectiveness of investment projects and their selection for financing" (hereinafter referred to as the Recommendations)
In the work of Shapiro V.D. ( Shapiro V.D. and other project management. - SPb .: DvATrI, 1996.) a project is understood as a system of goals formulated within its framework, created or modernized for their implementation of physical objects, technological processes; technical and organizational documentation for them, material, financial, labor and other resources, as well as management decisions and measures for their implementation.
In another work (Investment design: a practical guide to the economic feasibility of investment projects / Under scientific. ed. SI. Shumilina. - M .: Finstatinform, 1995.) an investment project is understood as a comprehensive plan of measures (including capital construction, the acquisition of technologies, the purchase of equipment, training, etc.) aimed at creating a new or modernizing (expanding) the existing production of goods and services in order to obtain economic benefits.
To a greater extent, the essence of the project analysis is answered by the interpretation of the project as a set of interrelated activities designed to achieve the goals set within a limited period of time and with an established budget.
Any project is introduced into a real-life external environment: at the entrance, the project draws resources from it to create products or provide any services, and at the exit, the environment accepts the results of project activities. For the success of a project, one cannot but take into account its interaction with the external environment, which is carried out through a comprehensive examination of the project - a systematic, interrelated study of the internal and external environment of the project.
So, any project for its implementation needs resources - financial, material, labor - for the implementation of both the production process and the management process.
At the earliest stage of work with a project, it becomes necessary to collect the most complete information about the scope of the project, about the participants in this project, about the legal support of the normal course of the production process. At the stage of development of project documentation, this information is supplemented and becomes complex, which makes it possible with a greater degree of validity to predict the course of implementation and operation of the project.
In most of the specialized literature, investment projects are classified according to the degree of obligation, urgency and degree of relatedness:
By the degree of obligation :
Required. These projects are required to comply with rules or regulations. They can be designed to critically update assets to keep existing assets in working order. This type includes contract projects, i.e. designed to secure contractual obligations, for example, investment projects for the protection of the environment.
Optional. This can include any optional development projects, such as replacing broken equipment.
By urgency :
Urgent. These projects are either not available at all in the future, or they lose their attractiveness when postponed, for example, various kinds of acquisitions.
Deferred. Along with urgent investments, there is a fairly large range of investments that can be postponed, while their attractiveness, although changing, is rather insignificant. An example is the reactivation of shut-in wells.
By the degree of connectedness :
Alternative. There are projects in connection with which the adoption of one project excludes the adoption of another. These projects are, as it were, competitors for the firm's resources. These projects are evaluated simultaneously, but they cannot be carried out simultaneously. Examples are projects that completely exhaust the firm's currently available resources: the installation of satellite communications in the company and the drilling of a new field.
Independent. The rejection or acceptance of one of these projects does not affect the decision-making in relation to another project, these projects can be carried out simultaneously, their evaluation takes place independently. For example, the reconstruction of two unrelated divisions within a firm.
Interrelated. The acceptance of one project depends on the acceptance of the other. These projects are evaluated simultaneously with each other as a project, resulting in one decision.
But such a simplified classification system cannot describe all projects encountered in practice and cannot reflect the specifics of financing, their significance, the role of industry affiliation, etc.
There are many other approaches and features of classification.
In the book E.P. Karavaev Industrial investment projects: theory and practice engineering ; "MISIS". 2001.-299 p. the following type of classification of projects is given:
Table 3.1.
|
Appointment |
Goals |
Means of reaching |
Resources and og- |
Result |
|
pursuing goals |
injuries | |||
|
Industrial |
New sales markets |
Building |
Limited |
Sales of products |
|
New products |
facility, issue |
material, |
Payback |
|
|
Commercial |
new product |
financial, | ||
|
(usually) |
tion. Implementation |
labor. Same |
nested |
|
|
modern |
tough times | |||
|
technologies, |
ny frames | |||
|
equipment | ||||
|
Environmental |
Decrease in |
Building |
Limited | |
|
loads on the area |
object, protection |
material, |
social |
|
|
living environment. |
new buildings |
financial, |
and economic |
|
|
Non-profit |
niy. Complex |
labor |
problems |
|
|
(usually) |
activities for | |||
|
limiting | ||||
|
or exclusion | ||||
|
harmful emissions | ||||
|
Search in- |
Research and |
Carrying out ex- |
Limited |
Negative |
|
innovative |
creation of new |
actions |
material, |
ny or po |
|
technologies and |
financial, |
false |
||
|
equipment. |
labor. Not- |
with the transition |
||
|
Commercial and |
hard limi |
to the industrial |
||
|
non-profit |
you time |
indignant |
||
|
Search engines |
Discovery and use |
Travel and |
Limited |
Negative |
|
spatial |
following but- |
expeditions |
material, |
ny or by |
|
out areas in |
financial, |
false |
||
|
space. |
labor. Og- |
with the transition |
||
|
Non-profit |
differentiation in |
to mastering |
||
|
new areas |
||||
|
Architectural |
Aesthetic. |
Building |
Negative |
|
|
construction |
Mastering new |
ny or po |
||
|
construction |
false |
|||
|
technologies, |
with the introduction |
|||
|
exploration and ma- |
in the industry |
|||
|
materials. Com- |
lazy and |
|||
|
commercial and non- |
other pro |
|||
|
commercial | ||||
|
Humanities |
Establishment and |
Human |
Financial. |
Solution co- |
|
strengthening pre- |
contacts. Kul- |
Implicit constraints |
social |
|
|
belief in society |
tour exchanges |
differences in | ||
|
ve. Non-commercial | ||||
|
Medical and |
Health protection |
Creation of new |
Material, |
The solution is |
|
in the field of health |
of people. Fight against |
drugs, me- |
financial, |
dicin and | |
|
vosokhraneniya. |
epidemics |
todes, technology |
labor |
social |
|
commercial |
giy treatment. Or- | |||
|
(usually) |
organizational | |||
|
Social |
Improving performance |
Privileges. Mero- |
Legislator- |
Solution co- |
|
livy life. |
acceptance. Subsi |
new acts. Ma- |
social |
|
|
Non-profit |
terrestrial, | |||
|
financial | ||||
|
Publishing |
Spreading |
Edition print |
Material, |
Solution co- |
|
knowledge, experience. |
products |
financial, | ||
|
Commercial and |
or other but- |
labor |
economic |
|
|
non-profit |
sky and technical |
|||
|
information |
nichny |
|||
|
In the field of |
Aesthetic, |
Creation of production |
Material, | |
|
moral and |
knowledge of art |
financial |
social. |
|
|
spiritual education |
different |
ethical. |
||
|
melting and enlightenment |
aesthetic |
|||
|
schenia. Commercial |
and social |
|||
|
non-commercial and non-commercial |
political |
|||
|
commercial |
problems | |
|||
|
In the field of |
Perfection- |
Creation of new |
Material, |
Solution co- |
|
development |
system operation |
methods and |
financial, |
social |
|
education. By- |
gram of training. |
labor. | ||
|
higher qualification |
New training |
Cyclic | ||
|
fication and re- |
institutions. Pro- | |||
|
preparation. |
conducting seminars | |||
|
Commercial and |
moat, symposium | |||
|
non-profit |
mov, etc. |
The following table provides a universal classification of investment projects
Table 3.2.
|
SIGNS OF CLASSIFICATION |
TYPES OF INVESTMENT PROJECTS |
|
Functional focus |
Development; reorganization |
|
Implementation period |
Short-term; medium-term; long-term |
|
Investment objectives |
Supporting: increasing production volumes; expansion (renewal) of the assortment; improving product quality; cost reduction; aimed at solving social, environmental and other problems |
|
Required resources |
Small; medium; large; megaprojects |
|
Level of mutual influence |
Alternative; independent; interdependent; complementary |
|
Urgency |
Urgent; postponed |
|
Obligation |
Required; optional |
|
Proposed financing scheme |
Financed from internal sources; financed through corporatization; financed by a loan; with mixed forms of financing |
|
The degree of influence on the external environment |
Global; large-scale; regional scale; urban (intra-industry) scale |
|
Field of activity |
Social; economic; organizational; technical; mixed |
|
Complexity |
Simple; complex; very difficult |
|
Appointment |
For industrial purposes; innovative |
|
Internal; external |
|
|
Estimated income type |
Reducing costs; expansion income; entering new sales markets; expansion into new business; risk reduction; social effect |
|
Cash flow type |
Ordinary; extraordinary |
|
Risk attitude |
Risky; risk-free |
|
Parent organization level |
International; federal; regional; corporate |
|
Industry affiliation |
Intra-industry; intersectoral |
|
Availability of a prototype |
Typical; using standard solutions; original |
Classification of investment projects according to Blank I.A .:
By functional focus
Investment development projects
Investment rehabilitation projects
By investment goals
Investment projects providing an increase in the volume of output of products
Investment projects that ensure the expansion (renewal) of the range of products
Investment projects to improve product quality
Investment projects that reduce the cost of production
Investment projects that ensure the solution of social, environmental and other problems
By implementation compatibility
Investment projects independent of the implementation of other projects
Investment projects dependent on the implementation of other projects
Investment projects excluding the implementation of other projects
By terms of implementation
Short-term investment projects with a period of implementation up to one year
Medium-term investment projects with a period of implementation from one to three years
Long-term investment projects with a period of more than three years
By the volume of required investment resources
Small investment projects (up to 100 thousand USD)
Medium investment projects (from 100 up to 1000 thousand USD)
Large investment projects (over 1000 thousand USD)
According to the proposed financing scheme
Investment projects financed from internal sources
Investment projects financed by corporatization (primary or additional issue of shares)
Loan-financed investment projects
Investment projects with mixed forms of financing
There are other classification types of projects in the economic literature.
Thus, the complexity and size of projects and the impact of their results on the economic, social or environmental situation characterize significance projects.
Along with the specified features of investment projects, there are other signs by which they are distinguished. So, the two analyzed projects are called independent projects, if the decision to invest in one of them does not affect the decision to finance the other, For example, the decision to create a center for new medical technologies should not affect the possibility of a project to build a city rehabilitation center. Moreover, the effect from the simultaneous implementation of these projects will be equal to the sum of the effects of these projects.
If two or more analyzed projects cannot be implemented at the same time, then such projects are called alternative, or mutually exclusive. Typically, such projects include the construction of large enterprises, which include separate industries, united by technology and organization of production, as well as transport communications and energy supply systems.
I must say that in reality, most investment projects relate to conflicting projects, that is, to projects in which different ways of achieving the same goal are assumed. Projects with different purposes, but requiring approximately the same investments for their implementation, can also be recognized as conflicting. Therefore, an investment company always chooses from the analyzed options such a project that, with all the restrictions on the capital invested, will bring it the greatest benefit.
Investment projects can also differ in their organizational, operational and time series.
Organizational framework the project is characterized by the composition of its participants. In turn, the composition of the participants is determined by a large number of factors: the level of specialization; the complexity of individual parts of the project; organizational structure for managing participants, project financing, etc.
Operating framework the project is determined by the actions taken by its participants in accordance with the requirements of the project documentation and the adopted technology.
Time frame projects are characterized by the period of project implementation. They are set on the basis of duration norms for objects financed by the state budget, or based on the payback period of capital investments for projects carried out at the expense of private investors.
Investment projects can also be grouped according to the minimum threshold rate of return. The minimum rate of return can be adjusted depending on the level of return on securities, lending rates, etc. In this case, with an increase in investment risk, the threshold value of the rate of return increases, and the choice of a financing scheme becomes more complicated.
Along with investment projects for industrial purposes, they can be innovative projects, aimed at the development and creation of new effective materials, apparatus, equipment, machines, technologies or technological processes. The implementation of projects for industrial and innovative purposes are often closely related, since their effectiveness depends not only on a scientific idea, but also on its implementation.
For the implementation of the planned programs of the country's economic growth, investment projects aimed at the following sectors are promising:
military-industrial complex;
housing construction;
light industry;
mechanical engineering;
metallurgy;
oil refining and petrochemicals;
fuel and energy complex (FEC);
food complex;
transport, communications and telecommunications;
The scale of the project in terms of its complexity and implementation costs, as well as the impact on the environment, determine the level of feasibility and the possibility of its implementation in a given period of time.
Making a decision on the formation of an investment project is preceded by:
evaluation of the investment proposal, which substantiates the idea of the project, by the management bodies;
preliminary agreements with federal, regional and local authorities, selection of an enterprise (organization) capable of implementing the project by the recipient.
availability of funds.
Information considered for making an investment decision should include the following data:
goals of the project, its orientation and economic environment (taxes, government support, risk, etc.);
marketing information (sales opportunities, competitive environment, promising sales program and product range, pricing policy);
material costs (needs, availability of raw materials, prices and terms of supply of raw materials and components, auxiliary materials and energy carriers);
location taking into account labor, climatic, social and other factors;
design and construction information (selection of planning and design solutions for buildings and structures, utilities) and design and design (selection of industrial production technology, specifications of standard and non-standard equipment and conditions for its manufacture and delivery, design documentation, etc.);
information on the organization and management of production (structure of the enterprise, form of ownership, management system, sales and distribution, etc.);
personnel (need, security, the need for training, payment terms and work schedule);
project implementation schedule (preparatory work, construction, installation and commissioning works, operation period);
the amount of financing by the periods of the project;
project performance evaluation
The results of the preliminary analysis and assessment of the effectiveness of the investment project are used to prepare a preliminary feasibility study (PFS), and then a final feasibility study (FS).
If the company sees the feasibility of implementing a number of investment projects, distinguished by the direction of production or by scale, then in these cases a preliminary assessment of the project's effectiveness can be presented in the form of a technical and economic report (TED) or a technical and economic calculation (FER).
In conclusion, it should be noted that the above classifications do not exclude the possibility of the existence and development of other types of investment activities. For example, there is investment in production and economic activities, that is, the use of capital as working capital or for the acquisition of fixed assets. However, in all cases, descriptions of the project idea, the method of analysis and assessment of the project's effectiveness are required.
Development of a business project for the production of small foam concrete wall blocks. Calculation of the creditworthiness, payback and profitability of the project. Assessment of the impact of inflation, risks and uncertainty on the economic efficiency of an investment project.
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"Development of an investment project (by the example of Orsstroy LLC)"
- Introduction
- Chapter 1 Theoretical and methodological approaches to assessing the effectiveness of investment projects
- 1.1 The essence of the investment project
- 1.2 Evaluation of project effectiveness
- 1.3 Accounting for inflation, uncertainty and risk
- Chapter 2. Development and analysis of an investment project
- 2.1 General characteristics of the enterprise and investment project
- 2.2 Product characteristics
- 2.3 Analysis of the organizational and production part of the project
- Chapter 3. Evaluation of the effectiveness of the investment project
- 3.1 Calculation of the financial justification of the investment project
- 3.2 Calculation of the main financial indicators of an investment project
- 3.3 Risk assessment and sensitivity analysis of the investment project
- Conclusions and offers
- List of used literature
- INconducting
The relevance of this topic is due to the fact that the world economy has long been working on the principles of an investment economy. The owners of capital - "economic electricity" that makes the elements of systems move - direct it to those activities that will give the result that consumers need: and, therefore, will generate revenue and profit. Capital is channeled into activity for a long time - for many months and years, and in the "millstones of the economic machine", first into production, which then, finding the end consumer, gives a financial result of the activity. If the product is needed by the consumer - there is a positive result, not really needed - the project works to zero, and if the product is not needed - the financial result of the project is negative. This is how the voices of consumers evaluate the usefulness of the created product for each individual and, in part, for society as a whole.
It is not an easy task to assess in advance the usefulness and necessity of a product (project result). Its solution comes down to economic calculations that predict the financial results of the project. To predict the results, you need to know everything about the project, think in advance and evaluate, if possible, every detail, every turn of unpredictable events. And even with the most careful assessment, there will still be a certain degree of probability of deviations from all the calculated options. No project has yet been completed 100% on schedule. But the plan does not have the task of constructing an absolutely accurate scenario for the development of the project - this is impossible. The task of investment design is to provide, if possible, all the details, influencing factors and options for the development of the project, to prepare the project team for its implementation, to understand the possibilities and feasibility of the project, to see the ways of its implementation.
The purpose of this study is to develop an investment project and assess its effectiveness.
To achieve the goal of this study, it is necessary to perform the following tasks:
ь consider the essence and concept of an investment project;
ь consider the types of investment projects;
ь evaluate the attractiveness of an investment idea;
ь to develop an investment project;
b analyze its effectiveness.
The object of the research is Orsstroy LLC.
The subject of the research is the process of evaluating the effectiveness of an investment project.
Chapter 1. Theoretical and methodological approaches to assessing the effectiveness of investment projects
1.1 The essenceinvestmentOnnOGOetcOectbut
Investments are usually understood as a flow of investment funds, for a specific purpose, diverted from direct consumption. Investments can be real and financial. Real investments are investments in tangible and intangible assets, and financial investments are investments in financial assets.
Most of the real investment is in the form of real investment projects. Currently, the investment strategy of any enterprise consists of a package of projects. The implementation of effective investment projects can allow the company to get out of the crisis. Recently, among the areas of banking activity, project financing and investment lending related to the financing of investment projects have become widespread.
There are many definitions of the concept of "project", but, in my opinion, this concept is most accurately disclosed in the Methodological Recommendations for Evaluating the Effectiveness of Investment Projects. According to this document, the project is:
a set of documents containing the formulation of the goal of the forthcoming activity and the definition of a set of actions aimed at achieving it;
a set of actions (works, services, economic acquisitions, controlled operations and decisions) aimed at achieving the stated goal.
In modern literature, an investment project is understood as a comprehensive plan of measures (including capital construction, the acquisition of technologies, the purchase of equipment, training, etc.) aimed at creating a new or modernizing (expanding) the existing production of goods and services in order to obtain economic benefits or achieving a different beneficial effect. The term "investment project" also denotes a discrete set of resources, investments and certain actions aimed at eliminating or mitigating various kinds of restrictions on development and achieving higher productivity and improving the life of a certain part of the population over a given period of time. The project includes the problem (concept), the means of solving the problem and the results of the solutions obtained in the process.
Project features:
ь uniqueness - the project is one-time and it is impossible to repeat it;
ь coordinated implementation of interrelated actions presupposes that the project has a decision-making center, management, head;
ь focus on achieving specific goals - any project is carried out for a reason and is needed for something, and the goal should go beyond the project;
ь limited time implies that the project has a beginning and an end;
ь the limited resources of the project.
The implementation of the project takes place in a dynamic environment that has a certain impact on it: economic, social, financial, organizational, etc. Each of these impacts under certain conditions can be critical for the project. Therefore, the project environment should be analyzed and the environmental factors of the project that can have a significant impact on its implementation should be identified.
Types of investment projects.
The challenge in project management is that the characteristics of projects can vary greatly. There are four groups of factors that determine a specific project: the scale of the project, the timing of implementation, quality, limited resources. Based on the analysis of these factors, specialists distinguish the following special types of projects:
in scale - small projects and megaprojects;
Small projects are simple, small-scale projects with limited scope. Investments in such projects range from several hundred thousand to 10-15 million dollars.
Distinctive features of megaprojects are high cost (about $ 1 billion), capital intensity, large volume of work, significant implementation timeframes, etc.
by terms of implementation - short-term, medium-term and long-term projects;
Short-term projects are designed for up to six months / year;
Medium-term projects are designed for a period of 3 years;
Long-term projects are designed for more than 3 years.
in terms of quality - defect-free and defective projects;
In defect-free projects, superior quality is the dominant factor. The cost of such projects can be quite significant (for example, nuclear power plant projects).
by resources - multi-projects, monoprojects and international projects.
In multiprojects, the ideas that are realized are on the borderline between a single project and multiple projects.
In contrast to multi-projects, there are monoprojects with clearly defined resource, time and other frameworks, implemented by a single project team and representing separate investment, social and other projects.
International projects make up a significant part of special types of projects. They differ in their volume and cost, as well as an important role in the economy and politics of the countries for which they are developed.
Participants in investment projects.
The composition of the project participants, their roles, the distribution of functions and responsibilities depend on the type, type, scale, implementation of the project during its life cycle, are constant, and the composition of the participants, their roles, distribution of responsibilities and duties may change. The main participants in the project are:
2) Customer - the future owner and user of the project results, who determines the basic requirements and scope of the project, provides funding for the project, concludes contracts with performers, manages the process of interaction between all participants and is responsible for the project;
3) Investors are subjects of investment activities that invest their own, borrowed or borrowed funds in the form of investments and ensure their intended use. Individuals and legal entities created on the basis of an agreement on joint activities, associations of legal entities that do not have the status of a legal entity, state and municipal formations can act as investors.
4) Project manager (project manager) - a legal entity to which the customer and the investor delegate the authority to manage the work related to the implementation of the project. The scope of functions and powers is determined by the contract with the customer;
5) Project team (working group) - an organizational structure created for the period of the project and headed by a manager. Its task is to carry out project management functions until the effective achievement of its goals;
6) Licensors are organizations that issue licenses for the right to own land plots, conduct tenders, perform certain types of work, etc.
7) Users are subjects for which an object of investment activity is created. Users can be individuals and legal entities, the state, municipalities, foreign states, international organizations. Users can also be investors.
1 .2 Evaluating the effectiveness of the project
Any project can and should be evaluated in terms of efficiency. Often people do it even subconsciously - for such simple projects in their lives as cooking dinner, going to the movies, giving flowers and much, much more.
To make a decision on the implementation of a project - on a long-term investment, it is necessary to have information that justifies the feasibility and possibility of such investments. Financial and economic assessment of investment projects is central to the process of justification and selection of possible options for investing in real assets. With all other favorable characteristics of the project, it will never be accepted for implementation if it does not provide:
· Reimbursement of invested funds at the expense of income from the sale of goods;
· Making a profit that ensures the return on investment is not lower than the level desired for the company;
· Return on investment within the time frame acceptable to the firm.
Determining the reality of achieving precisely such results of investment operations is the key task of assessing the financial and economic parameters of any project for investing in real assets.
The sequence of evaluating an investment project.
When evaluating an investment project, an expert goes through several main stages:
1. Description of the general scheme of the project. The essence of the work at this stage is to identify the project idea - identify the source of income, describe how the implementation of the investment idea looks technically and organizationally. The description of the project implementation scheme is fundamentally important for the correct determination of the initial data for the calculations.
2. To evaluate any project, it is necessary to prepare initial information on four main blocks: proceeds from sales (income), current (operating, production) costs, investment costs, sources of financing.
3. Undoubtedly, settlement technology plays an important role in project appraisal. There are many available sources of information on project appraisal methodology. Each of them testifies to the fact that in accordance with the generally accepted methodology of commercial appraisal, an investment project is analyzed in two directions - the efficiency of investments and the financial viability (feasibility) of the project. The analysis of efficiency is intended to characterize the potential profitability of the project. Financial viability is the potential opportunity of the initiating company to implement this project. Efficiency assessment is based on the calculation of indicators such as the payback period of investment costs, NPV, IRR, PI. Also, when conducting a commercial assessment of an investment project, one more direction is highlighted - an analysis of the risks of implementing the investment idea under consideration. There are various methods of risk assessment, from simple sensitivity analysis to mathematical methods.
4. Interpretation of the results (characteristics of the attractiveness, feasibility of the project).
Assessment of the economic efficiency of the project.
All methods used in assessing the effectiveness of investment projects can be divided into two groups: traditional (simple, statistical) methods and dynamic methods using the concept of discounting.
Traditional (simple, statistical) methods for assessing the economic efficiency of investment projects, such as the payback period and a simple (annual) rate of return, have been known for a long time and were widely used in domestic and foreign practice even before the concept based on discounting cash receipts. The ease of understanding and relative simplicity of calculations made these methods popular even among workers with no special economic training.
Method for determining the simple payback period (PP). The condition for the economic efficiency of the project is its ability to generate net income in excess of the amount of investment. The period of time during which the investment costs of the project "return" in the form of net profit and amortization is called the payback period of the investment. And assumes the use of the following formula:
Payback period (years) = Investment costs / Net profit
This method is often used at the first stages of project development, when the potential profitability of the project and the feasibility of its further more detailed study are determined in general terms.
The main advantage of this method is its simplicity, which makes it possible to use it for small firms with a small cash turnover, as well as for quick project appraisal in the face of a shortage of resources.
The disadvantages of the payback method include the fact that it ignores the development period of the project, the return on invested capital, i.e. does not assess its profitability, and also does not take into account the differences in the price of money over time and cash receipts after the end of the return on investment.
Method for calculating a simple (average, calculated) rate of return on investment (Аverage Rаte оf Returп - АRR); or the calculated rate of return (Аccоunting Rate оfRеturп - АRR) (sometimes it is also called the method of accounting return on investments - ROI Return оf Invеstmеht), based on the use of an accounting indicator - profit. AND Calculated by the following formula:
Simple Rate of Return = Net Income (Year) / Total Investment Cost
The simple (average, calculated) rate of return method has a number of advantages. This is, first of all, the simplicity and obviousness of calculations, ease of use in the system of material incentives, direct connection with the indicators of the accepted accounting and analysis. However, it also has serious drawbacks. For example, the question arises which year to take in the calculations. Since annual data are used, it is difficult, if not impossible, to select the most representative year for the project. All of them can differ in terms of production levels, profits, interest rates and other indicators. In addition, certain years may be taxable.
Dynamic methods for assessing the economic efficiency of investment projects.
To eliminate all of the above disadvantages, it is advisable to apply the second group of methods for assessing the economic efficiency of investment projects using the concept of discounting. Discounting is the process of bringing cash receipts from investments to their present value. To bring costs, results and effects at different times, the discount rate (r) is used, which is equal to the rate of return on capital acceptable to the investor. Technically, it is convenient to multiply the costs, results and effects that occur at the n-th step of calculating the project implementation to the base point in time by multiplying them by the discount coefficient a n, determined for a constant discount rate.
The key parameter for applying a group of dynamic methods is the value of the discount rate. The discount rate plays the role of a factor that characterizes the generalized influence of the macroeconomic environment and financial market conditions, and is determined by the levels of profitability prevailing in the capital market.
Uncertainty of future cash flows is one of the main problems when choosing a discount rate in the process of raising funds for investment projects. If the future cash flow is risky, then the projected amount is usually discounted at a risk-adjusted discount rate.
The following dynamic indicators are used to assess the effectiveness of the project:
The discounted payback period (discоuntеd payback period, DPB) will show the point in time at which incomes, taking into account their cost in time, will be equal to the investment costs of the project. The discounted payback rule is based on the question: "How long should a project take to make sense in terms of net present value?" The discounted payback period serves as a better criterion than the simple payback period. It takes into account that the ruble at the beginning of the payback period is worth more than the ruble at the end of the payback period.
Discounted payback period (years) = Investment costs / (Net profit *) (2)
The discounted payback period is longer than the simple period, as it takes into account discounted cash flows.
Net present value (net present value of the project Net Present Valye - NPV). To make a decision on the feasibility of the project, it is necessary to imagine what total net income the project is capable of generating, and to understand how valuable they are, the weight of these future incomes in relation to the current moment in time. To solve this problem, the indicator of the net present value of the project, NPV, is intended. The net present value is the value obtained by discounting separately for each time period the difference of all outflows and inflows of income and expenses accumulating over the entire period of operation of the investment object at a fixed, predetermined interest rate (interest rate).
Net present value, NPV is determined by the formula:
r is the discount rate.
The method for evaluating the effectiveness of investment projects at their net present value is based on the assumption that it is expected to find an acceptable discount rate to determine the present value of future income equivalents.
If the net present value is greater than or equal to zero (positive), the project can be accepted for implementation, if less than zero (negative), it is usually rejected.
The use of the net present value method gives an answer to the question whether the analyzed investment option contributes to an increase in the company's finances or the investor's wealth, but does not speak about the relative magnitude of such an increase. To compensate for this deficiency, they use the method of calculating the return on investment and the internal rate of return (rate of return).
Internal rate of return (rate of return) (International Rаte оf Return - IRR).
When assessing the effectiveness of investment costs, a fair question arises: what is the level of return on the invested monetary unit that the project under consideration has? The answer to this question will allow you to give an indicator of the internal rate of return - IRR. The approach to determining the IRR is to determine the comparison rate at which the NPV becomes zero.
According to the classics of investment design, the meaning of the IRR indicator is to determine the maximum rate of payment for the attracted sources of project financing, at which the latter remains breakeven. For example, in the case of assessing the effectiveness of total investment costs, this may be the maximum interest rate on loans, and when assessing the effectiveness of using equity capital, it may be the highest level of dividend payments.
On the other hand, the IRR value can be interpreted as the lower guaranteed level of return on investment costs. If it exceeds the cost of capital in a given sector of investment activity and if the investment risk of this project is taken into account, the latter can be recommended for implementation.
Finally, the third interpretation option is to interpret the internal rate of return as the marginal level of return on investment (profitability), which may be a criterion for the expediency of additional investment in the project.
If the difference between the indicator of internal profit and the interest rate is positive, and the internal rate of return is higher than the interest rate, then the investment activity is recognized as effective (profitable), and, conversely, if the internal rate of return is less than the interest rate at which the loan was received, then the investment is considered unprofitable.
The internal rate of return is determined from the following ratio:
Invеstments - initial investment;
CFt is the net cash flow of the period t;
N is the duration of the project in periods.
IRR values:
· The project is considered acceptable if the calculated IRR value is not lower than the required rate of return, which is determined by the investment policy of the company;
· At IRR equal to the discount rate, NPV is equal to zero;
· The IRR is compared with the investor's required rate of return on capital, which should be higher than in the case of a risk-free capital investment.
The rate of return on investment PI (prоfitаbility indеx), adopted to assess the effectiveness of investments, is the ratio of reduced income to investment costs reduced to the same date. It allows you to determine to what extent the funds of the investor (firm) increase in the calculation of 1d. units investment.
The profitability index is calculated using the formula:
Invеstments - initial investment;
CFt is the net cash flow of the period t;
N is the duration of the project in periods;
r is the discount rate.
PI values:
· For an effective project, PI must be greater than 1;
· Indices of profitability of discounted costs and investments exceed 1, if NPV for this flow is positive.
The NRV, IRR and PI criteria are actually different versions of the same concept, so their results are related to each other.
Thus, the following mathematical relationships can be expected to be fulfilled for one project:
if NPV> 0, then PI> 1, IRR> r,
if NPV<0, то PI<1, IRR if NPV = 0, then PI = 1, IRR = r. where r is the required rate of return (opportunity cost of capital). In order for the project to be recognized as effective, it is necessary and sufficient to fulfill one of the following conditions: 2) provided that IRR is the only positive root of the equation NPV = 0. 4) payback period, taking into account discounting t о k 1
.3
Accounting inflation, uncertainty and risk Accounting for uncertainty and risk. The activity of almost any economic entity is carried out under conditions of uncertainty and risk. Uncertainty refers to the incompleteness or inaccuracy of information about the prerequisites, conditions or consequences of the project, including the associated costs and results. According to experts, the reasons for uncertainty are three main groups of factors: ignorance, chance and opposition. In modern economic theory, the category of risk is used as an indicator of uncertainty. Risk is understood as the possibility of occurrence of conditions leading to negative consequences. Risk can also be defined as a generalized subjective characteristic of a decision-making situation under conditions of uncertainty, reflecting the possibility of occurrence and significance for the subject of decision-making of damage as a result of the consequences of making a decision. Therefore, any type of analysis and assessment must be carried out taking into account risk and uncertainty. Unlike uncertainty in general, risk is a measurable quantity, its quantitative measure is the probability of an unfavorable outcome. Investment risk is the measurable likelihood of incurring a loss or missing out on an investment. Since an investor is willing to take risks and invest, he is entitled to a risk premium - the additional income that an investor who invests in risky projects expects in comparison with projects associated with zero risk. Determination, calculation and analysis of risk factors is one of the main parts of investment planning. The created project is, in essence, a forecast that shows that with certain values of the initial data, calculated performance indicators can be obtained. However, it is risky to build your plans on such a rigidly set forecast, since even a slight change in the initial data can lead to completely unexpected results. The success of the project implementation depends on many variables that are entered into the description as input data, but in reality are not completely controllable parameters. All these values can be considered as random factors influencing the result of the project, and there is a risk of changes in these random factors. There are many methods of risk analysis: · Analysis of scenarios; · Analysis of break-even (equilibrium points); · Sensitivity analysis; · Factor analysis; · Monte Carlo method (statistical analysis, simulation modeling); · Expert analysis, etc. Let's consider one of them: Sensitivity Analysis. One of the tasks of project analysis is to determine the sensitivity of performance indicators to changes in various parameters. It is necessary to analyze the stability of the project against possible changes in both the economic situation as a whole (changes in the structure and rates of inflation, increasing the delay in payments) and the internal indicators of the project (changes in sales volumes, product prices). This analysis is called a sensitivity analysis. Sensitivity analysis allows you to answer the question: "What will happen if the value of such and such a factor changes by so much?" Sensitivity analysis makes it possible to conduct a comparative analysis of project options. Sensitivity analysis steps: highlighting the key parameters of the project (NPV, IRR, etc.), a change in which will significantly affect the flows of the project and the factors affecting their values (revenue, cost, salary, taxes, etc.); calculation of key parameters with basic values of factors; consistent change of factors and calculation of key parameters under new conditions; checking the sensitivity of the selected parameters with the probability of deviations of the first type (the probability that the factor will change, that is, it becomes more, less, or remains planned) and the second type (if the factor nevertheless turns out to be below the planned level, then with a probability of 60% the deviation will be no more than 10 %); identifying the key parameters and factors that are most sensitive to these changes and having the greatest impact; comparison of the sensitivity of the project for each factor. The study of the sensitivity of performance indicators to changes in the discount rate allows us to determine the stability of the project in relation to fluctuations in the financial market and possible changes in the macroeconomic conditions of activity. The wider the range of parameters in which the performance indicators remain within acceptable values, the higher the safety margin of the project, the better it is protected from fluctuations of various factors that affect the results of the project. Taking into account the influence of inflation on the assessment of investment projects. Inflation is one of the most important environmental factors affecting the efficiency of investment. Inflation is the depreciation of money in circulation, i.e. the fall (decrease) in their purchasing power, the presence in the sphere of circulation of surplus money, not secured by the growth of the mass of commodities. Influence of inflation on indicators of financial performance of a project is usually considered in two aspects: · Influence on the project indicators in physical terms, when inflation leads not only to a reassessment of the financial results of the project, but also to a change in the project implementation plan; · The impact on the performance of the project in monetary terms. The following method is used to take into account the impact of inflation when assessing the effectiveness of investment projects. 1. Accounting for inflation premium in the interest rate (real and nominal interest rates). Influence of inflation on the efficiency of the project also affects the change in the need for borrowed funds and payments on loans, i.e. in the change in the interest rate. The interest rate is the relative (in percentage or shares) amount of payment for using a loan over a certain period of time. The interest rate charged by the bank on loans is called the credit interest rate. The interest rate paid by the bank on deposit accounts is called the deposit interest rate. Credit and deposit interest rates can be nominal, real and effective. The nominal interest rate is the interest rate announced by the lender. The real interest rate is the interest rate at constant prices (in the absence of inflation), the value of which provides the same loan yield as the nominal rate in the presence of inflation. The effective interest rate is the lender's income from the capitalization of interest paid over the period for which the interest rate is declared. The real interest rate is obtained from the nominal one by eliminating the influence of inflation and is used in the analysis of interest rates, as well as for the approximate recalculation of loan payments when assessing the effectiveness of an investment project at current prices. The relationship between real and nominal interest rates is given by the formula of I. Fisher: where r is the real interest rate; r n - nominal interest rate; i - inflation rate (price growth rate). The effective interest rate characterizes the lender's income from the capitalization of interest paid during the period for which the nominal interest rate is declared. If the nominal interest rate for the year is r n, r (in shares), and interest is paid on the loan condition m times a year, that is paid with each payment. interest at the rate r H, y / m. in this case, the effective interest rate for the year r eff, r is (in shares): If interest is paid more often than once a year, the effective interest rate is higher than the nominal one, and their difference is the greater, the higher the interest rate and the more often interest is paid. Chapter2
... Development and analysis of an investment project 2.1
Brief description of the enterprisetiya andinvestment project The initiator of the project for the production of foam concrete blocks - Limited Liability Company "Orsstroy". The form of ownership is private. The main activity is procurement and intermediary and construction activities. The authorized capital is 39 thousand rubles. The founders of Orsstroy LLC are legal entities and individuals. The range of future products is foam concrete blocks used in the construction of residential and industrial facilities. The raw material base of production is 100% provided by local suppliers. The planned volume of finished products is 1980 cubic meters. m per year for a total amount of 3564 thousand rubles per year based on leased and planned production facilities. The sales market for finished products are construction organizations and the population of Sterlitamak and the surrounding areas with an average income level. The total cost of the project for the commissioning and operation of a production complex for the production of foam concrete blocks is 750 thousand rubles, which is supposed to be attracted by taking a loan from a bank at a rate of 18% per annum in rubles. The personnel directly producing foam concrete consists of 7 people plus a foreman and an accountant. Due to the pronounced seasonality of demand for building materials, it is expected to decrease to 5 people in winter. The competitiveness of the manufactured products is ensured by low internal production costs due to low demands on production and storage facilities and the flexibility of small production to reduce seasonal costs. The term of the investment project is determined by the payback time of the investment and, according to preliminary estimates, which are presented below, will be 9.5 months. Executor of the investment project "Orsstroy" LLC. The authorized capital is 50 thousand rubles. Organizational legal form Limited Liability Company. This separation will allow for an independent accounting policy. A bank loan will be issued to Orsstroy LLC, which already has a credit history. investment return risk inflation 2.2
NSbutRbutcharacteristicsbutproducts Foam concrete - lightweight cellular concrete obtained as a result of hardening of a solution consisting of cement, sand and water, as well as foam. This foam provides the required air content in the concrete and its uniform distribution throughout the mass in the form of closed cells. The foam is obtained from the foam concentrate. This building material is especially popular in Germany, Holland, Scandinavian countries, Czech Republic. Moreover, in the latter, blocks from it are called "bioblocks", since only environmentally friendly natural components are used as a raw material: burnt lime, sand and water, with a relatively small addition of cement. Recently, to reduce the cost of building materials, waste from various industries, for example, slags, are often used in the form of components. Agree that it is unpleasant to live in a house built from someone's waste, in the ecological purity of which you cannot be completely sure. Foam concrete has the following properties: · Easily set compressive strength; · Good heat and sound insulation; · Low water absorption; · Low coefficient of shrinkage; · Resistance to variable freezing, thawing; · High fire resistance; · Workability; · Good nailing properties. It is very convenient that the blocks can be sawed, drilled, milled, and the trim elements can be fastened with nails, as to an ordinary tree. In terms of its characteristics and consumer properties, these materials are closest to wood, but have a significantly greater durability. Table 2.1 Comparative characteristics of building materials Indicators Building brick Building blocks Foam concrete (non-auto- clay silicate expanded clay Aerated concrete (autoclaved) Density, kg / m 3 Weight 1m 3, kg Thermal conductivity, W / m * K Frost resistance, cycle Water absorption,% by weight Compressive strength, MPa Foam concrete is very technological when laying. Foam concrete blocks are large enough, with a small mass. For example, a 600x300x250 block weighs no more than 18 kg, which allows you to reduce labor costs. A team of 3 people can cope with the assembly of a foam block house with an area of 120 m 3 in just 10-12 working days. Foam concrete has the following advantages: · Profitability. Construction using foam blocks will cost significantly less compared to other materials, due to the low price of foam concrete, savings on transportation, installation and decoration of premises. · Convenience and speed of installation. The relative lightness of foam concrete, large block sizes and high accuracy of linear dimensions greatly facilitate and increase the speed of laying. Foam blocks are easy to process and finish (easy to drill and cut with a conventional tool). · Heat and sound insulation. Due to their cellular structure, foam blocks have a high ability to absorb sound and are an effective insulation that maintains an optimal temperature regime of the room, independent of external conditions. The use of foam blocks allows you to achieve significant savings on heating. · Reliability. Foam concrete is an almost eternal material that is not affected by time and has the strength of a stone. Increased seismic resistance of buildings, in the construction of which foam blocks were used, due to the lower weight of the structures. · Environmental Safety. During operation, foam concrete does not emit toxic substances, since foam blocks do not contain such, and in terms of environmental friendliness it is second only to wood. · Fire safety. Foam blocks correspond to the first degree of fire resistance, and reliably protect against the spread of fire. Under the influence of intense heat on the surface, the foam concrete does not split or explode, as is the case with heavy concrete. Foam concrete has been used in construction since the 70s in more than 40 countries: · For roof insulation - with a density of up to 300-400 kg / m 3; · To fill void spaces (conservation of mines, reconstruction of sewerage systems in cities) - 600-1000 kg / m 3; · For the manufacture of building blocks - 700-800 kg / m 3; · Fences, balcony railings - 800-1000 kg / m 3; · For the manufacture of reinforced and unreinforced partitions, wall panels, floors - 1200-1400 kg / m 3. That is, this product can be used as a structural and heat-insulating material. Unfortunately, some people still have a prejudice about the low structural strength of foam concrete. Previously, technologies were used that did not allow the production of foam concrete with high strength characteristics. Currently, it is possible to use foam concrete for the construction of load-bearing walls in houses of several floors. The main difference between foam concrete and other building materials is its high thermal insulation qualities. 30 cm of foam concrete in terms of thermal insulation qualities are equal to 75-90 cm of expanded clay concrete or 150-180 cm of bricks. An alternative to using foam concrete can be building a fortress with meter-high brick walls or excessive heating costs for the house. If heat is not lost through the walls of the house, then even the use of electric heating systems will not affect the budget. Table 2.2 Comparative characteristics of foam concrete Concrete grade by average dry density Limits of deviation of average concrete density, kg / m 3 Coefficient of thermal conductivity of concrete, no more than W / (m * K) Compressive strength class of concrete В2.5 В3.5 В5 В7.5 Average compressive strength (with a coefficient of variation V = 17%), not less, MPa The relevance of this issue today is also associated with the entry into force of the second stage of SNiPs on heat conservation. The Ministry of Construction of the Russian Federation made changes to SNiP II-3-79 "Building heat engineering", according to which the total thermal resistance of the enclosing structures should be at least 3.2m2 * oC / W for the Moscow region. It is almost impossible to fulfill this rule by increasing the thickness of the enclosing structures: the thickness of walls made of reinforced concrete should be at least 6 m., And of brick - at least 2.3 m. All technologies for external finishing of facades, used for finishing walls made of bricks, concrete, cinder blocks, etc., are applicable to foam concrete. The main technologies are plastering, facade tiles and finishing bricks. Brick decoration is currently the most common in cottage construction, and the bulk of construction is carried out using this technology. But the fashion for the same type of brick boxes is already passing and the design of new houses is becoming more beautiful and diverse. 2.3
Analysis of the organizational and production partthe project The financial part of the investment project analyzed in this work is based on the following business idea. The production of foam concrete blocks is being created in Sterlitamak. The requirements for the technological process make it possible to attract workers of average qualifications. The simplest raw materials are used: sand, cement, water and a foaming agent. 1. Purpose and objectives of the project. The goal of the project is to create a profitable production facility for the production of small foam concrete wall blocks that meet the requirements of GOST 21520-89. The profitability of the project is due to: 1) The selection and use of equipment, mechanisms, units and accessories that have the best performance in terms of: · Productivity; · The quality of the parameters of the technological process at all stages of the production of blocks; · Reliability; · Maintainability; · Energy consumption; · Ease of operation and maintenance; · Metal consumption; · Cost. The proposed technological line as a whole confirmed the high estimates of all the listed indicators by operating experience in real production. 2) Development of the technological layout of the line for the production of blocks, providing the maximum removal of marketable products from one square meter of the production area. 3) Minimization of energy consumption for production. 4) Ensuring maximum productivity of workers through the use of original equipment, own design of forms and an optimal work organization scheme. 5) Development of recipes and technological modes that ensure guaranteed quality of the produced blocks and the minimum technological cycle time even when using sand of medium size modulus. 2. Equipment. The technological line includes: 1) Mixer with an installed power of 15 kW. for the preparation of foam concrete mixture with a capacity of up to 0.75 m 3 per batch, equipped with a pneumatic mechanism for unloading the prepared portion of the mixture into the receiving tank. 2) A slipway for loading raw materials into the mixer and installing a foam generator on it, mixing water and water dispensers for preparing a working solution of a foaming agent, a control panel. The slipway is also the operator's workplace for the preparation of foam concrete mixture. 3) Foam generator with a capacity of 400 liters of finely dispersed foam from a low-expansion foaming agent for 3 minutes. 4) Line for receiving from the mixer and distributing the foam concrete mixture into forms. 5) Forms for the manufacture of foam concrete blocks. 6) Areas of heat treatment of forms with foam concrete. 7) Equipment for the final processing of blocks after their stripping. 8) Pumping and compressor stations. 3. Engineering networks, types of energy carriers and their provision of the production process. To organize the production of foam concrete blocks, engineering networks must provide a technological process: · Warm water with a temperature of 45 degrees. Celsius with a flow rate of at least 1m 3 per hour; · Hot air (with a temperature of about 90 degrees Celsius) with a flow rate of at least 120 m 3 / min; · Compressed air to control the process of dumping the foam concrete mixture from the mixer with a working pressure of 5 atmospheres; · Electricity supplying power consumers with a total capacity of up to 25 kW; · The ability to discharge water into the sewerage system with a volume of up to 1.5 m 3 per day. 4. Access roads. Access roads and unloading sites must ensure the delivery to the processing line during the working week at least 70 tons of cement and 70 tons of sand. 5. Technological layout of the block manufacturing workshop. In the second case, the distribution of the foam concrete mixture is made from the receiving tank using a generator pump. The container, together with the pump, moves along the molds along the rails. 6. Technological process of making blocks. The recipe for the foam concrete mixture. In this project, the technological process is developed, tested and debugged in the conditions of planned production for the following types of raw materials and components: Cement - PC 500-DO Sand - mountainous, medium size module. Foaming agent - "Arekom-4", PB-2000 and similar. Mold lubricant - "Compil". Hydration reaction activator - Asilin hardening accelerator. Net operating time of the main operations of preparation of one batch with a capacity of 0.5 - 0.6 m 3. foam concrete mixture, which determines the productivity of the technological line, is 21 minutes. The real average time (taking into account standard losses) spent on one batch is 30 minutes. The given times are valid even with manual loading of cement and sand. The use of mechanization means will increase the design productivity of the technological line. When working in one shift with a capacity of one batch of 0.75 m 3, the line capacity will be up to 12 m 3 of foam concrete blocks. The use of Asilin components, as well as areas of heat treatment of forms with foam concrete, allows for stripping and subsequent finishing of the free surface of the block: · At an air temperature in the workshop up to 16 degrees. - after 10-12 hours; · At an air temperature in the workshop up to 5 degrees. - in 18-20 hours. 7. Organization of the labor process and regulatory framework. Basic operations are defined: · Assembly of forms and their lubrication; · Preparation of foam concrete mixture; · Filling of forms with foam concrete mixture; · Heat treatment of forms filled with foam concrete; · Demoulding of forms with extraction of blocks; · Transportation of blocks to the place of their finishing and storage; · Processing and storage of blocks; · Cleaning of forms. Time norms have been established empirically for the implementation of each operation, which make it possible to plan work in one shift with the number of production workers in 7 people. 8. Organization of storage facilities. The warehouse management is based on the principle of cost minimization. Cement is purchased and stored in bags. This makes it possible to exclude equipment for storage and transportation of cement and sand, their dispensers from the technological line, which reduces the funds required for the manufacture and installation of technological equipment, and the start of commercial production of commercial products. The storage of bags is as close as possible to the mixer. 9. Ensuring the quality of finished products at the stages of their production. The quality of the blocks produced depends on the exact observance during operation: · Recipes for the preparation of foam concrete mixture; · Temperature of mixing water and water for making foam; · The temperature of the air in the chamber for heat treatment and the time for maintaining this temperature; · Exact observance of the developed sequence and duration of operations in the preparation of aerated concrete mixture; · Rules and techniques for introducing the components "Arekom-4", Asilin. Investment objects. The production process requires a production area of 100-150 sq.m. Warehouse space of about 60 sq. m., with the possibility of storing products produced in 2 weeks in the amount of 100 m 3. foam blocks. The main requirement for the implementation of the production process is the availability of all communications necessary for production: water supply; sewerage; ventilation; heating from the boiler room; power supply. The state of the product sales market. LLC "Orstroy" plans to sell its products on the regional market, the capacity of which allows for entry into the market with a still insignificant volume with the possibility of further development. High profitability and a quick payback period allow you to quickly increase the volume of production. Since 2007 the volume of sales of building materials in Sterlitamak district increased by an average of 15 percent per year. And the volume of the market of aerated concrete sold in the region as of 2011, according to our estimates, is 120 thousand cubic meters. The planned production volume of Orsstroy LLC is 1980 cubic meters. in year. Thus, LLC "Orsstroy" will take about 1.7% of the total sales of foam concrete in the regional market in the near future. Therefore, the organization's strategy is directed towards that. to occupy this market niche and gain a foothold in it. The concept and characteristics of the main methods for assessing the risks of an investment project, analysis of its impact on the profitability of the project. Qualitative and quantitative assessment of the risks of an investment project for the introduction of a new product of a jewelry factory - gold chains. term paper, added 06/30/2010 The main stages of development and implementation of an investment project. Appointment of a business plan for an investment project. Information about the projected enterprise and the main characteristics of the project. Market dynamics, economic, environmental and industry risks. presentation added on 07/11/2011 thesis, added 11/17/2012 Essence and feasibility study of the investment project. Costs required to start production. Evaluation of the effectiveness of the proposed investment project. Break-even point calculation. Discounted investment payback period. term paper added on 11/24/2014 Basic concepts of investment planning. General characteristics of methods for assessing the effectiveness of an investment project. General concepts of uncertainty and risk. Building a model for assessing the risk of an investment project. thesis, added 09/12/2006 The essence and principles of business planning in an enterprise. Studying the structure of a business plan and a system for evaluating investment projects. Development of a business plan for an investment project at Bonot LLC. Risk assessment and financial investment plan. term paper added 06/13/2014 Investment risks and methods for assessing the sustainability of an investment project. An enlarged assessment of the sustainability of an investment project. Estimation of the expected effect of the project, taking into account the quantitative characteristics of the uncertainty. Calculation of break-even boundaries. term paper, added 06/24/2009 An enlarged assessment of the stability of an investment project, its profitability and payback. Calculation of break-even boundaries. Method of variation of parameters and their limiting values. The expected effect of the project, taking into account the quantitative characteristics of the uncertainty. term paper, added 03/16/2014 Research and justification of the economic efficiency of the investment project - the production of PVC resin. Calculation of investments in fixed, working capital and production costs. Calculation of the commercial efficiency of an investment project. term paper, added 06/13/2010 Calculation methods for justifying an investment project. Determination of the most attractive investment project in terms of net present value. Determination of the profitability index and payback period of the project, assessment of its sustainability. Investment project is a plan for the implementation of a set of measures aimed at the creation, acquisition or modernization of physical objects and technological processes, scientific research and financial transactions. A real investment project must have a technical justification, be interconnected in terms of resources, deadlines and performers. Each project is pre-tested experts. First of all, the project is assessed from the point of view of its feasibility, both in economic and technical aspects, i.e. the preliminary feasibility study of the project (PTEO) is being considered. If the preliminary assessment of the project is positive, then proceed to a more detailed study of the project. The value of preliminary appraisal lies in the timely weeding out of projects with low chances of success in order to save the cost of expensive project research. One of the important stages of project evaluation is associated with the definition of the investment risk of the project. Investment risk of a project is a complex concept that includes various types of risks. Each stage of investment is inherent in specific types of risks, which are both internal and external. Assessment of the total risk for the project is carried out on the basis of aggregated data for its individual stages. In specific Russian conditions, the following can be distinguished main types of investment risks: Comprehensive assessment of an investment project, i.e. its feasibility study (FS) is carried out in accordance with the requirements of regulatory enactments. If we proceed from the definition that investment is a long-term investment of economic resources in order to create and receive benefits in the future, then the main purpose of this investment is to transform the investor's own and borrowed funds into assets that, when used, will create new liquidity. Such a definition of the concept of "investment" includes all types of investment and corresponds to the goals and objectives of investment projects. Creation and implementation the investment project includes the following stages: One of the stages of the analysis of an investment project is pre-project research and assessment of investment opportunities (business plan). At this stage, the following works are performed: At the preliminary stage of considering an investment project, it is of fundamental importance assessing the viability of the project, which is understood as the result of comparing various existing project options in terms of their cost, timing of implementation and profitability. A project viability assessment should provide answers to two critical questions: If there is only one or several alternative variants of projects, the so-called situation "without a project" or "without building a new enterprise" is taken as a comparison base. In the first case, this means that the production and financial results of the operating enterprise are compared before and after the reconstruction. In the second case, the hypothetical production and financial results of the new enterprise, built according to the proposed project, are compared with the indicators of the existing enterprise. After determining the viability of the investment project, it is necessary to determine project value, i.e. results after its implementation. To do this, determine the difference between the change in benefits and the change in costs as a result of its implementation. The main project document when considering the construction plan of the facility is the feasibility study (Feasibility study) of the project. The feasibility study defines the main solutions: technological, space-planning, constructive, environmental; the environmental, sanitary-epidemiological and operational safety of the project, its economic efficiency and social consequences are assessed. Feasibility study contains estimate and financial documentation, including: calculation of capital costs, estimation of production costs, calculation of annual receipts from production (enterprise) activities, calculation of the need for working capital, sources of project financing, estimated needs in foreign currency, choice of creditors. In addition, the feasibility study should include an assessment of the risks associated with the implementation of the project and the timing of its implementation. The feasibility study consists of following sections: The feasibility study is undergoing non-departmental environmental and other types of expertise. Based on the feasibility study and expert opinions, decisions are made on investing in an investment project. Simultaneously with the preparation of the feasibility study, a business plan, contract and working documentation are being prepared. Business plan is a detailed document that sets out the goals and objectives of an investment project, methods of its implementation and technical and economic indicators of an enterprise or project after its completion. Contract Documentation includes: When preparing working documentation, design estimates (working drawings) are prepared, manufacturers and suppliers of non-standard technological equipment are determined. At the final stage of the investment project implementation, construction, installation and commissioning works are carried out, as well as the release of a pilot batch of products. After the completion of the construction of the facility and the start of its normal operation, the current monitoring of the functioning of the created enterprise is carried out, i.e. production and its economic indicators. Concept and classification of investment projects An investment project is an option (program) for the implementation of investments associated with the justification of economic (or other, for example, social) feasibility, volume and timing of investments, including the preparation of the necessary design and estimate documentation and a description of specific practical actions for the implementation of investments (business -plan). In other words, an investment project is a set of intentions, justifications and practical actions to implement the investment process, to ensure the specific financial, economic, production and social results of investment activities set by the investor. In accordance with Federal Law No. 39-FZ of February 25, 1999 "On investment activities in the Russian Federation carried out in the form of capital investments", an investment project justifying the economic feasibility, volume and timing of capital investments, including the necessary design estimates developed in accordance with the legislation of the Russian Federation and standards (norms and rules) approved in accordance with the established procedure, as well as a description of practical actions for making investments (business plan). Thus, an investment project should be understood both as an intention to carry out practical actions for investing capital, and as a set of documents in which these actions are planned and justified. As a result of the implementation of the investment project, measures can be taken in a wide range from the creation of a new enterprise or the technical re-equipment of an existing production facility to the organization of various kinds of festivals or sports events. Thus, the results of investment projects can be both economic and social results. The classification of investment projects can be carried out according to various classification criteria. 1. Depending on the direction of investments and the goals of their implementation, investment projects can be classified into production, scientific and technical (research), commercial, financial, environmental and social. The implementation of industrial investment projects involves investing in the creation of new, expansion, modernization or reconstruction of existing industries for various sectors of the economy. Scientific and technical (research) investment projects are associated with the development and creation of modern highly efficient machines, apparatus, equipment, instruments, technologies and technological processes. The development and implementation of scientific and technical and industrial investment projects are often related to each other, in particular, the implementation of an industrial investment project can be a continuation and a necessary stage in the implementation of a scientific and technical project. The purpose of commercial investment projects is to make a profit from the investments made as a result of the purchase, sale and resale, use of any property, products, goods, services, property rights. Scientific and technical, industrial and commercial investment projects can be related to each other, since the effect of the implementation of commercial investment projects (income, profit) can become a source of financial support for industrial or scientific and technical investment projects. Financial investment projects are associated with the acquisition of securities and other financial assets, with the formation of a portfolio of equity (stocks) and debt (bonds) securities and their sale, the purchase and sale of financial obligations, as well as the issue and sale of securities. The investor, the buyer and the owner of the securities, receives dividends on them and increases their financial capital. The source of capital increase is the implementation of industrial investment projects. In addition, as a result of the implementation of financial investment projects, there may be a redistribution of capital in the sphere of financial circulation. Moreover, an investor, implementing a project for the issue and sale of securities, solves the problem of financial support of an industrial investment project, i.e. the implementation of a financial investment project is directly related to the implementation of an industrial investment project and is an integral part of it. Environmental investment projects include projects that result in nature conservation objects. Another option is to improve the parameters of existing industries or to implement measures to reduce the harmful effects on nature, for example, reducing or changing the structure of emissions of harmful substances into the atmosphere. The result of the implementation of social investment projects is the achievement of a certain socially useful goal, in particular, improving the state of health care, education, culture, sports, etc. 2. Depending on the degree of mutual influence, investment projects are subdivided as follows. Independent investment projects are projects, the decision to implement one of which does not affect the decision to implement the other. In order for one project to be independent of the other, two conditions must be met: a) there must be technical, technological, financial, temporary, legal and other opportunities to carry out one project, regardless of whether or not another project will be accepted for implementation; b) the amount and structure of cash flows expected from the implementation of one project should not be influenced by the acceptance of another project for implementation or its rejection. Alternative (mutually exclusive) investment projects are projects that cannot be implemented simultaneously. In other words, the adoption of one of them means that the remaining projects cannot be realized (for example, the construction of two bridges in one place). Complementary investment projects are projects that are implemented jointly. At the same time, complementary investment projects are divided into two types: a) complimentary projects that have the following property: the adoption of one project leads to an increase in income for other projects; b) replacement projects, which differ in the following: acceptance a new project leads to a slight decrease in revenues for existing projects. 3. By terms of implementation, investment projects can be divided into the following groups: a) short-term (up to 1 year); b) medium-term (1-3 years); c) long-term (over 3 years). 4. By the scale of implementation, investment projects are subdivided for the following types: a) global projects, the implementation of which significantly affects; the economic, social, political or environmental situation in the world; b) national economic projects that provide effective influence on the whole country as a whole or its regions; c) large-scale projects covering large territorial formations or individual sectors of the economy; d) local projects, the action of which affects within the framework of the enterprise implementing the investment project. 5. By the type (time structure) of the cash flow during the implementation of the investment project, projects are divided into two groups: a) projects with ordinary cash flows, i.e. stream having the next temporary structure at a time or sequentially investments made and subsequent positive cash flows; b) projects with extraordinary cash flow, i.e. a flow in which investment and positive cash flows can alternate in random order. Examples with cash flows of different time structure are presented in table. 7.1 and 7.2. Development phases of an investment project The process of developing and implementing an investment project fits into several phases, within which goals are set and the corresponding tasks are solved: pre-investment, investment, operational (sometimes called operational or production) and liquidation (liquidation-analytical) phase. The first phase of the project, pre-investment, includes the following stages: a) determination of the investor's investment opportunities, an overview of possible options for their implementation; b) analysis of alternative options and selection of the best option actions (i.e. the best investment project); c) making a decision on investment, developing an action plan for the implementation of the selected project. The second phase of the project, the investment phase, includes the following stages: a) design; b) conclusion of contracts, selection of personnel; c) making investments; d) construction of production facilities, construction of facilities, commissioning, etc. The third phase is operational (operational, production) - the longest phase of the investment project. During the operation of the investment object, the planned results are formed (achieved), these results are assessed in terms of the continuation or termination of the project, the necessary possible adjustments are made in order to increase the efficiency of the project implementation. The main problems associated with this phase are production and marketing of products, financing of current costs. The final fourth phase of the project, the liquidation (liquidation-analytical) phase, is no less important than the three previous ones. Within this phase, three tasks are accomplished. The first task is to eliminate possible negative consequences (mainly of an environmental nature) of a completed or discontinued project. The second task is the release of working capital and the reorientation of production facilities. The third task is to analyze and evaluate the results of the project, its effectiveness, compliance with the set and achieved goals, the degree of reliability of the forecasts, the reliability of the methods used to evaluate the investment project. In other words, post-audit of the project is performed. The main tasks solved as part of the implementation of investment projects Making investments, as part of the implementation of investment projects, subjects of investment activities solve many different problems, pursuing their own interests. Since the list of these tasks is extremely extensive, let us consider the main tasks solved in the implementation of investment projects at the enterprise scale. As a result of the effective implementation of the investment project, the enterprise can increase its production potential by updating, qualitatively improving and quantitatively increasing fixed assets, increasing the technical level and efficiency of production and management. Thus, the first of the main tasks in the implementation of investment projects is being solved. When making investments, there is always uncertainty associated with the possibility of adverse situations arising during the implementation of the project. Incompleteness or inaccuracy of information on the volumes and prices of sales of products, on the prices of purchased raw materials and materials, equipment, components, etc., as well as on the volume and timing of investments leads to an increase in the degree of risk in the implementation of investment projects. Since the market environment is characterized by volatility and unpredictability (uncertainty of the conjuncture and market prospects) and in market conditions, the risk is almost inevitable (this applies to the greatest extent to investments, the return on which may occur in several years), insofar as when making decisions on the direction of investments, on the implementation a specific investment project requires a comprehensive analysis and justification of the project, which will significantly reduce the degree of investment risk and the associated possible financial, property and other losses. In this regard, it becomes necessary to solve the second problem of minimizing the investment risk in the implementation of an investment project. The third task is to achieve the greatest financial return (financial productivity). The main final indicator of the efficiency of the economic activity of the enterprise, including investment, is the income received. Receiving income is a prerequisite for the development and improvement of production efficiency, which largely depends on the invested capital and the efficiency of its use. Investment optimization is the fourth challenge. This task is directly related to the task of obtaining the maximum return on investment. Return on investment in various areas of production and economic activity in different regions of the country, in international projects, etc. differs significantly, therefore it is especially important not only to ensure the effectiveness of a separate production and investment project, but also to optimize the distribution of investments in the development of the economy of regions, industries, the country as a whole, taking into account international cooperation of production and management. The considered optimization refers to a greater extent to the public sector of the economy, as well as to large investment, financial and industrial organizations. The return on investment of various legal entities and individuals in shares and securities depends on the policy of forming their portfolio. The fifth task to be solved during the implementation of the project at the enterprise is to ensure the financial stability and solvency of the enterprise. The implementation of large investment projects involves the diversion of significant financial resources for a sufficiently long period of time, which can lead to a decrease in the solvency of enterprises and even to bankruptcy. In addition, when implementing large investment projects, an enterprise, as a rule, attracts borrowed funds, which, with a significant share of borrowed funds in the structure of an enterprise's assets, can lead to a decrease in its financial stability in the future. In this regard, when forming investment sources, accepting credit conditions, evaluating the effectiveness and timing of investment projects, it is necessary to conduct a deep analysis and correctly predict the financial stability of an enterprise at all stages and phases of their implementation. 6. Acceleration of the implementation of investment projects is the sixth task to be solved at the enterprise. The time factor in the implementation of an investment project plays a particularly important role. Acceleration of the implementation of investment projects can significantly reduce the degree of risk in their implementation. Reducing the time of implementation of investment projects accelerates the return on investment of financial resources and other capital by accelerating the release of products and their implementation. At the same time, the terms of using the loan and other borrowed funds are reduced, and, consequently, the interest payments on the loan. In addition, the accumulation of depreciation funds and profits, which are the sources of further development and technical improvement of production, is accelerated. The main tasks solved in the framework of the implementation of investment projects are interconnected and, in general, are aimed at solving the main task of increasing the efficiency of investment activities. ANALYSIS OF THE EFFICIENCY OF CAPITAL INVESTMENTS (REAL INVESTMENTS) - EVALUATION OF INVESTMENT PROJECTS Methodological foundations for comparative assessment of the effectiveness of investment projects Analysis and evaluation of the effectiveness of investment projects take the main place in the process of justification and selection of possible options for investing money and other capital in order to increase them. A capital investment (investment) option is accepted for implementation if it provides the investor with: reimbursement of invested funds and other capital; making a profit that ensures a return on investment not lower than the level desired for investors; return on investment within a period acceptable to the investor. The results of capital investment can be the creation of new enterprises, industries or their modernization, technical re-equipment and the sale of goods, products and services produced on them. Determining the possibility of achieving economic (or social) results when making investments is the main task of evaluating any specific investment project. This task is a difficult and crucial stage in making decisions related to investment, which is aggravated by the following circumstances. Firstly, investments can be made on a one-time basis when creating new enterprises, and repeatedly repeated throughout the implementation of production and economic activities by existing enterprises as a reinvestment process and a process for diversifying production at existing enterprises. Secondly, obtaining results from investments due to the duration of the implementation of real investment investment projects (as a rule, a year or more) has a probabilistic nature and is subject to the influence of various kinds of risks. Third, due to the duration of the implementation of real investment projects in the process of their implementation, changes in the external economic environment are very likely (in particular, changes in the tax system, financial and credit policy of the state, borrowing conditions, inflation, changes in prices for certain goods and works (services ) etc.). As a result, these circumstances can lead to significant deviations of the actual investment results from the calculated, forecast. Therefore, considerable attention is paid to the assessment and selection of rational (optimal) justified investment projects. The main document regulating the assessment of the effectiveness of the use of investments in the development and implementation of an investment project is the Methodological Recommendations for assessing the effectiveness of investment projects, approved by the Ministry of Economy of the Russian Federation, the Ministry of Finance of the Russian Federation and Gosstroy of Russia on June 21, 1999. The assessment of the commercial efficiency of a project is understood as the determination of the ratio of financial costs and results that provides the necessary rate of return for the participants in a particular project. In all cases, the assessment of the forthcoming costs and benefits in assessing the effectiveness of the project is carried out in a certain time interval, which is usually called the calculation horizon. The size of the calculation horizon is taken taking into account the following: duration of creation, operation and (if necessary) liquidation of the facility (investment project); standard service life of the main technological equipment; achievement of the specified characteristics of the cash flow associated with this investment project (rate of return, etc.); Investor requirements and preferences. The calculation horizon is measured in years, and when calculating the economic efficiency of the project, it is divided into calculation steps. Each step can be measured by one month, quarter, year. The methodological basis for assessing the effectiveness of an investment project is the definition and ratio of costs and benefits from its implementation. Another important provision that needs to be taken into account when assessing economic efficiency is discounting (bringing to the current moment) the results and costs incurred when calculating efficiency indicators. When determining the performance indicators of investment projects, the base, forecast and calculated prices for products, works (services) and consumed resources can be used. Since, as a rule, the calculation of performance indicators is carried out on the basis of prices at the date of the start of the project, the cost of the resources consumed and the products (work, services) produced is also determined in basic prices at the beginning of the investment project. All types of prices can be expressed in rubles or foreign currency. Basic principles for making investment decisions The implementation of investment projects presupposes the refusal of the investor from funds today in the hope of making a profit in the future. Moreover, as a rule, you should count on making a profit no earlier than a year after the investment. Objects of real investments (capital investments) can be real estate, business, machinery and equipment, buildings, land plots, natural resources. An investment project is primarily assessed in terms of its technical feasibility, legal feasibility, environmental safety and economic efficiency, which is understood as the profitability (rate of return) the result of comparing the profit generated by the project and the total costs incurred for this project. Obviously, when making an investment decision when choosing an investment project, preference is given to a project that is technically feasible, legally justified, environmentally safe and most economically efficient. Obviously, if there are several projects, you can get an equal amount of income, but the effectiveness of these projects can be different, since their implementation may require different costs. When evaluating the effectiveness of an investment project, one should also take into account the degree of various kinds of risk (business, financial, etc.). The main task in analyzing the effectiveness of investment projects is to calculate the future cash flows generated (projected) during the implementation of the project. Only the cash flows received during the implementation of the investment project are able to ensure the payback of the investment project. Therefore, it is cash flows, and not profit, that are the main central element of the analysis of the effectiveness of an investment project. In other words, the analysis of the effectiveness of investment projects should be based on the study of cash flows that are generated as a result of the implementation of these projects. Key assumptions in the analysis and evaluation of investment projects When analyzing investment projects, one proceeds from certain assumptions and assumptions. Each investment project is associated (correlated) with a cash flow (CF), the elements of which represent either a net outflow or a net cash inflow. The net outflow is understood as the excess of the current cash costs for the project over the current cash receipts (with the opposite ratio, there is a net inflow). A cash flow in which after investments made at the same time or over several consecutive periods, cash inflows follow, is called ordinary. If the inflows and outflows of funds alternate (in any sequence), then the cash flow is called extraordinary. Most often, the analysis is carried out by years, although this limitation is not mandatory. The analysis can be carried out for equal periods of any duration (month, quarter, year, etc.). At the same time, however, it is necessary to remember the comparability of the values of the elements of the cash flow, interest rates (discount rate and inflation) and the duration of the period. It is assumed that all investments are made at the end of the year preceding the first year of the project implementation, although in principle they can be carried out over a number of subsequent years, and, in addition, investments can be made evenly. It is also assumed that the cash inflow (outflow) refers to the end of the next year (period). At the same time, it is enough to simply take into account the effect of the distribution of funds (uniform or any other) over time. Evaluation of the effectiveness of an investment project The cost of an investment project is its cost for a specific investor. The cost of an investment project is determined on the basis of the individual investor's biased investment requirements. An investor, investing money in a business in an investment project, strives to receive, along with the return of the invested capital, also a profit on the invested capital. Therefore, the cost of an investment project is calculated based on the expected income of the investor, the investment return required by him and a specific rate on capital. An investment project can be assessed by a large number of factors: the situation on the investment market, the state of the financial market, the geopolitical factor, etc. However, in practice, there are universal methods for determining the investment attractiveness of projects that give a formal answer to the question whether it is profitable or unprofitable to invest in this project, which project to prefer when choosing from several options. The problem of assessing investment attractiveness is to analyze the expected investment in the project and the income stream from its use. A necessary condition for the expedient investment of capital is the receipt in the future of returns in the form of cash receipts sufficient to reimburse the initially (or within a certain sufficiently long interval of time) the invested costs during the period of the investment project. To judge the attractiveness of an investment project, four main components should be considered (three cost and one temporary): the first component is the volume of initial costs, investments, invested capital (1C); the second component is the potential benefits in the form of future cash flows from economic (operational) activities (operating cash flows, CF), (future value, FV); the third component is the economic life of the investment, i.e. the period of time during which the investment project will generate income (economic life N years); the fourth component is any release of capital at the end of the economic life cycle of the investment - the reverse value RV. The criteria for assessing the economic efficiency of an investment project are clearly reflected using the financial profile of the investment project (Figure 8.1). The methods used in the analysis of investment efficiency can be divided into two groups depending on whether or not the time aspect of the value of money is taken into account. Simple or static methods that do not take into account the dependence of the value of money on time. These methods allow you to obtain only approximate results and can be used only for express appraisal of projects or for appraisal of projects of short duration with a relatively even distribution of cash flows over individual periods. Dynamic methods based on taking into account the time dependence of money and suggesting the use of a procedure for discounting income and expenses at different times to bring them to a comparable form, namely, to the conditions of their commensurability in terms of economic value in the initial period. Comparative evaluation of investment projects is carried out mainly using the following dynamic indicators (evaluation criteria): net present value (net present value or integral effect of an investment project); profitability index or profitability index; internal rate of return on investment; the payback period of the investment. Method for calculating the net present value of an investment project The integral economic effect of investments is determined by the net present value (NPV). Net current (present, present) value characterizes the absolute result of the investment process. The economic attractiveness of an investment project is determined by the expression: ; = 0 K1 + H * = 1 Vі + "J Here ICj is the value of investments (invested capital) carried out during the y "th year for M years with the predicted inflation rate at the average level equal to /; FVk is the value of the annual income (cash flow) generated as a result of the implementation of the investment project during k- year over N years; d discount rate in the analyzed time interval; RVg the reduced liquidation value of the project (reversion). using the discounting procedure) can be taken at any other point in time. The formula for calculating NPV requires the following remark. When forecasting income by year, it is necessary to take into account all types of income that may be associated with a given project. So, if at the end of the project it is planned to receive funds in the form of the liquidation value of equipment or the release of part of the working capital, they should be accounted for as income of the corresponding periods. In addition, it is necessary to take into account the "echo effect" of the income stream that the business will generate in the future thanks to this investment project. The residual value, taking into account all these factors, is calculated using the Gordon formula: RV CFlN + »1 (8.2) r-g (+ r) N Here N is the duration of the forecast period when evaluating a specific project (the estimated duration of the project); CFfN + I) cash flow for the first year following the year of the end of the project; g long-term growth rate of cash flow. The final cost of the project according to the Gordon model is determined at the time of its completion, therefore, this cost must also be discounted starting from that moment. When using the Gordon model, some limiting conditions must be met: 1) the growth rate of cash flow must be stable; 2) capital investments in the post-forecast period must be equal to depreciation deductions; 3) the value of the growth rate of cash flow should not exceed the discount rate. If investments are made once, at the beginning of the investment project implementation period, then in the sum for the components of the investment cash flow one term 1C0 remains, and formula (8.1) takes the form: NPV = -1C, + + RV0. (8-3) Formula (8.3) is also suitable for the case when the investment cash flow contains more than one term, if the subscript in term 1C0 of expression (8.3) is omitted, and the value 1C denotes: The accuracy of calculating the net present value can be improved if, for the moment of discounting the cash flow, you choose not the end of the year, but its middle (this takes into account the fact that the investment project generates income continuously, and not only at the end of the billing period). Then the formula for calculating the net present value will take the following form: NPV = -Y J-, + t rVkkn, + RV0. (8.5) ft 0 + 0 "tr (i + r) * - °" 5 It is also taken into account that investments in normal conditions are carried out impulsively at the beginning of each settlement period. If investments are made continuously (not impulsively), but at an approximately constant rate during the year with number j, then the last expression will slightly change: XPV = -Y LTr + Y * + RV0. (8-6) The logic of using the npv criterion for decision making is obvious. If the cost npv> 0, then the project should be accepted, if npv< 0 -отвергнуть, если npv = О, то проект ни прибыльный, ни убыточный. Положительное значение npv отражает величину дохода, который получит инвестор сверх требуемого уровня. Следует особо прокомментировать ситуацию, когда величина npv инвестиционного проекта равна нулю. В этом случае инвестор обеспечит возврат вложенного капитала, достигнув требуемого уровня доходности вложенного капитала (который задается ставкой дисконтирования). В случае реализации такого проекта благосостояние инвестора не изменится, однако объемы производства возрастут. Поскольку часто увеличение производственного потенциала предприятия оценивается положительно, проект все же принимается к реализации. The absolute value of the net present value depends on the parameters of two types. The former characterize the investment process objectively, since they are determined by the production process (more products, more revenue; less costs, higher profits, etc.). The second type is the subjective parameter comparison rate (discount rate). The value of this rate is the result of the choice, the subjective judgment of the investor, the analyst, i.e. the value is conditional, and the npv indicator reflects the forecast assessment of changes in the economic potential of the enterprise in the event of the adoption of the project under consideration. Due to this, it is advisable, when analyzing investment projects, to determine npv not for one discount rate, but for a certain interval of rates. Considering the properties of NPV, there is one more property that needs to be considered. The fact is that at a high level of the discount rate, incomes distant in time have a small effect on the value of npv. Due to this, projects that differ in the duration of the payback period may turn out to be practically equal in terms of the final economic effect. The NPV indicator has an important additivity property, i.e. npv of different projects can be summarized. This is a very important property that distinguishes this criterion from all the others and allows it to be used as the main one in the analysis and selection of an investment project. Typical Errors When Using the Net Present Value Criterion When evaluating investment projects based on the use of the net present value criterion, the following two typical mistakes are often made. 1. The amount of investment should be brought to the current moment (discounted) at a discount rate equal to the predicted inflation rate / at the average (over the life of the investment project) level, and not the value r, as investment analysts sometimes do. The reason for this choice of the discount rate equal to the value of / is that for the investor (playing a fair investment game consciously and responsibly) the value of future investment costs (in accordance with the principle of “future money is cheaper than the present”) on the scale of the present decreases only because of inflation. Other components of various kinds of risks _ are taken into account when constructing the discount rate r, on the basis of which the values are recalculated (the values of the annual income generated as a result of the implementation of the investment project). The investor's interest and responsibility lies, among other things, in the exact fulfillment of his investment obligations in the risk-free provision of capital investments within the agreed time frame and in the agreed volumes. Otherwise, we will talk about a completely different investment project, and not about the one that was initially accepted for consideration, analysis and implementation. In other words, the probability of making investments for a given investor in this case should be taken equal to one (the risk is zero). Of course, in this case, the probability of obtaining projected cash income is less than one (and the less, the higher the risk, which is taken into account when constructing the discount rate). 2. It is necessary to warn against a typical error, which is often found both in textbooks and in the analysis and evaluation of investment projects (and when using the method of discounting cash flows kov in the theory of property valuation) incorrect discounting at a variable value of the discount rate, i.e. in the case when this value changes from year to year (period from period): r, r2, -, rN; i0, ih i2, / ^ the corresponding formula is converted to an erroneous form: At the same time, it is obvious that the calculation by formula (8.7) assumes that the discounting of the monetary value corresponding to a certain year occurs from this year directly to the point of reduction (in our case to zero) in a kind of jump, bypassing all intermediate years, which is impossible. The consequence of this approach is significant errors in the calculation, and the greater, the greater the difference in the values of the discount rate (inflation index) for each year. The correct ratio is as follows: NPV = -IC0 ~ ^ ... ^ + 0 1 + 1, (i + i,) (i + / 2) (i + ai + i2) ... (i + i „) L + 2 + _ + N _ (g8) 1 + (l + / i) (l + r2) (l + r,) a + r2) ... (l + rw) So, if the value of the discount rate r is not constant (changes from period to period), then the current value of the cash flow of the investment project for N periods is determined in general form from the ratio containing not only summation, but also the product: NPV = - / C + 2, (8.9) where + r,) = (1 + r,) x (1 + r2) x ... x (1 + r „); G; discount rate in the period with number /. The same applies to the case when a variable inflation rate is assumed from year to year. In this expression, the sequential transition along the arrow of time from year to year (and, accordingly, discounting) occurs sequentially from one year to the next, etc., up to the zero (initial) moment, i.e. without "jumping" from the future to the present, bypassing the intermediate years. An example of calculating the net present value of an investment project 1 + 0,1 1 + 0,15 (1+0,15)0 + 0,13) (1 + 0,15)(1+ 0,13)(1 + 0,12) 100 36,4+43,5 + 53,9 + 55,0+13,7 = 29,7. (1 + 0,15)0 + 0,13)0 + 0,12) So, the net present value of this investment project is 29.7 thousand rubles. NPV = (1 + 0.11) "2 (1 + 0.14)" 2 (1 + 0.14) 3/2 (1 + 0.14) 5/2 ~ -70 30 60 40 W SHGSHGyvG-bb "4 + 2b "1 + 49.3 + 28.8 = -6b, 4 + 10b, 2 = 39.8 thousand rubles. Method of calculating the return on investment index The method for calculating the return on investment index (profitability index, NPI) is, in fact, a consequence of the previous one. The calculation of the profitability index PI of the project, equal to the ratio of discounted income (positive component of the NPV value) to the value of discounted investment costs, is carried out according to the formula: PI = NPV (+) / NPV (_y (8.10) The equivalent of this expression is the following obvious relationship: Р1 = i-r- ■■ (8-n) Obviously, if the inequality PI> 1 is satisfied (this is equivalent to the condition NPV> 0), the project should be accepted if PI< 1 (т.е. NPV< 0), то проект следует отвергнуть, если PI = 1 (NPV = 0), то проект является ни прибыльным, ни убыточным инвестиционная стоимость равна нулю. Unlike the net present value NPV, which is an absolute value measured in rubles, the profitability index PI is a relative indicator. Due to this, it is very convenient when choosing one project from a number of alternative ones that have approximately the same NPV values, or when completing an investment portfolio with the maximum total value of the net present value NPV. Let's illustrate the method with the data from Example 8.1: p1_ NPV + W _ 29.7+ | -136.4 | = 166.1 = 1 2, 1C -136.4 136.4 " This equation is transcendental and cannot be solved explicitly (except for the case when the project is, for example, one-year, i.e. the sum of cash flows over the years degenerates into a single term). The most visual representation of the essence of the IRR criterion (and at the same time is one of the ways to solve the problem) is provided by the graphical method. Consider some obvious properties of the NPV (z) function. When r = 0, the expression on the right-hand side of formula (8.1) is converted into the sum of the components of the original (undiscounted) cash flow, including the amount of investments, while the value of the net present value takes on its maximum value. For an investment project, the cash flow of which can be called classical (in the sense that outflow (capital investment) is replaced by inflows that in total exceed this outflow), the corresponding function NPV (r) is decreasing, i.e. with an increase in r, the graph of the function tends to the abscissa axis and crosses it at some point, which is exactly the IRR (Fig. 8.2). We will do the same based on the data in Example 8.2: PI = NPV ^ / NPV ^ = 106.2 / 66.4 = 1.60. Method for calculating the internal rate of return (rate of return) of an investment project The internal rate of return (IRR) of an investment project is understood as the value of the discount coefficient r, at which the project's net present value, NPV, of the project is zero. In other words, the project's internal rate of return is the root of the equation: NPV (r) = NPV (IRR) = 0. It is necessary to point out an obvious mistake that wanders from textbook to textbook, which consists in the conclusion that the IRR criterion does not have the additivity property from the nonlinearity property of the NPV (r) function. It is easy to see that even for the hypothetically linear character of the function f (r), the roots of the equations f, (r) = 0, f2 (r) = 0, ... are non-additive. The nonadditivity of the IRR criterion has nothing to do with the nature of the NPV (r) function. The enterprise organizes financing of its activities, including investment, from various sources. Payment for the use of financial resources includes: for borrowed funds, interest on a loan, for attracted share capital, dividends to shareholders, remuneration, etc. The indicator characterizing the relative level of these costs is called the weighted average cost of capital (WACC). It reflects the minimum required return on capital of the enterprise and is calculated using the formula of the arithmetic weighted average: WACC = rWACC = rsxws + rpxwp + rDxwDx (ltc). (8.12) Here rs is the cost of equity capital, the cost of raising equity capital (ordinary shares); ws share of ordinary shares in the capital structure of the company; гР cost of attracted capital, cost of raising equity capital (preferred shares); ws share of preferred shares in the capital structure of the company; rD cost of borrowed capital, cost of attracting loans; wD the share of borrowed capital in the capital structure of the enterprise; tc corporate income tax rate. Or, on the other hand, the last formula can be written as: WACC = rWACC ^ rqxwq, where rq is the price q-vo of the source of funds; wqspecific weight of the g-th source of funds in their total volume; Q is the number of sources of funds. The economic sense of using the criterion of the internal rate of return IRR is as follows: IRR shows the maximum allowable relative level of costs for the project. At the same time, the company can implement any investment projects, the level of profitability of which is not lower than the current value of the cost of capital indicator (CC). The latter is understood as the WACC or the price of the target source, if any. It is with the CC indicator that the IRR criterion calculated for a specific project is compared. Moreover, if: IRR> CC, then the project should be accepted; IRR< СС, то проект следует отвергнуть, поскольку цена капитала слишком велика для такого инвестиционного процесса; IRR = СС, то проект не является ни прибыльным, ни убыточным. При прочих равных условиях большее значение IRR считается предпочтительным. By definition, the internal rate of return of a project is the solution to the transcendental equation. Such an equation cannot be solved analytically, and numerical methods are required to solve it. However, for the case when there are not too many terms in the equation, it can be solved by the selection method using the method of successive iterations. For this, two arbitrary values of the discount coefficient Г /< г2 должны быть подобраны таким образом, чтобы соответствующие значения функций NPV (г}) и NPV (г2) имели разный знак, например: NPV(rt) >Oh, a NPV (r2)< 0. Тогда справедлива приближенная формула: Ш = Гі + NPV (ri) (r2-r,). (8.13) 1 NPV (rx) -NPV (r2) 2 1 The accuracy of the iterations is inversely proportional to the width of the interval (rh r2). If the accuracy of the calculations is insufficient, they are repeated with new, closer values of the discount coefficient. An example of calculating the internal rate of return of an investment project Example 8.3. Let's calculate the value of the internal rate of return of the investment project, the structure of cash flows of which is presented in table. 8.3, assuming a one-time investment (investment) and income at the end of each year. Since this indicator is relative and does not depend on the unit of measure of cash flow, cash flow is measured in conventional unitless units. Since in this case the sum of the undiscounted components of the cash flow slightly exceeds the modulus of the investment value (10.5 and 8.0, respectively), the IRR value will be insignificant. Let's assume that the IRR is in the range (5.10 \%). Then, having calculated the value of JVPV (5 \%): 1.05 1.052 1.053 1.054 1.055 and then the value of NPV (10%).
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Discounted Cash Flow (PV)
Example 8.1. Let's calculate the value of the net present value of the investment project, which is characterized by the following data: the duration of the project is 3 years, the liquidation value is 20 thousand rubles, the projected inflation index is 10%. The values of cash flow and investments (referred to the end of the corresponding year) are given in table. 8.1.
Example 8.2. Let's calculate the value of the net present value of the investment project as of 01.01.2000, which is characterized by the following data: the duration of the project is 3 years, the liquidation value is zero, the predicted inflation index is 11%, the capital price is 14%. The values of cash flow and investments (referred to the entire corresponding year) are given in table. 8.2.
NFVmax
