Investment Performance: How to Calculate Wins and Failures. Main criteria for assessing the effectiveness of investments Efficiency of investments

State regulation of investment activities, i.e. investment policy, carried out in accordance with state investment programs in the following ways:

direct management of public investments;

introduction of a tax system with differentiated tax rates and benefits;

providing financial assistance in the form of subsidies for the development of individual territories and industries;

carrying out appropriate financial and credit policies, pricing (including the issue of securities), depreciation policies;

control over the application of norms and standards, as well as compliance with the rules of mandatory certification, etc.

The enterprise independently determines the volumes, directions, size and efficiency of investments. It attracts, on a contractual basis, primarily on a competitive basis, individuals and legal entities necessary for the implementation of investments.

The choice of investment direction is determined by many circumstances. The most important among them are the following:

investment climate in the country;

the state of the production and technical base of industrial enterprises;

credit policy;

the level of development of reproductive market infrastructure and the system for attracting and disbursing capital investments;

taxation system, level of development;

legislative framework in the field of investment activities.

Since enterprises do not have sufficient financial resources to maintain production in accordance with market requirements, they face two tasks: firstly, to justify to investors the attractiveness and need for introducing new fixed assets (modernization), and secondly, to prove the attractiveness of the project based on an assessment its effectiveness.

Basic economic parameters of investments

There is a system of indicators that reflect the ratio of costs and results in relation to the interests of participants in the investment project:

expected profitability indicators from investing in the project, as well as indicators of commercial (financial) efficiency, taking into account the financial consequences of the project for its direct participants;

economic efficiency indicators, taking into account the costs and results associated with the implementation of the project;

social and environmental impact indicators, as well as costs associated with social activities and environmental protection.

The immediate result of capital investment in economic terms is the introduction or modernization (reconstruction) of fixed assets, and the final result is an increase in production volumes.

Therefore, the economic efficiency of capital investments made (Ef) should be considered as the ratio of the increase in production volumes (Q) to the volume of capital investments (K) that caused this increase:

There is a certain period of time between investments and receiving the effect from them - lag lag. The company strives to reduce it even at the stage of justifying the choice of an investment project.

Economic efficiency of investments

The methodology and methods for assessing the effectiveness of investment projects in the Russian Federation, regardless of the form of ownership, are defined in the Methodological Recommendations for assessing the effectiveness of investment projects and their selection for financing, approved by the State Construction Committee of Russia, the Ministry of Economy of the Russian Federation, the Ministry of Finance of the Russian Federation, the State Committee for Industry of Russia on March 31, 1994 No. 7 -12/47.

commercial (financial) efficiency, those. financial consequences of the project for its direct participants;

budget efficiency - financial consequences of the project for the federal, regional and local budgets;

economic efficiency - costs and results associated with the implementation of the project that go beyond the direct financial interests of the participants in the investment project and allow for cost measurement.

The basis for assessing the effectiveness of investment projects is the determination and correlation of costs and results of their implementation.

The assessment takes into account discounting of listed indicators, i.e. bringing them to the cost at the time of comparison. This is due to the fact that revenues and expenses are incurred at different times and have different meanings. Income received in an earlier period is worth more than income received in a later period. The same goes for costs.

Estimated prices are determined by multiplying the base price by a deflator corresponding to the inflation index (increase in the average price level in the economy) by the resource or product.

Forecast and estimated prices are used at the feasibility study stage of investment projects.

Estimated prices are used to determine integral performance indicators in cases where current values ​​of costs and results are accepted in forecast prices. This is necessary to ensure comparability of results obtained at different levels of inflation.

Performance assessment investment projects are carried out by calculating a number of indicators.

Net present value(NPV), is defined as the sum of current effects for the entire calculation period, reduced to the initial step, formula

Where R t - results achieved at the t-th calculation step;

3 t - costs incurred on t-m step;

T - time period of calculation (years);

E - discount rate.

- discount factor

The time period for the calculation is taken based on the timing of the project.

If the NPV of an investment project is positive, then it is considered effective, i.e. ensuring a level of investment not less than the accepted discount rate.

Discount rate(E) is the return on capital ratio (the ratio of the amount of income to capital investments), at which other investors agree to invest their funds in the creation of projects of a similar profile.

If the discount rate changes over time, then the formula looks like this:

where E k is the discount rate in k-m year;

t - time period taken into account, year.

Profitability index(ID) of investment is the ratio of the amounts of the reduced effect to the amount of investment (K):

.

If the profitability index is equal to or greater than one (ID => 1), then the investment project is effective, and if it is less than one (ID< 1) - неэффективен.

Internal rate of return(IRR) of investments represents the discount rate (E inn) at which the value of the reduced effect is equal to the reduced investment, i.e. E inn is determined from the equality

The rate of return calculated using this formula is compared with the return on capital required by the investor. If the IRR is equal to or greater than the required rate of return, then the project is considered effective.

Payback period. This indicator is important from the standpoint of knowing the time to return the initial investment, i.e. whether the investment will pay off over its life cycle.

Payback is calculated using the following formula:

,

where Kok is payback, months (years);

C - net investment, rub.;

Der - average annual cash inflow from the project, rub.

However, from an economic point of view, simply returning the invested funds is unacceptable, since the investor must earn a profit on the invested funds. He must make a profit throughout the entire life cycle of the investment (equipment, development of a new project) after the payback period.

The payback indicator is not a criterion for the profitability of the project, since it does not reflect the life cycle of the investment. Therefore, in practice, investments are considered in terms of return on the initial investment and are calculated using the formula:

where R I is return on investment, %;

M n - profit after taxes, rub.;

K - investment (initial).

To convert cash flows into equivalent cash amounts, regardless of the time of their occurrence, use accrual at the compound discount rate.

In practice, out of two investment proposals, an investor prefers the one that will give income earlier, since this allows him to invest again and earn a profit.

The longer the waiting period, the lower the present discounted value of money to be received in the future, because each additional waiting period increases the opportunity to earn a profit during that period.

The main problem arising in connection with the need to make investments is the choice (in the absence of financial resources) of those investments that are expected to give the desired level of profitability with an acceptable degree of risk.

The minimum rate of return is a level sufficient to compensate for the risk of implementing the project and the impact of costs due to lost opportunities.

To take into account risk factors it is used stability method, consisting of scenarios of the most likely options for project implementation or the most “dangerous” situations. For each scenario, probabilistic income, losses and performance indicators are established.

There are three types of enterprise investment policy:

Conservative (its goal is to minimize disruptions in the process of implementing an investment project).

Compromise (the level of profitability and the probability of deviation from planned targets are close to the average values ​​characteristic of a market economy).

Aggressive (the goal is higher profitability compared to the average level with an increase in the ability to eliminate losses).

Investment projects can be assessed according to many criteria - in terms of their social significance, the scale of their impact on the environment, the degree of involvement of labor resources, etc. However, efficiency is central to these assessments.

In general, efficiency is understood as the correspondence of the results obtained from a project - both economic (in particular profit) and non-economic (relief of social tension in the region) - and the costs of the project.

The effectiveness of an investment project is a category that reflects the compliance of the project that generates this IP with the goals and interests of the project participants, which are understood as subjects of investment activity (discussed above) and society as a whole. Therefore, the term “effectiveness of an investment project” is understood as the effectiveness of the project. The same applies to performance indicators.

Among the basic principles and approaches that have developed in world practice to assessing the effectiveness of investment projects, adapted for the conditions of transition to a market economy, the following can be distinguished:

• modeling of flows of products, resources and funds;
• taking into account the results of market analysis, the financial condition of the enterprise applying for the implementation of the project, the degree of trust in the project managers, the impact of the project on the environment, etc.;
• determining the effect by comparing upcoming results and costs with a focus on achieving the required rate of return on capital and other criteria;
• bringing forthcoming expenses and income at different times to the conditions of their commensurability in terms of economic value in the initial period;
• taking into account the impact of inflation, delays in payments and other factors on the value of the funds used;
• taking into account the uncertainty and risks associated with the implementation of the project.

It is proposed to evaluate the following types of effectiveness:

1) the effectiveness of the project as a whole;

2) effectiveness of participation in the project.

The effectiveness of the project as a whole. It is assessed in order to determine the potential attractiveness of the project and the feasibility of its adoption for possible participants. It shows the objective acceptability of an individual entrepreneur, regardless of the financial capabilities of its participants. This efficiency, in turn, includes:

Public (socio-economic) effectiveness of the project;

Commercial effectiveness of the project.

Social efficiency takes into account the socio-economic consequences of the implementation of an investment project for society as a whole, including both the direct costs of the project and the results of the project, as well as “external effects” - social, environmental and other effects.

The commercial effectiveness of an investment project shows the financial consequences of its implementation for the individual entrepreneur, assuming that he independently makes all the necessary costs for the project and benefits from all its results. In other words, when assessing commercial efficiency, one should abstract from the capabilities of project participants to finance IP costs, conditionally assuming that the necessary funds are available.

Effectiveness of participation in the project. It is determined in order to verify the financial feasibility of the project and the interest of all its participants in it. This efficiency includes:

The effectiveness of enterprises’ participation in the project (its effectiveness for enterprises participating in the investment project);

Efficiency of investing in company shares (efficiency for JSC shareholders - participants in the investment project);

The effectiveness of participation in the project of higher-level structures in relation to enterprises participating in the IP (national economic, regional, sectoral and other efficiency);

Budgetary efficiency of individual entrepreneurs (the effectiveness of state participation in the project in terms of expenses and revenues of budgets of all levels).

General scheme for assessing the effectiveness of an investment project. First of all, the social significance of the project is determined, and then the effectiveness of the IP is assessed in two stages. At the first stage, performance indicators of the project as a whole are calculated. In this case:

• if the project is not socially significant (local project), then only its commercial effectiveness is assessed;
• for socially significant projects, their social effectiveness is first assessed (methods for such assessment are outlined in general terms in the “Methodological Recommendations”).

If such effectiveness is unsatisfactory, then the project is not recommended for implementation and cannot qualify for government support. If social efficiency is acceptable, then commercial efficiency is assessed. If the commercial efficiency of a socially significant individual entrepreneur is insufficient, it is necessary to consider various options for supporting it, which would increase the commercial efficiency of the individual entrepreneur to an acceptable level. If the conditions and sources of financing for socially significant projects are already known, then their commercial effectiveness need not be assessed.

The second stage of assessment is carried out after the development of a financing scheme. At this stage, the composition of participants is clarified and the financial feasibility and effectiveness of participation in the project of each of them is determined. We can formulate the main tasks that have to be solved when assessing the effectiveness of investment projects:

1. Assessing the feasibility of the project - checking whether it satisfies all actually existing restrictions of a technical, environmental, financial and other nature. Typically, all restrictions, except financial feasibility, are checked in the early stages of project formation. The financial feasibility of an investment project is ensuring such a structure of cash flows in which at each step of the calculation there is a sufficient amount of money to implement the project that generates this IP. Accordingly, the cash flows of an investment project are understood as the cash flows of the project associated with this individual entrepreneur.

2. Assessing the potential feasibility of implementing the project, its absolute effectiveness, that is, checking the condition according to which the total results of the project are no less valuable than the required costs of all types.

3. Assessment of the comparative effectiveness of the project, which is understood as an assessment of the advantages of the project under consideration compared to the alternative.

4. Evaluation of the most effective set of projects from their entire set. Essentially, this is an investment project optimization problem, and it generalizes the previous three problems. As part of solving this problem, it is possible to rank projects, that is, select the optimal project.

Basic methods for assessing the effectiveness of investment projects

There are two groups of methods for evaluating investment projects:

1. simple or static methods;

2. discounting methods.

Simple or static methods are based on the assumption of equal importance of income and expenses in investment activities and do not take into account the time value of money.

Simple ones include: a) calculation of the payback period; b) calculation of the rate of return.

The rate of return shows how much of the investment costs are recovered as profits. It is calculated as the ratio of net profit to investment costs:

Rate of return = Net profit / Investment costs.

Discounted methods for assessing the effectiveness of an investment project are characterized by the fact that they take into account the time value of money.

When economically assessing the effectiveness of an investment project, indicators widely known in world practice are used:

Present value (PV);

Net Present Value (NPV);

Payback period (PBP);

Internal rate of return (IRR);

Profitability Index (PI).

Present value (PV). The task of any investor is to find a real asset that would ultimately bring income that exceeds the cost of its acquisition. In this case, a complex problem arises: money must be spent today (at the moment t = 0) to purchase a real asset, but the investment usually does not give a return immediately, but after a certain period of time (at the moment t = 1). Consequently, to solve the problem, it is necessary to determine the cost of a real asset, taking into account the remoteness in time of future receipts (income) from its use.

In general, to find the present value PV of any asset (real or financial) used during a certain holding (investment) period, it is necessary to multiply the expected income stream from this asset (C) by the value 1/(1 + r):

PV = C * (1/(1+r)) ,

where r determines the return on the best alternative financial instrument with the same holding period and similar level of risk.

The value 1/(1+r) is called the discount factor (discount factor). The return on an alternative financial instrument r is called the discount rate. The discount rate determines the opportunity cost of capital because it characterizes how much benefit the firm missed out on by investing money in real assets rather than in the best financial alternative.

To determine the feasibility of purchasing a real asset worth C0 rubles, you must:

a) estimate what cash flow C1 expects from the real asset for the entire holding period;

b) find out which security with the same holding period has the same level of risk as the planned project;

c) determine the yield r of this security at the present time;

d) calculate the present value PV of the planned cash flow C1 by discounting the future income stream:

PV = C1 / (1+r) ;

e) compare investment costs C0 with the present value PV:

if PV > C0, then the real product can be purchased;

if PV = C0, then a real asset can be bought or not bought (that is, from an economic point of view, investing in a real asset has no advantage compared to investing money in securities or other objects).

If an investment project is designed for several steps (in particular, n years), then to find the present value of future income from the project it is necessary to discount all amounts Ct that the project must provide:

PV = Σ Ct / (1+r)^t .

For example, for an investment project designed for three years, the present value is estimated as follows:

PV = Ct / (1+r) + Ct / (1+r)^2 + Ct / (1+r)^3 .

Some funds can provide a continuous stream of income indefinitely. The present value of such a facility at a given and constant discount rate r is:

PV = Ct / (1+r) + Ct / (1+r)^2 + Ct / (1+r)^3 + ... = C / r .

The present value of an annuity that provides income stream C for n periods (years) at a constant discount rate r is calculated using the formula:

PVannuity = C * Fannuity,

where F annuity is the annuity factor, which is determined as follows:

Annuity F = 1/r - 1/(1+r)^n .

Net Present Value (NPV)

The feasibility of acquiring a real asset can be assessed using net present value (NPV), which is understood as the net increase in the potential assets of the company due to the implementation of the project. In other words, NPV is defined as the difference between the present value of the PV of the asset and the amount of initial investment C0:

NPV = Σ Ct / (1+r)^n - C0 .

Payback period (PVR)

The payback period of a project is the period over which the initial investment costs are recovered, or the number of periods (calculation steps, for example, years) during which the accumulated amount of estimated future income streams will be equal to the amount of the initial investment. As a rule, the company itself sets an acceptable deadline for completing the investment project, for example, k steps. This period is determined by the company on the basis of its own strategic and tactical guidelines: for example, the company’s management rejects any projects lasting more than 5 years, since after 5 years the company is planned to be repurposed to produce other products.

When the completion date k of alternative projects is determined, then the payback period of the project under evaluation can be found by calculating how many calculation steps m the sum of cash flows C1+C2+...+Cm will be equal to or begin to exceed the value of the initial investment C0. In other words, to determine the payback period of a project, it is necessary to consistently compare the accumulated amounts of income with the initial investment. According to the payback period rule, a project can be accepted if the following condition is met: m

Internal rate of return (IRR)

The internal rate of return is the estimated discount rate at which the net present value of the project is zero.

It is found by solving the following equation:

NPV = C0 + C1/(1+IRR) + C2/(1+IRR)^2 + C3/(1+IRR)^3 + ... + Cn/(1+IRR)^n = 0 .

This equation is solved by iteration. To calculate IRR, you can use specially programmed calculators or computer programs. Rule of internal rate of return: it is necessary to accept those projects whose discount rate (that is, the opportunity cost of capital) is less than the internal rate of return of the project (r

The profitability index (PI) is understood as a value equal to the ratio of the present value of the expected cash flows from the project to the initial cost of investment:

The profitability index shows how much an investor receives per invested ruble. The rule of the profitability index is as follows: it is necessary to accept only those projects whose profitability index value exceeds one. When evaluating two or more projects that have a positive profitability index, you should choose the one that has a higher profitability index.

The effectiveness of the IP is assessed during the calculation period - the investment horizon from the start of the project to its liquidation. The start of a project is usually associated with the start date of investment in design and survey work. The calculation period is divided into calculation steps, which are periods of time within which data is aggregated to estimate cash flows and cash flows are discounted.

Calculation steps are usually numbered (step 0, step 1, step 2, etc.). The duration of calculation steps is measured in years or fractions of a year, their sequence is counted from a fixed moment t0 = 0, taken as the base one. For reasons of convenience, the moment of the beginning or end of the zero step is usually taken as the base one. If several projects are being compared, it is recommended to choose the same base point for them. When the base moment coincides with the beginning of the zero step, the moment of the beginning of step number m is denoted by tm, but if the base moment coincides with the end of step 0, then tm denotes the end of the calculation step m. The duration of different steps may vary.

Source - Maksimova V.F. Investment management: Educational and practical manual. – M.: Publishing house. EAOI center. 2007. – M., 2007. – 214 p.

The idea of ​​any capital investment must be justified by calculations investment efficiency and fulfilling the key task: to what extent will future income cover current (current) expenses? This question must be answered by every investor - from private individuals to the state.

Based on this, the theoretical foundations of investment analysis of the methods and indicators that make up the system for calculating the effectiveness of investment activities (attractiveness).

World experience has accumulated a significant number of methods and techniques of investment analysis, which are beginning to spread in our country. The investment efficiency methods themselves can be divided into three groups:

1) methods for assessing the effectiveness of investments using the ratio of cash receipts (positive flows) to costs (negative flows). These methods are traditional today;

2) methods for assessing the effectiveness of investments after analyzing financial statements;

3) methods for assessing the effectiveness of investments, based on the theory of the so-called time value of money.

Using these methods, a complete investment analysis of the effectiveness of projects is carried out, that is, the investment attractiveness-power (efficiency) of investment directions, as well as individual programs (projects) or objects, is assessed and compared.

Grade investment efficiency

There are three types of investment efficiency assessment: financial (commercial), budgetary and economic.

Financial assessment involves determining the financial results of the project for its direct participants. It is based on the expected rate of return, which suits all investment subjects. At the same time, other consequences of the project implementation are not taken into account.

Budgetary performance assessment reflects the financial implications of this for different levels of budgets, i.e. expected ratios of expenses, taxes and fees. An indicator of the budgetary efficiency of project implementation is the difference between taxes and expenses of a certain budget level, the extent of which depends on the implementation of a specific project.

The economic efficiency of an investment project is the difference between results and costs beyond the financial efficiency of the direct participants in the project. Economic assessment characterizing the effectiveness of the project for the national economy as a whole or for an industry, group of enterprises, region, etc.

Depending on the type of performance assessment, certain methods of investment analysis are implemented. Traditional methods of investment analysis have been used for a very long time, and after the emergence of the time theory of money they are used in parallel with methods that are based on the concept of discounting. Traditional methods of investment analysis are based on calculating such methods and indicators as the rate (coefficient) of efficiency (profitability) and the period (term) of return on investment. The efficiency rate is calculated as a certain ratio of total cash receipts from the actual (real) cost to the amount of capital investments that are aimed at implementing the entire investment project. Moreover, if the investment efficiency rate is less than one, the project should be rejected as unprofitable and which will not bring the predicted additional income to the investor.

Evaluating the effectiveness of investments.

The effectiveness of investments is determined by solving a set of problems. These include assessing project feasibility, absolute project effectiveness, and comparative effectiveness.

The feasibility of a project means the possibility of its implementation subject to all financial, technical and economic parameters. The absolute effectiveness of a project implies that the significance of the achieved results exceeds the resource costs incurred. Comparative effectiveness refers to the possible effectiveness when comparing various alternative project options.

Efficiencyinvestments of a separate project.

The possible effectiveness of individual ones is characterized by a system of indicators that reflect the ratio of resource and material costs and future results in the interests of participants in the investment project. At the same time, the effectiveness of investments can be reflected by the ratio of the project result to the costs incurred for it. The effect of an investment can be calculated as the result of the difference between the result and the costs.

Types of investment efficiency.

There is financial (commercial), budget and investment.

Commercial - characterizes the investment attractiveness of the project itself for investors and its financial solvency. Budget - shows the financial consequences of the project for the budgets of the federal, regional or local levels. Economic - takes into account costs and correlates them with results, while taking into account all costs that go beyond the direct interests of the participants in the investment project, which can be expressed in terms of value.

When assessing the effectiveness of investments, the socio-economic effectiveness of investments is also carried out, that is, all possible economic and social consequences of the project are examined, as well as all costs that will be associated with social events and activities

Results and cost indicators are assessed within the billing period. Its duration depends on the duration of the creation and development of the facility, the service life of technical equipment, the conditions for achieving the planned profit characteristics, as well as the specific requirements of investors.

The effectiveness of investments is assessed using UNIDO methods. In Russian practice, those developed according to it are used to assess the effectiveness of projects in order to select them for future financing. Valuation methods are divided into simplified ones used for initial pre-selection and those that take into account changes in the value of money over time.

investments.

The return period (payback) expresses the relationship between net investment and proceeds from the implementation of investment decisions.

The simple rate of return expresses the part of the costs that is reimbursed in the form of profit per one investment planning interval.

Accounting shows the effectiveness of investments as a percentage of cash receipts in relation to the initial amount of investment.

The accounting payback ratio is calculated by dividing the annual average profit by the average cost of investing capital.

Assessing the effectiveness of capital investments is of great importance in running a business. If the provided investment funds are used inappropriately, low returns, or their lack, you need to think about the need to select the most effective methods for analyzing projects being implemented or planned for implementation.