Course work
The main condition of providing objective analyses of investment projects, performing calculations at constant prices is the use of existing values of all input parameters. Calculated at current prices should be carried out within the project risk analysis as a supplement to the basic calculation at constant prices. As the only objective measure of capital costs in these circumstances should… Π§ΠΈΡΠ°ΡΡ Π΅ΡΡ >
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- What are the main methods of analysis?
- 1. simple Method (accounting) rate of return
This method is based on calculating the average relationship between the life of the project net accounting profit and the average size of investment (cost of fixed and circulating assets) to the project. Select the project with the highest average accounting rate of return.
Course work (ΡΠ΅ΡΠ΅ΡΠ°Ρ, ΠΊΡΡΡΠΎΠ²Π°Ρ, Π΄ΠΈΠΏΠ»ΠΎΠΌ, ΠΊΠΎΠ½ΡΡΠΎΠ»ΡΠ½Π°Ρ)
In terms of return the premium over the firm’s hurdle rate is small at 1.16 per cent and any significant deterioration in the firms cost of capital would be very damaging to the value of this project. The liquidity statistics reveal that the bulk of the project’s cash returns are promised in the early part of the recovery phase and that half the value invested in the project should be recovered by year five. Taking this into account acceptance is recommended to the board.
Table 1
year
Stream
Calculation 1 Calculation 2 Calculation 3 Calculation 4 r=10% PV r=20% PV r=16% PV r=17% PV 0 -10 1,000 -10,00 1,000 -10,00 1,000 -10,00 1,000 -10,00 1 3 0,909 2,73 0,833 2,50 0,862 2,59 0,855 2,57 2 4 0,826 3,30 0,694 2,78 0,743 2,97 0,731 2,92 3 7 0,751 5,26 0,579 4,05 0,641 4,49 0,624 4,37 1,29 -0,67 0,05 -0,14 Value of the IRR is calculated as follows:
1,29
IRR = 10% + (20% -10%) = 16,6%.
1,29-(-0,67)
You can refine the result value. Let’s say that, through several iterations, we have identified the next integer values of coefficient of discounting where the NPV changes sign: if r = 16% NPV = +0.05; When r = 17% NRV = -0.
14. Then the value of the IRR will be qualified:
0,05
IRR = 16% + (17% -16%) = 16,26%.
0,05-(-0,14)
Follow the procedure that applies only to public companies. In enterprises that are not equity, an analogue of MOP is the level of production and circulation costs as a percentage of total capital.
Conclusion
Methods of evaluating the effectiveness of projects determine the feasibility of long-term investing in a variety of objects (projects, events) in order to assess the potential for their profitability and ROI.
It should be noted that the evaluation methods of investment project indicate that, depending on the efficiency criterion used as the basis for a specific project can be made different conclusions. Therefore, the analysis of investment project should proceed from the specific conditions of activity of the enterprise and its investing objectives. As a rule, the most objective assessment gives a complex application of different methods of assessing the impact of projects.
The main condition of providing objective analyses of investment projects, performing calculations at constant prices is the use of existing values of all input parameters.
Calculated at current prices should be carried out within the project risk analysis as a supplement to the basic calculation at constant prices.
As the only objective measure of capital costs in these circumstances should be the refinancing rate of the Bank.