Justification of expediency of participation in the investment project. Determining the economic feasibility of an investment project average sales
For a newly created industrial production of obtaining products with given consumer qualities on the set We = Me x Re x Se, find such an option w * e We, for which the sum of the weighted relative losses of individual criteria has a minimum value. The definition of the w* option is carried out using indicators:
net present value;
profitability index;
discounted payback period.
The set We is a Cartesian product of the sets of options: the conditions for the sale of finished products Me, the financing schemes for the investment project Re, and the sources of financing for the investment project Se.
In a formalized form, the task is to find the minimum of the objective function Fe (we):
*
w = argmin Fe (we), (3.65)
weWe
when fulfilling restrictions on system performance indicators
themes:
c-NPV^ w G7 NPV, zad. fl
(3.67)
FT7 (we) > F«p-d;
Fe (we) > Fe " ; (3.66)
(3.68)
F^co(we)^;
connection equations representing mathematical models:
formation of options for sources of financing of the investment project
M1 (A, PR, IC, CR) = 0, (3.69)
formation of options for the conditions for the sale of products obtained during the implementation of the project
M2(D, P, RC) = 0, (3.70)
- formation of variants of investment project financing schemes
M3(TP, FC) = 0. (3.71)
Here W is a set of possible options for synthesizing cash inflows and outflows for an investment project, We = Me x Re x Se, Me is a set of options for the conditions for selling finished products, Re is a set of options for project financing schemes (sequence of financing), Se is a set of options for sources investment project financing; we t = (mopt; ropt; sopt) is the best option.
Fe4nG "zad - a given value for the NPV indicator (as noted in section 1.2, the rule for making a decision on an investment project using this criterion is such that for an economically efficient project NPV > 0). However, it will not be advisable for the investor to accept the option, the value of the NPV of which will be equal, for example, to 10 rubles, therefore, as the optimal value of the NPV, we will take an acceptable value of the indicator corresponding to the scale of the investor;
F^hp, zad - the given value of the IR indicator (as noted in Section 1.2, the rule for making a decision on an investment project using this criterion is such that for an economically efficient project IR > 1);
F ^ co "zad - the specified value of the DSO indicator (as noted in section 1.2, the rule for making a decision on an investment project using this criterion is such that for an economically efficient project, the calculated DSO is less than the DSO expected by the investor). The shorter the period the time during which the investor will be able to fully reimburse the costs of the project, the more favorable this project is for him.
Based on the study of the market for products that are produced at the enterprise, the possibility of increasing effective demand for it has been established. In this regard, the company is considering the feasibility of acquiring a new production line to increase production in order to increase sales. The assessment of a possible increase in sales volume is established on the basis of an analysis of data on the potential opportunities of competitors. The cost of the line (capital investment for the project) is $18,530; service life - 5 years; profit net of tax on it from the sale of fixed assets at the end of their service life will be $926.5;. cash flows (profit minus tax on it and depreciation deductions from the cost of fixed assets put into operation at the expense of capital investments) are forecasted for years in the following volumes: $5406, $6006, $5706, $5506, $5406. The discount rate for determining the present value of cash flows is assumed to be 12% and 15%. The threshold rate for assessing the calculated level of the internal rate of return is set at 16%. The payback period of capital investments acceptable for the enterprise, calculated according to the data on cash flows and the present value of cash flows, is 5 years. Is this project feasible for implementation?
2.2. Determination of present net worth
a) At a discount rate of 12%.
b) At a discount rate of 15%.
2.3. Determination of the internal rate of return
Table 2.1.
Initial data for calculating the IRR indicator.
Cash flows, $ | |||||
Based on the calculations given in Table. 2.1, we can conclude that the function NPV=f(r) changes its sign on the interval (15%,16%).
2.4. Determining the payback period (according to cash flow data)
The investment is $18530 in year 0. Cash flows for a five-year period are: $5406, $6006, $5706, $5506, $5406. The income will cover the investment for 4 years. For the first 3 years, income is:
$5406 + $6006 + $5706 = $17118
For 4 years you need to cover:
$18530 - $17118 = $1412,
$1412/ $5506 = 0.26 (approximately 4.1 months).
The total payback period is 3 years 4.1 months.
2.5. Determination of the payback period (according to the present value of cash flows)
a) At a discount rate of 12%.
The income will cover the investment for 5 years. For the first 4 years, incomes are (data taken from Table 2.1):
$4826,79 + $4787,95 + $4061,21 + $3507,01 = $17182,96
For 5 years you need to cover:
$18530 - $17182,96 = $1347,04,
$1347.04 / $3071.59 = 0.44 (approximately 5.4 months).
The total payback period is 4 years 5.4 months.
b) At a discount rate of 15%.
The income will cover the investment for 5 years. For the first 4 years, income is:
$4700,87 + $4550 + $3753,95 + $3146,29 = $16151,11
For 5 years you need to cover:
$18530 - $16151,11= $2378,89,
$2378.89 / $2689.55 = 0.88 (approximately 10.7 months).
The total payback period is 4 years 10.7 months.
As mentioned above, the implementation of any investment project must be preceded by its economic justification, i.e. development of a business plan. When developing a business plan, Methodological recommendations for evaluating the effectiveness of investment projects (official publication) approved by the Ministry of Economy of the Russian Federation, the Ministry of Finance of the Russian Federation, the State Committee of the Russian Federation for Construction, Architectural and Housing Policy on June 21, 1999 No. VK 477 should be used.
Overall project efficiency is evaluated in order to determine the potential attractiveness of the project, the expediency of its acceptance by possible participants. It shows the objective acceptability of an investment project in terms of economic efficiency, regardless of the financial capabilities of its participants. When evaluating the effectiveness of the project as a whole, its social significance should be taken into account, taking into account the scale of the investment project. The economic, social and environmental consequences of the implementation of global, national economic or large-scale projects affect the entire society. That is why the effectiveness of the project as a whole is usually divided into two types: public (socio-economic), the assessment of which is necessary for socially significant projects; commercial, the evaluation of which is carried out for almost all ongoing projects.
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 from the project, and "external effects" - social, economic, etc.
Commercial efficiency reflects the economic consequences of the project implementation for its participant, assuming that he independently bears all the necessary costs for the project and uses all its results. In other words, when evaluating commercial efficiency, one should abstract from the ability of project participants to finance the costs of an investment project, conventionally assuming that the necessary funds are available.
Efficiency of participation in the project allows you to assess the feasibility of an investment project, taking into account the financial capabilities and interest in it of all its participants. This efficiency can be of several types:
- o the effectiveness of the participation of enterprises in the project (its effectiveness for enterprises - participants in the investment project);
- o efficiency of investing in the shares of the enterprise (efficiency for the shareholders of the company - participants in the investment project);
- o the effectiveness of participation in the project of structures of a higher level in relation to enterprises - participants in the investment project (national economic, regional, industry, etc.);
- o budgetary efficiency of the investment project (effectiveness of state participation in the project in terms of expenditures and revenues of budgets of all levels).
General scheme for evaluating the effectiveness of an investment project. First of all, the social significance of the project is determined, and then the evaluation of the effectiveness of the investment project is carried out in two stages.
At the first stage, the performance indicators of the project as a whole are calculated.
The second stage is carried out after the development of the financing scheme. At this stage, the list of participants is specified, the financial feasibility and effectiveness of participation in the project of each of them are determined.
There are many methods for evaluating the effectiveness of investment projects. Conventionally, these methods can be divided into two groups (Fig. 6.3): simple, or static; discounted.
Rice. 6.3.
Simple, or static, methods do not take into account the time value of money and are based on the assumption that income and expenses associated with the implementation of an investment project are of equal importance for different periods of time (calculation steps) during which the project's effectiveness is evaluated. The most well-known simple methods are simple rate of return and payback period.
simple rate of return determined by the formula
where Pch - the value of the annual net profit; And - the total amount of investment costs.
The simple rate of return is compared to the investor's required rate of return. If it is higher, then this means that the investment project is acceptable (profitable) for the investor.
Payback period this method can be calculated as follows:
where P is the net annual cash flow from the implementation of the investment project, which consists of the annual profit and depreciation charges (Pch + A); A - the annual amount of depreciation.
Discounted Methods are characterized by the fact that they take into account the time value of money.
In the world practice of developed countries, the most widely used method for assessing real investments based on the system of indicators given in Table. 6.1.
Table 6 1
The system of indicators for evaluating real investments
Net present value determined by expression
where Rt - results (all cash inflows) achieved at the i-th calculation step; 3t - costs (all cash outflows excluding capital investments) carried out at the same step; T - calculation horizon (month, quarter, year); E - discount rate; K - capital investments required for the implementation of the project.
Due to the fact that Ri is all cash income (revenue from product sales, revenue from the sale of obsolete and obsolete equipment, etc.), and 3t is all costs (costs associated with the production and sale of products, tax payments, etc. .), then the value (Rt - 3t) is the net profit (Π4t) plus depreciation deductions (А(), therefore, the expression
Depreciation charges are added to net profit due to the fact that they remain at the disposal of the enterprise for the simple reproduction of fixed production assets.
This formula is valid if the discount rate for the entire calculation period is constant.
If the discount rate is not constant (it changes from period to period), then the value of the net discounted flow is recommended to be calculated using the formula
Depending on the value of the NPV, a certain investment decision is also made.
Rule. If NPV > 0 - the investment project is profitable. If NPV< 0 - проект является невыгодным. Если ЧДД = 0 - проект не является ни прибыльным, ни убыточным. Решение о его реализации принимает инвестор.
The larger the NPV, the greater the financial safety margin of the project, and hence the lower the risk associated with its implementation.
The criteria for NPV and ID are closely interconnected, since they are determined on the basis of the same calculation base.
Yield Index determined by the following formula:
Rule. If ID > 1 - the project is effective. If ID< 1 - проект неэффективен. Если ИД = 1 - решение о реализации проекта принимает инвестор.
Under internal rate of return understand the value of the discount rate (E), at which the NPV of the project is zero, i.e.
This criterion (indicator) shows the maximum allowable relative level of expenses that can be associated with an investment project.
For example, if the project is fully financed by a loan from a commercial bank, then the value of IRR shows the upper limit of the acceptable level of the bank interest rate, the excess of which makes the project unprofitable.
In practice, investment projects are financed, as a rule, not from one source, but from several, so GNI must be compared with the weighted average cost of capital (MA).
Rule. If IRR (IRR) > SS - the project should be accepted. TYPE (IRR)< СС - проект следует отвергнуть. ВИД (IRR) = = СС - проект ни прибыльный, ни убыточный.
In practice, IRR is usually found by iterative selection of discount rate values until the NPV becomes equal to 0. This method is quite laborious, therefore, a simplified algorithm for calculating IRR is proposed in the economic literature:
GNI (/DYA) \u003d E, at which NPV \u003d f (E) \u003d 0,
where E1, E2 - the discount rate at which the NPV is positive and negative, respectively; NPV1, NPV2 - the value of positive and negative NPV, respectively.
Discounted payback period (term) - the time for which the income from the production activities of the enterprise will cover the cost of investment. The payback period is measured in years or months.
The use of the payback period as an efficiency criterion is one of the simplest and most widely used methods of economic justification of investments in world practice.
In conditions of high inflation, instability in society and the state, i.e. in conditions of increased investment risk, the role and importance of the payback period, as a criterion for the economic justification of investments, increases significantly.
But in any situation, the shorter the payback period, the more attractive this or that investment project.
The general formula for calculating the discounted payback period is
under which
Example. To implement the investment project, capital investments in the amount of 500 million rubles are required. After the implementation of the investment project, the net cash flows by years (Ph + A) are, million rubles:
- 1st year 150
- 2nd year 200
- 3rd year 250
- 4th year 350
Determine the NPV, ID, VID, Current and, on their basis, draw a conclusion about the economic feasibility of implementing an investment project, if it is known that the discount rate E = 20%.
Solution. 1. Calculate the net present value, million rubles:
2. Calculate the yield index:
3. Find the internal rate of return,%, according to the algorithm
- 4. Let's determine the payback period, years, using various methodological approaches:
- 1) excluding discounting cash receipts:
- 2) taking into account discounted cash receipts:
- a) based on the average annual amount of cash receipts
b) on the basis of an increase in cash receipts until the value of capital investments is reached
Conclusion. The investment project is economically justified, since all indicators are positive: NPV > 0; ID > 1; IRR > 20%, and the payback period is 3.7 years.
Evaluation of the budgetary efficiency of the investment project. The implementation of any investment project, especially medium and large, has a positive effect on the revenue side of the budgets of various levels. And if the state participates in the financing of an investment project, then this is reflected in the expenditure part of the budget. In this case, in accordance with the Guidelines for evaluating the effectiveness of investment projects, it is necessary to determine their budgetary efficiency.
where D - budget revenues from the implementation of the project; E - discount rate; n - serial number of the period; P - budgetary expenses for the implementation of the project.
Budget expenditures include:
- o funds allocated for direct budget financing of the project;
- o bank loans for individual project participants allocated as borrowed funds subject to compensation from the budget;
- o direct budgetary allocations for surcharges on market prices for fuel and energy carriers;
- o payment of benefits for persons left without work in connection with the implementation of the project;
- o state, regional guarantees of investment risks to foreign and domestic participants; and etc.
Budget revenues include:
- o additionally received tax revenues to the budget of various levels from the implementation of the investment project;
- o increase (decrease) in cash receipts from third-party enterprises due to the impact of project implementation on their financial payments;
- o receipt of customs duties and excises in the budget;
- o share premium from the issue of securities for the implementation of the project;
- o Dividends received and government-owned shares and bonds issued to finance the project; and etc.
Along with NDDb, indicators of GNIb, IDb and Tpk.b can be used to assess rational state participation.
Determination of the discount rate in the economic justification of investment projects. Determining the discount rate is the most important stage in the process of economic justification of investment projects, since all criteria (NPV, PI, IRR, RR) depend on its value, on the basis of which an investment decision is made. The discount rate depends on many factors: the level of inflation, the magnitude of the investment risk, the interest on the loan, the sources of financing for the investment project, the investor's requirements for efficiency from the invested capital, the specifics of a particular enterprise and a particular investment project. It should be noted that there are no official regulations prescribing the choice of one or another discount rate. All responsibility for its establishment lies with the specialists who carry out the economic justification of investment projects. They must provide written justification for the discount rate chosen.
The economic literature provides some guidance on choosing a discount rate. For example, if an investment project is fully funded from its own funds, i.e. without involving other sources, then in this case it is recommended to take the discount rate at the level of the return requirements of the investor on the capital invested by him. It is believed that the investor in this case takes into account all the factors that affect the discount rate.
If an investment project is financed from several sources, then the discount rate is determined based on the weighted average cost of capital.
So, if an investment project is financed by own and borrowed funds, then the weighted average price of capital
where dc, d3 - the share of own and borrowed funds, respectively, in the total amount of resources allocated for the implementation of the investment project, the share of units; Cs, C;, - the price of capital, respectively, own and borrowed funds,%; St - income tax rate, shares of units.
The need to multiply by the value (1 - St) is due to the fact that if interest on a loan is included in the cost of production, then an income tax benefit is formed, therefore, it should be taken into account in the price of capital of borrowed funds.
If the investment project is financed only by borrowed funds, then the discount rate
E \u003d Z (1 - St).
From all of the above, we can conclude that the discount rate should take into account the internal and external factors associated with the implementation of the investment project.
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Makeevka Institute of Economics and Humanities
Department of Enterprise Economics
Practical task
in the discipline "Investment activity"
Makeevka - 2009
Individual task number 7
The enterprise is considering the feasibility of implementing an investment project, the main indicators of which are presented in the table (for three options).
The company uses the straight-line method of depreciation. The income tax rate is 25%.
Assess the economic efficiency of the investment project by calculating the net present value and the return on investment index if the project discount rate is 12% (or 15%).
Graphically and by calculation, determine the break-even point of the project.
Indicators |
Values of indicators by options |
|||
Sales volumes for the year, pcs |
||||
Project implementation period, years |
Draw conclusions by characterizing the level of investment attractiveness and investment risk of the project.
Solution:
1. Calculate the net present value of the project for three options.
Let's determine the amount of cash flows during the implementation of the project in the first option. We will enter the data in table 1.
Table 1. Cash flows for the implementation of the investment project
Sales proceeds, UAH |
||||||||||
Investments, UAH |
||||||||||
Variable costs, UAH |
||||||||||
Fixed costs, UAH |
||||||||||
Depreciation |
||||||||||
Profit(01-03-04-05) |
||||||||||
Net profit (06*0.75) |
||||||||||
Let us determine the discounted indicators for evaluating the economic efficiency of the project, if the project discount rate is
NPV = - I s, where (1)
I with - primary investments.
i - discount rate.
NPV = - 420000 = 876013.07 - 420000 = 456013.07 UAH
Return on investment R.
R == 2.08 R > 1
NPV = - 420000 = 798592.57 - 420000 = 378592.57 UAH
Profitability R== 1.90
Let's determine the amount of cash flows during the implementation of the project in the second option. We will enter the data in table 2.
Table 2. Cash flows for the implementation of the investment project
Sales proceeds, UAH |
|||||||||||
Investments, UAH |
|||||||||||
Variable costs, UAH |
|||||||||||
Fixed costs, UAH |
|||||||||||
Depreciation |
|||||||||||
Profit(01-03-04-05) |
|||||||||||
Net profit (06*0.75) |
|||||||||||
Net cash flow, UAH (05+09) |
NPV = - I s, where (1)
Cash receipts for the k-th year;
I with - primary investments.
i - discount rate.
In our case
NPV = - 510000 = 1434405.98 - 510000 = 924405.98 UAH
Net present value NPV is positive, the project is suitable for implementation.
Return on investment R.
R == 2.81 R > 1
At a discount rate of 15%:
NPV = - 510000 = 1295714.09 - 510000 = UAH 785714.09
Profitability R== 2.54
Let's determine the amount of cash flows during the implementation of the project in the third option. We will enter the data in table 3.
Sales proceeds, UAH |
|||||||||||
Investments, UAH |
|||||||||||
Variable costs, UAH |
|||||||||||
Fixed costs, UAH |
|||||||||||
Depreciation |
|||||||||||
Profit(01-03-04-05) |
|||||||||||
Net profit (06*0.75) |
|||||||||||
Net cash flow, UAH (05+09) |
Let's determine the discounted indicators for evaluating the economic efficiency of the project, if the project discount rate is i = 12%.
NPV = - I s, where (1)
Cash receipts for the k-th year;
I with - primary investments.
i - discount rate.
In our case
NPV = - 690000 = 921993.94 - 690000 = 231993.94 UAH
Net present value NPV is positive, the project is suitable for implementation.
Return on investment R.
R== 1.33 R > 1
At a discount rate of 15%:
NPV = - 690000 = 832846.87 - 690000 = 142846.87 UAH
Profitability R== 1.20
Graphically and by calculation, we will determine the break-even point of the project.
Calculate the break-even point using the formula:
TB==570pcs
So, we will choose for implementation the project with the highest profitability indicator. The project according to option 2 has the highest profitability R = 2.81 at a discount rate of 12%.
Individual task number 1
The enterprise is considering the feasibility of implementing an investment project, the main indicators of which are presented in Table 1.
It is necessary to characterize the level of investment attractiveness and investment risk for each investment option, while:
1. Evaluate the economic efficiency of the investment project by calculating the net present value and the investment profitability index if the project discount rate is 10%.
2. Determine the net discounted income, if due to the acquisition of new, more advanced equipment, variable costs will decrease to 0.19 thousand gr. per unit of production (at the same time, the cost of acquiring fixed assets will increase by 198 thousand gr.).
3. By calculation, determine the break-even point for two alternative options.
Table 1. Information for solving the problem
Indicators |
Values |
|
Sales volumes for the year, pcs |
||
Unit price, thousand UAH |
||
Variable costs for the production of a unit of production, thousand UAH |
||
Annual fixed costs excluding depreciation of fixed assets, thousand UAH. |
||
Annual depreciation rate of fixed assets, % |
||
Initial investment costs, thousand UAH |
||
Including fixed assets, UAH ths. |
||
Project implementation period, years |
||
Income tax rate, % |
Solution:
The enterprise is considering the implementation of two investment projects: the data on the first one are shown in Table 1, the second one is distinguished by the acquisition of more advanced equipment (variable costs will decrease to UAH 0.19 thousand per unit of production, and the cost of acquiring fixed assets will increase by UAH 198 thousand) .
1. Let's evaluate the economic efficiency of the implementation of the first investment project. Let's determine the amount of cash flows during the implementation of the project. We will enter the data in table 2.
Table 3. Cash flows for the implementation of the investment project
Sales proceeds, UAH |
||||||||||
Investments, UAH |
||||||||||
Variable costs, UAH |
||||||||||
Fixed costs, UAH |
||||||||||
Depreciation |
||||||||||
Profit(01-03-04-05) |
||||||||||
Net profit (06*0.75) |
||||||||||
-740000,0 |
NPV = - 740000 = 798664.1 -740000 = 58664.1 UAH
Return on investment R.
R== 1.08 R > 1
Net present value NPV is positive, the project is suitable for implementation, but the profitability of the project is low, slightly more than 1.
2. Determine the amount of cash flows during the implementation of the project in the second option, if due to the acquisition of new, more advanced equipment, variable costs will decrease to UAH 0.19 thousand. per unit of output (at the same time, the cost of acquiring fixed assets will increase by UAH 198,000). Assume, since the condition of this does not stipulate additionally, that the total amount of investments will increase by the amount of the increase in fixed assets (the amount of working capital remains unchanged).
Table 3. Cash flows for the implementation of the investment project
Sales proceeds, UAH |
||||||||||
Investments, UAH |
||||||||||
Variable costs, UAH |
||||||||||
Fixed costs, UAH |
||||||||||
Depreciation |
||||||||||
Profit(01-03-04-05) |
||||||||||
Net profit (06*0.75) |
||||||||||
Net cash flow, UAH (05+07) |
Let's determine the discounted indicators for evaluating the economic efficiency of the project, the project discount rate is i = 10%.
NPV = - 938000 = 1030960.7-938000 = UAH 92960.7
Return on investment R.
R== 1.1 R > 1
By calculation, we will determine the break-even point of the project according to the formula:
TB = , where
TB - break-even volume, pcs;
PI - fixed costs, UAH;
C i - price per unit of production, UAH;
PerI i - variable costs per unit of production, UAH.
TB 1 = = 662 pcs.
TB 2 = = 542 pcs.
In all respects, the second project is more attractive, gives a higher absolute income, somewhat higher profitability, and has a large margin of safety. We are accepting a second project.
Individual task number 3
The company plans to purchase a new production line. Data characterizing the level of production and sales of products for three alternative investment options are presented in Table 3.
Using these data, it is necessary to justify the safest investment option, while:
1. For each alternative investment option, find the break-even point.
2. Build a break-even chart for each investment option.
3. Determine the return on investment, if it is known that, according to optimistic estimates, the sales volume will be 140% of the break-even point (probability 35%), the expected sales volume is planned to be 15% more than the break-even point (probability 0.5), according to pessimistic estimates, the sales volume will be 5% below the breakeven point (probability 0.15).
Table. Initial data for evaluating the effectiveness of the project (for three options)
Indicators |
Indicator values |
|||
Option 1 |
Option 2 |
Option 3 |
||
Annual fixed costs, UAH |
||||
Variable costs for the production of a unit of production, UAH |
||||
Unit price, UAH |
||||
Necessary investments, UAH |
Solution:
By calculation, we will determine the break-even point for each alternative option using the formula:
TB = , where
TB - break-even volume, pcs;
PI - fixed costs, UAH;
C i - price per unit of production, UAH;
PerI i - variable costs per unit of production, UAH.
For the first option TB 1 = = 26923 pcs.
For the second option TB 2 = = 49473 pcs
For the third option TB 3 = = 49333 pcs
2. Let's build a break-even chart for each investment option (Fig. 1, Fig. 2, Fig. 3).
Obviously, the graphs confirm the calculated data.
3. Determine the return on investment if it is known that, according to optimistic estimates, the sales volume will be 140% of the break-even point (probability 35%), the expected sales volume is planned to be 15% more than the break-even point (probability 0.5), according to pessimistic estimates, the sales volume will be 5% below the breakeven point (probability 0.15).
Since in our case the determination of the sales volume is probabilistic, we will find the average sales volume using the formula:
, where
- average sales volume,
- volume of sales,
- probability.
269231.40.35+269231.150.5+269230.950.15 = 32509 pcs.
Drawing 1
493331.40.35+493331.150.5+493330.950.15 = 59569 pcs.
To determine the return on investment R, it is necessary to calculate the ratio of cash inflows to cash outflows (in our case, the ratio of gross revenue to the amount of required investments).
R 1 == 0.44 R< 1
R 2 == 0.67 R< 1
Figure 2
R 3 == 0.71 R< 1
The profitability of all three projects is less than one. Under these conditions, none of them can be recommended for implementation. However, it should be taken into account that, according to the condition of the task, the implementation of projects is considered only within one year. In fact, investments give returns over several years. If we consider projects in a longer period, then the profitability will certainly increase and take acceptable values. In this case, the third option is the most interesting (R is the maximum).
Figure 3
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test, added 05/05/2010
Analysis of the economic efficiency of an investment project: the impact of inflation factors on the analyzed reporting, calculation of cash flow and project discount rates. Calculation of the index of return on investment, payback period and profitability of the project.
term paper, added 11/05/2010
Assessment of the possibility of risk when raising funds for the implementation of the investment project of the construction complex of buildings of OAO IPSP. Determination of the expected income from the implementation of the project. Calculation of the economic efficiency of capital investments in the project.
thesis, added 07/06/2010
Characteristics of the financial condition of Mir Beauty LLC. Features of the implementation of the investment project to expand the range and quantity of products. Determination of financial viability and discounted payback period of the project.
control work, added 10/18/2013
Essence of investments and investment plan. Methods for evaluating the effectiveness of an investment project. The current financial and economic condition of the enterprise, the feasibility of implementing the investment project of OOO Apteka Pharma-Plus, efficiency assessment.
term paper, added 08/24/2011
Analysis of the investment activity of the enterprise. Directions and conditions for the implementation of the investment project. Calculation of cash flows, selection of a rational project financing scheme. Evaluation of indicators of its economic efficiency and investment reliability.
term paper, added 10/21/2011
Network models for the implementation of the main stages of the investment project. Phases of the investment project implementation: pre-investment; investment; operational. Commercial efficiency of the project. Discounting and accounting at simple interest rates.