Commercial efficiency of an investment project. Abstract: Assessing the commercial effectiveness of an investment project. · investments in permanent assets

Question 57 Assessing the effectiveness of investments The effectiveness of investments is assessed using statistical and dynamic methods. Statistical methods for assessing the effectiveness of investments include calculating the payback period of investments SOI (PP), the rate of return and the coefficient

Purpose of the lecture: to learn calculate cash flows and indicators of commercial efficiency of an investment project.

If the project is recognized as socially effective, then they move on to assessing its commercial value. efficiency. In Methodological recommendations for assessment efficiency investment project provides a list of commercial indicators efficiency [ 6 ] :

Conditions of commercial efficiency investment project is a positive value of the integral NPV, as well as the values ​​of IDI and IDI exceeding one.

In order to correctly evaluate commercial efficiency investment project, it is necessary to correctly determine cash flows, the values ​​of which are used in the calculations. Any cash flow F represents the difference between the inflow P and outflow O of funds:

The procedure for calculating cash inflows and outflows varies depending on the nature of the cash flow. Outflow of funds from investment activities– these are all investments related to the implementation of the project (investments in fixed assets, in the initial working capital, in intangible assets). Inflow of funds from investment activities is formed in the event of the sale of assets and is determined by the income from this sale. Operational activities are activities related to the production and sale of products. The outflow of funds from operating activities includes the cost of production less depreciation and the cost of paying taxes and other mandatory payments. The influx of funds from operating activities is revenue from sales of products [7].

Example. Calculate cash flows from investment and operating activities to assess commercial efficiency project, if investments amount to 18,000 thousand rubles. are carried out in the first year of implementation of the investment project, and production begins in the second year. The project life cycle is 8 years. In the last year of the life cycle, assets are sold. Income from the sale of assets is 50 thousand rubles. The cost of production is 5 thousand rubles/piece. , unit price – 7 thousand rubles. PC. Production and sales volume – 12,000 pcs./year. The annual amount of taxes and other obligatory payments is 30 thousand rubles. Annual amount depreciation charges– 80 thousand rubles.

Solution.

Let's consider cash flow from investment activities. In our task, the outflow of funds from investment activities will amount to 18,000 thousand rubles. (investment), and the influx of funds from investment activities– 50 thousand rubles. (income from the sale of assets). We know that investments are made in the first year project life cycle, and the sale of assets - in the last (eighth) year. This means that the cash flow from investment activities in the first year it will be -18,000 thousand rubles. , and in the last year - 50 thousand rubles. From the second to the seventh year inclusive cash flow from investment activities will be equal to zero, because during these years no operations related to investment activities are carried out.

Cash flow from operating activities should be calculated from the second to eighth years of the life cycle. In the first year this cash flow is not calculated because there is no production yet this year. First of all, you should calculate the cost of annual production volume and annual revenue.

The cost of annual production volume is calculated as the product of the cost per unit of production and the annual production volume:

Annual revenue is calculated as the product of unit price and annual sales volume:

To calculate the annual amount cash flow from operating activities, the cost price should be deducted from the revenue (while excluding depreciation from its composition) and the annual amount of taxes and other mandatory payments:

Let's arrange the calculations in the form of a table (table 5.1):

The problem we solved is a fairly simple case: the production volume is exactly equal to the sales volume and does not change during project life cycle, other parameters do not change (cost and unit price, amount of tax payments). In more complex cases cash flow from operating activities will be calculated separately for each year of the life cycle of the investment project.

Having calculated cash flows, proceed to the calculation of commercial efficiency indicators.

Example. Using the data from the previous example, estimate the commercial efficiency investment project at a discount rate of 15%.

Solution.

To assess the commercial effectiveness of the project, we use cash flows, which were already calculated in the previous example. Net income and net present value must be calculated at each calculation step. Let's make the calculation in tabular form (Table 5.2):

The integral NPV amounted to 70,792 thousand rubles.

Posted on the website 05/14/2009

In the context of the global economic crisis, the construction sector of the Russian economy is experiencing serious difficulties, in particular, limited access to credit resources. The article discusses an example of assessing the effectiveness of an investment project for the construction of a multifunctional complex.

A.V. Zemtsov, independent expert

Criteria and methods for evaluating investment projects

Financial and economic assessment of investment projects occupies a central place in the process of justification and selection of possible options for investing funds in operations with real assets. It is largely based on design analysis. The purpose of project analysis is to determine the outcome (value) of the project. To do this, use the expression:

Project result = project price - project costs.

It is customary to distinguish between technical, financial, commercial, environmental, organizational (institutional), social, economic and other assessments of an investment project.

Predictive assessment of a project is quite a complex task, which is confirmed by a number of factors:

1) investment expenses can be made either on a one-time basis or over a fairly long period of time;

2) the period for achieving the results of the investment project may be greater than or equal to the calculated one;

3) carrying out long-term operations leads to an increase in uncertainty in assessing all aspects of investments, that is, to an increase in investment risk.

The effectiveness of an investment project is characterized by a system of indicators that reflect the ratio of costs and results depending on the interests of its participants.

Assessing the overall effectiveness of the project for the investor

Investment projects can be either commercial or non-commercial. Even with non-commercial projects, there are opportunities expended and opportunities gained.

The difference between investment projects and current activities is that costs intended for the one-time acquisition of some opportunities are not considered investments. It turns out that an investor is a person who invests his capabilities for repeated use, making them work to create new opportunities.

If there are ways to evaluate effectiveness for commercial projects, then how to evaluate the effectiveness of non-commercial projects? Efficiency in general refers to the degree of compliance with the goal 1. The goal must be set precisely, in detail and allow only an unambiguous answer - whether it has been achieved or not. At the same time, you can achieve your goal in different ways, and each path has its own costs.

To decide on the implementation of a commercial project, an assessment of its economic efficiency is carried out. In the case of a non-profit project, if it is decided to achieve a goal, then the choice is to determine the most effective way. In this case, non-financial criteria should take precedence over financial ones. But at the same time, the goal must be achieved in the least expensive way.

Also when evaluating a non-profit project:

The investor’s resilience to the implementation of the project should be taken into account - will the investor withstand the implementation of the project;

When identifying alternatives of equal quality, the cheapest one is usually chosen;

It is advisable to plan the movement of costs (investments) over time in order to calculate forces in advance, anticipate shortages and take care of attracting additional resources, if necessary.

Assessment of project externalities

The second aspect of project evaluation is that the project may have value not only for the investor. For example, investments in the knowledge of some people no longer brought benefits to themselves, but to society as a whole, which then used the discoveries and inventions of scientists for its needs. In addition to commercial significance, ordinary commercial investment projects of companies also have the following effects:

Social;

Tax;

Budget;

Ecological.

All the effects of the project for other parties are important, since the company and the project are surrounded by society, people, the state, and nature. If the project improves the environment, then it is better for the company implementing the project, because everything in the world is interconnected.

1. The social effect is assessed by the benefit of the project for the population either living around the project site or working on the project, and consists of:

In increasing the level of salaries;

Development of infrastructure and other opportunities for the population around the project site.

2. The tax effect is assessed by the volume of taxes collected from the project into the local, regional and federal budget.

3. The budgetary effect is assessed if the project is fully or partially financed from the budget (federal, regional, local). It is determined how much money the project returns to the budget through taxes, after the budget has invested in the project, over a certain number of years.

4. An environmental effect occurs if the project somehow affects the environmental situation.

Economic approach to assessing the effectiveness of an investment project

The vast majority of decisions made by market economy entities are based on a preliminary assessment of the expected consequences. Individual assessment of the acceptability (effectiveness, value) of each investment project is carried out using various methods and taking into account certain criteria. We have analyzed Russian and foreign methods for evaluating investment projects and shown the application of these methods using practical examples.

General approaches to determining the effectiveness of investment projects

Investment decision-making is based on an assessment of the economic efficiency of investments. A market economy requires taking into account the influence on the efficiency of investment activity of environmental factors and time factors, which are not fully assessed in the calculation of these indicators.

They quite fully reflect the results of scientific research by domestic and foreign economists in the field of efficiency assessment methods. According to the Methodological Recommendations, the performance indicators of investment projects are divided into the following types 3:

Indicators of commercial efficiency, taking into account the financial consequences of the project for its direct participants;

Budget efficiency indicators reflecting the financial consequences of the project for the federal, regional or local budgets;

Indicators of economic efficiency that take into account the results and costs associated with the implementation of an investment project, going beyond the direct financial interests of the project participants and allowing for cost measurement.

The identification of such types is artificial and is associated with the determination of a single indicator of economic efficiency, but in relation to different objects and levels of the economic system: the national economy as a whole (a global criterion of economic efficiency), regional, sectoral, enterprise level or a specific investment project.

According to methodological recommendations, investment efficiency is characterized by a system of indicators that reflect the ratio of investment-related costs and results and allow one to judge the economic advantages of some investments over others.

Investment efficiency indicators can be classified according to the following 4 criteria:

1) by type of general indicator, serving as a criterion for the economic efficiency of investments:

Absolute, in which general indicators are defined as the difference between the cost estimates of the results and costs associated with the implementation of the project;

Relative, in which generalizing indicators are defined as the ratio of cost estimates of project results to the total costs of obtaining them;

Temporary, which estimates the payback period of investment costs;

2) using the method of comparing monetary costs and results at different times:

Static, in which cash flows arising at different points in time are assessed as equivalent;

Dynamic, in which cash flows caused by the implementation of the project are reduced to an equivalent basis by discounting them, ensuring comparability of cash flows at different times.

Static methods are also called methods based on accounting estimates, and dynamic methods are called methods based on discounted estimates 5.

TO group of static methods include: payback period of investments (Payback Period, PP); investment efficiency ratio (Accounting Rate of Return, ARR).

TO dynamic methods include: net present value, net present value (Net Present Value, NPV); return on investment index (Profitability Index, PI); internal rate of return (Internal Rate of Return, IRR); modified internal rate of return (Modified Internal Rate of Return, MIRR), discounted payback period of investment (Discounted Payback Period, DPP).

It should also be noted that the assessment of the effectiveness of each investment project is carried out taking into account criteria that meet certain principles, namely:

The influence of the value of money over time;

Opportunity costs;

Possible changes in project parameters;

Carrying out calculations based on real cash flow rather than accounting indicators;

Inflation and its reflections;

Risk associated with the implementation of the project.

Let us consider the main methods for assessing the effectiveness of investment projects in more detail and find out their main advantages and disadvantages.

Static estimation methods

Payback Period (PP)

The most common static indicator for evaluating investment projects is the term payback period (PP).

The payback period is understood as the period of time from the start of the project until the operation of the facility, when the income from operation becomes equal to the initial investment (capital costs and operating costs).

This indicator answers the question: when will the full return of the invested capital occur? The economic meaning of the indicator is to determine the period within which an investor can return the invested capital.

To calculate the payback period, the elements of the payment series are summed up on an accrual basis, forming the balance of the accumulated flow, until the amount takes a positive value. The serial number of the planning interval, in which the balance of the accumulated flow takes a positive value, indicates the payback period expressed in planning intervals. The general formula for calculating the PP indicator is:

where P k is the value of the accumulated flow balance;
I 0 is the amount of initial investment.

When a fraction is obtained, it is rounded up to the nearest whole number. Often the PP indicator is calculated more accurately, that is, the fractional part of the interval (calculation period) is also considered; in this case, the assumption is made that within one step (calculation period) the balance of the accumulated cash flow changes linearly. Then the “distance” x from the beginning of the step to the moment of payback (expressed in the duration of the calculation step) is determined by the formula:

where P k- is the negative value of the balance of the accumulated flow at the step until the payback period;
Р k+ is the positive value of the balance of the accumulated flow at the step after the payback moment.

As a meter, the “payback period” criterion is simple and easy to understand. However, it has significant disadvantages, which we will consider in more detail when analyzing the discounted payback period (DPP), since these disadvantages apply to both static and dynamic indicators of the payback period. The main disadvantage of the static indicator “payback period” is that it does not take into account the time value of money, that is, it does not distinguish between projects with the same balance of income flow, but with different distributions over the years.

Accounting Rate of Return (ARR)

Another indicator of the static financial assessment of a project is the investment efficiency ratio (Account Rate of Return or ARR). This ratio is also called the accounting rate of return or the project profitability ratio.

There are several algorithms for calculating ARR.

The first calculation option is based on the ratio of the average annual profit (minus contributions to the budget) from the implementation of the project for the period to the average investment:

I av 0 - the average value of the initial investment, if it is assumed that upon expiration of the project, all capital costs will be written off.

Sometimes the profitability of a project is calculated based on the initial investment:

Calculated on the basis of the initial investment volume, it can be used for projects that create a stream of uniform income (for example, an annuity) for an indefinite or rather long period.

The second calculation option is based on the ratio of the average annual profit (minus deductions to the budget) from the implementation of the project for the period to the average investment, taking into account the residual or liquidation value of the initial investment (for example, taking into account the liquidation value of equipment upon completion of the project):

where Р r is the average annual profit (minus contributions to the budget) from the implementation of the project;
I 0 is the average value (value) of the initial investment.

Dynamic estimation methods

Net present value (Net Present Value, NPV)

In modern published works, the following terms are used to name the criterion of this method: net present value 6 ; net present value 7; net present value 8 ; net present value 9 ; total financial result from the implementation of the project 10; current value 11.

The value of net present value (NPV) is calculated as the difference between the discounted cash flows of income and expenses incurred in the process of implementing the investment over the forecast period.

The essence of the criterion is to compare the current value of future cash receipts from the project with the investment costs necessary for its implementation.

The application of the method involves the sequential passage of the following stages:

1) calculation of the cash flow of the investment project;

2) selection of a discount rate that takes into account the profitability of alternative investments and the risk of the project;

3) determination of net present value.

The NPV or NPV for a constant discount rate and a one-time initial investment is determined by the following formula:

where I 0 is the amount of initial investment;

i is the discount rate.

Cash flows must be calculated in current or deflated prices. When forecasting income by year, it is necessary, if possible, to take into account all types of income, both production and non-production, that may be associated with a given project. Thus, if at the end of the project implementation period it is planned to receive funds in the form of the liquidation value of equipment or the release of part of working capital, they should be taken into account as income of the corresponding periods.

The basis of calculations using this method is the premise that the value of money varies over time. The process of converting the future value of a cash flow into the current value is called discounting(from English discount- reduce).

The rate at which discounting occurs is called the rate discounting (discount), and the factor F = 1/(1 + i) t - discount factor.

If the project does not involve a one-time investment, but a sequential investment of financial resources over a number of years, then the formula for calculating NPV is modified as follows:

where I t is the cash flow of the initial investment;
C t is the cash flow from the sale of investments at time t;
t — calculation step (year, quarter, month, etc.);
i is the discount rate.

The conditions for making an investment decision based on this criterion are as follows:

If NPV > 0, then the project should be accepted;

If NPV< 0, то проект принимать не следует;

If NPV = 0, then accepting the project will bring neither profit nor loss.

This method is based on following the main target set by the investor - maximizing its final state or increasing the value of the firm. Following this target setting is one of the conditions for a comparative assessment of investments based on this criterion.

A negative net present value indicates the inexpediency of making decisions on financing and implementing the project, since if the NPV< 0, то в случае принятия проекта ценность компании уменьшится, то есть владельцы компании понесут убыток и основная целевая установка не выполнится.

A positive net present value indicates the advisability of making decisions on financing and implementing a project, and when comparing investment options, the option with the highest NPV value is considered preferable, since if NPV > 0, then if the project is accepted, the value of the company, and therefore the welfare of its owners will increase. If NPV = 0, then the project should be accepted provided that its implementation will increase the flow of income from previously implemented capital investment projects. For example, expanding a hotel's parking lot will increase the property's income stream.

The implementation of this method involves a number of assumptions that must be checked for the degree of their correspondence to reality and the results that possible deviations lead to.

Such assumptions include:

The existence of only one objective function - the cost of capital;

The specified duration of the project;

Data reliability;

Payments belong to certain points in time;

Existence of a perfect capital market.

When making decisions in the investment field, you often have to deal not with one goal, but with several goals. If a cost of capital method is used, these objectives should be considered when arriving at a solution outside of the cost of capital process. In this case, methods for making multi-objective decisions can also be analyzed.

The useful life must be established in the performance analysis before applying the net present value method. For this purpose, methods for determining the optimal service life may be analyzed, unless this has not been established in advance for technical or legal reasons.

In reality, there is no reliable data when making investment decisions. Therefore, along with the proposed method for calculating the cost of capital based on predicted data, it is necessary to analyze the degree of uncertainty, at least for the most important investment objects. Methods of investing under conditions of uncertainty serve this purpose.

When forming and analyzing the method, it is assumed that all payments can be attributed to certain points in time. The time period between payments is usually one year. In reality, payments can be made at shorter intervals. In this case, you should pay attention to the compliance of the calculation period step (calculation step) with the conditions for granting the loan. For the correct application of this method, it is necessary that the calculation step be equal to or a multiple of the period for calculating interest on the loan.

The assumption of a perfect capital market, in which financial resources can be attracted or invested at any time and in unlimited quantities at a single calculated interest rate, is also problematic. In reality, such a market does not exist, and interest rates for investing and borrowing funds tend to differ from each other. This raises the problem of determining an appropriate interest rate. This is especially important since it has a significant impact on the value of capital.

When calculating NPV, discount rates that vary from year to year can be used. In this case, it is necessary to apply individual discount factors to each cash flow, which will correspond to this calculation step. In addition, it is possible that a project acceptable at a constant discount rate may become unacceptable at a variable one.

The net present value indicator takes into account the time value of money, has clear decision criteria and allows you to select projects for the purpose of maximizing the value of the company. In addition, this indicator is absolute and has the property of additivity, which allows you to add the values ​​of the indicator for various projects and use the total indicator for projects in order to optimize the investment portfolio, that is, the following equality is valid:

NPV A + NPV B = NPV MB.

For all its advantages, the method also has significant disadvantages. Due to the difficulty and ambiguity of forecasting and generating cash flow from investments, as well as the problem of choosing a discount rate, there may be a danger of underestimating the risk of the project.

Profitability Index (PI)

The profitability index (profitability, profitability) is calculated as the ratio of the net present value of cash inflows to the net present value of cash outflows (including initial investments):

where I 0 is the enterprise’s investment at time 0;
i is the discount rate.

The profitability index is a relative indicator of the effectiveness of an investment project and characterizes the level of income per unit of cost, that is, the efficiency of investments - the higher the value of this indicator, the higher the return on the monetary unit invested in this project. This indicator should be given preference when compiling an investment portfolio in order to maximize the total NPV value.

The conditions for accepting a project according to this investment criterion are as follows:

If PI > 1, then the project should be accepted;

If PI< 1, то проект следует отвергнуть;

If PI = 1, the project is neither profitable nor unprofitable. It is easy to see that when evaluating projects involving the same amount of initial investment, the PI criterion is fully consistent with the NPV criterion.

Thus, the PI criterion has an advantage when choosing one project from a number of projects with approximately the same NPV values, but different volumes of required investments. In this case, the one that provides greater investment efficiency is more profitable. In this regard, this indicator allows you to rank projects with limited investment resources.

The disadvantages of the method include its ambiguity when discounting cash inflows and outflows separately.

Internal Rate of Return (IRR)

Under internal rate of return, or internal rate of return, investment (IRR) understand the value of the discount rate at which the NPV of the project is equal to zero:

IRR = i, at which NPV = f(i) = 0.

The meaning of calculating this coefficient when analyzing the effectiveness of planned investments is as follows: The IRR shows the maximum acceptable relative level of costs that can be associated with a given project. For example, if a project is financed entirely by a loan from a commercial bank, then the IRR value shows the upper limit of the acceptable level of the bank interest rate, exceeding which makes the project unprofitable.

In practice, any enterprise finances its activities from various sources. As payment for the use of financial resources advanced to the activities of the enterprise, it pays interest, dividends, remunerations, etc., that is, it bears some reasonable expenses to maintain its economic potential. An indicator characterizing the relative level of these incomes can be called at the price of advanced capital (capital cost, CC). This indicator reflects the minimum return on capital invested in its activities at the enterprise, its profitability and is calculated using the weighted arithmetic average formula.

The economic meaning of this indicator is as follows: an enterprise can make any investment decisions, the level of profitability of which is not lower than the current value of the CC indicator (price of the source of funds for this project). It is with this that the IRR calculated for a specific project is compared, and the relationship between them is as follows:

If IRR > CC, then the project should be accepted;

If IRR< СС, то проект следует отвергнуть;

0 if IRR = СС, then the project is neither profitable nor unprofitable.

Another interpretation option is to treat the internal rate of return as a possible discount rate at which the project is still profitable according to the NPV criterion. The decision is made based on comparison of IRR with standard profitability; Moreover, the higher the internal rate of return and the greater the difference between its value and the selected discount rate, the greater the margin of safety the project has. This criterion is the main guideline when an investor makes an investment decision, which does not at all detract from the role of other criteria. To calculate IRR using discount tables, two values ​​of the discount factor r are selected< i 2 таким образом, чтобы в интервале (i, …, i 2) функция NPV = f(i) меняла свое значение с «+» на «-» или с «-» на «+». Далее применяют формулу:

where r 1 is the value of the discount factor at which f (i 1) > 0 (f (i 1)< 0);
r 2 - the value of the discount factor at which f (i 1)< 0 (f (i 1) > 0).

The accuracy of the calculations is inversely proportional to the length of the interval (i 1, ..., i 2), and the best approximation is achieved in the case when i 1 and i 2 are the closest values ​​of the discount factor that satisfy the conditions.

Accurate calculation of the IRR value is only possible using a computer.

The corresponding assumption of the method for determining the internal rate (investment at the internal interest rate), as a rule, does not seem appropriate. Therefore, the method of determining the internal rate of return without taking into account specific reserve investments or other modification of conditions should not be used to assess absolute profitability if complex investments take place and thus a process of reinvestment occurs. This type of investment also poses the problem of multiple positive or negative IRRs, which can make it difficult to interpret the results obtained by the IRR method.

The method of determining the internal rate of return for assessing relative profitability should not be applied, as noted above, by comparing the internal interest rates of individual properties. Instead, the investment must be analyzed to determine the difference. If we are talking about investments made in isolation, then we can compare the internal interest rate with the calculated one to make it possible to compare profitability. If the investments for comparison of profitability are complex, then the use of the method for determining profitability is inappropriate.

The advantage of the internal rate of return method over the net present value method is the possibility of its interpretation. It characterizes the accrual of interest on capital expended (return on capital expended).

In addition, the internal interest rate can be considered as the critical interest rate for determining the absolute profitability of an investment alternative if the net present value method is used and the “hard data” assumption does not apply.

Thus, investment evaluation using this method is based on determining the maximum discount rate at which projects will break even.

The NPV, IRR and PI criteria most commonly used in investment analysis are actually different versions of the same concept, and therefore their results are related to each other. Thus, we can expect the following mathematical relationships to be satisfied for one project:

If NPV > 0, then IRR > CC(r); PI > 1;

If NPV< 0, то IRR < CC (r); PI < 1;

If NPV = 0, then IRR = CC (r); PI = 1.

There are techniques that adjust the IRR method for use in a particular non-standard situation. One of these methods is the modified internal rate of return (MIRR) method.

Modified Internal Rate of Return (MIRR)

The modified rate of return (MIRR) eliminates the significant shortcoming of the project's internal rate of return, which arises in the event of repeated cash outflows. An example of such repeated outflow is the purchase by installments or construction of a real estate project carried out over several years. The main difference of this method is that reinvestment is carried out at a risk-free rate, the value of which is determined based on financial market analysis.

In Russian practice, this may be the profitability of a fixed-term foreign currency deposit offered by Sberbank of Russia. In each specific case, the analyst determines the value of the risk-free rate individually, but, as a rule, its level is relatively low.

Thus, discounting costs at a risk-free rate makes it possible to calculate their total current value, the value of which allows a more objective assessment of the level of return on investments, and is a more correct method in the case of making investment decisions with irrelevant (extraordinary) cash flows.

Discounted Payback Period (DPP)

Discounted payback period of investment (Discounted Payback Period, DPP) eliminates the disadvantage of the static payback period method and takes into account the time value of money, and the corresponding formula for calculating the discounted payback period, DPP, is:

Obviously, in the case of discounting, the payback period increases, that is, always DPP > PP.

The simplest calculations show that this technique, under conditions of a low discount rate, characteristic of a stable Western economy, improves the result by an insensible amount, but for a significantly higher discount rate, characteristic of the Russian economy, this results in a significant change in the calculated payback period. In other words, a project acceptable under the PP criterion may be unacceptable under the DPP criterion.

When using the PP and DPP criteria in assessing investment projects, decisions can be made based on the following conditions:

a) the project is accepted if payback occurs;

b) the project is accepted only if the payback period does not exceed the deadline established for a particular company.

In general, the determination of the payback period is of an auxiliary nature relative to the net present value of the project or the internal rate of return. In addition, the disadvantage of such an indicator as the payback period is that it does not take into account subsequent cash inflows, and therefore can serve as an incorrect criterion for the attractiveness of the project.

Another significant drawback of the “payback period” criterion is that, unlike the NPV indicator, it does not have the property of additivity. In this regard, when considering a combination of projects, this indicator must be handled with caution, taking into account this property.

However, the “payback period” criterion is indifferent to the amount of initial investment and does not take into account the absolute volume of investment. Thus, this indicator can only be used to analyze investments with a comparable amount of initial investment.

In some cases, the application of the payback period criterion may be critical for investment decision-making purposes. In particular, this can happen if the investment involves a high risk, and then the shorter the payback period, the more preferable such a project is. In addition, the company's management may have a certain limit on the payback period, and this is primarily due to the problem of liquidity, since the company's main goal is for investments to pay off as soon as possible. Thus, the PP and DPP criteria make it possible to judge the liquidity and riskiness of a project as follows: the shorter the payback period, the less risky the project; The more liquid project is the one that has a shorter payback period. It is advisable to apply these criteria when the company is interested in increasing liquidity, as well as in industries in which investments are associated with a high level of risk (for example, in industries with rapid changes in technology: computer systems, mobile communications, etc.).

Cash flows of investment projects: analysis and assessment

Relevant cash flows

The most important stage in the analysis of an investment project is the assessment of the projected cash flow 12, which consists (in the most general form) of two elements: the required investments (outflows of funds) and cash receipts minus current expenses (inflows of funds).

In financial analysis, it is necessary to carefully consider the distribution of cash flows over time. Income statements are not linked to cash flows and therefore do not reflect when cash inflows or outflows occur during the reporting period.

When developing cash flow, the time value of money must be taken into account.

To compare cash flow values ​​at different times, a discounting mechanism is used, with the help of which all cash flow values ​​at various stages of the investment project are brought to a certain point, called the reduction moment. Typically, the moment of reduction coincides with the beginning or end of the basic stage of the investment project, but this is not a prerequisite, and any stage at which it is necessary to evaluate the effectiveness of the project can be selected as the moment of reduction.

As noted above, the most important indicator of project efficiency is net present value. The indicators of net present value and internal rate of return (IRR) allow you to compare different investment projects with each other in order to select the most effective one. However, such comparisons are subject to projects with comparable implementation periods, volumes of initial investments and relevant cash flows.

Relevant cash flows mean those flows in which a flow with a minus sign changes to a flow with a plus sign once. Relevant cash flows are typical for standard, typical and simplest investment projects, in which the initial investment of capital, that is, the outflow of funds, is followed by long-term receipts, that is, the inflow of funds.

Analysis of the cash flow of an investment project is not limited to studying its structure. It is also important to identify the cash flow, ensure its relevance/irrelevance, which will ultimately simplify the procedure for selecting evaluation indicators and selection criteria, as well as improve the comparability of different projects.

Irrelevant cash flows

Irrelevant cash flows are characterized by a situation where the outflow and inflow of capital alternate. In this case, some of the considered analytical indicators may change in an unexpected direction with changes in the initial parameters, that is, conclusions drawn on their basis may not always be correct.

If we recall that IRR is the root of the equation NPV = 0, and the function NPV = f (i) is an algebraic equation of the kth degree, where k is the number of years of project implementation, then, depending on the combination of signs and absolute values ​​of the coefficients, the number of positive roots equations can range from 0 to k. In particular, if cash flow values ​​alternate in sign, several values ​​of the IRR criterion are possible.

If we consider the graph of the function NPV = f (r, Pk), then it can be represented differently depending on the values ​​of the discount factor and the signs of cash flows (“plus” or “minus”). We can distinguish two most realistic typical situations (Fig. 1).

The given types of graph of a function

NPV = f (r, Pk) correspond to the following situations:

Option 1 - there is an initial investment of capital with subsequent receipts of funds;

Option 2 - there is an initial investment of capital; in subsequent years, inflows and outflows of capital alternate.

The first situation is the most typical: it shows that the function NPV = f (r) in this case is decreasing with increasing r and has a single IRR value. In the second situation, the type of graph may be different.

Project effectiveness assessment

Let's consider an example of assessing an investment project for the construction of a multifunctional complex within the third transport ring.

Assumptions

Any investment project is considered in the context of complex macro- and microeconomic processes. The process of modeling and evaluating an investment project is influenced by many, if not all, macro- and microenvironmental factors, if this concerns real investments in the construction sector that will be discussed. It is impossible to take into account absolutely everything, but there are indicators that can and even need to be taken into account: inflation, commercial loan rate, share of the fund’s profit, taxes, desired investor profit and others. It is easy to notice that some indicators, such as inflation and taxes, are conditionally constant, that is, their quantitative characteristics can be taken as constant over a certain period of time. Others, such as the commercial loan rate, the fund's profit share, the investor's desired return and others, may vary depending on the "appetite" of the participants. To analyze the effectiveness of the proposed investment project, a model was created in which it is possible to change the indicators described above, and the computer automatically recalculates the analytical part, but for this study it is necessary to fix some indicators in the form of economic assumptions 13:

Bank loan interest rate, 27% per annum;

Bank profit share, 0%;

Copyright holder profit, 84%;

Income tax rate, 24%;

Development fee, 3% of revenue;

Marketing costs, 2% of revenue;

Land rental cost, $91,000/ha per year;

Fixed portion of operating costs, $15,000 per month.

In addition to the assumptions described above, it is worth saying that there are several strategies for the development of the proposed investment project. To minimize risks and provide a faster return on investment, we propose to consider the situation of financing the project using 100% of funds raised with the parallel sale of areas under construction as they are being built.

Logic of the study

To determine investment needs, as well as to analyze the economic efficiency of an investment project, it is necessary to go through several stages 14:

1) investment forecasting: project estimate;

2) investment forecasting: investment plan;

3) revenue forecast;

4) drawing up a cash flow report;

5) determination of net present value (NPV) and internal rate of return (IRR);

6) calculation of the investment payback period (PP), discounted payback period (DPP) and investment profitability index (PI);

7) determination of financing needs.

Let's take a closer look at the key points.

Description of the investment project

Let's consider an investment project for the construction of a multifunctional complex within the third transport ring, which is a multi-storey complex on an area of ​​1.08 hectares with underground parking, offices, retail space, a hotel, restaurant and apartments.

Project effectiveness assessment. Investment forecasting: project estimate

Let's consider a specific example of assessing the effectiveness of an investment project for the construction of a multifunctional complex in Moscow. Let's draw up an estimate for the project (Table 1).

Preparation of a cash flow statement

Determining Net Present Value (NPV)

To determine NPV, the profit/loss (or cash flow) line from the cash flow statement is taken. For clarity, we present a method for calculating NPV.

NPV calculation:

conclusions

In the context of the global economic crisis, the construction sector of the Russian economy is experiencing serious difficulties, in particular, access to credit resources is limited even for such large companies as the Mirax Group, the PIK group of companies, and Glavmosstroy. Almost all developers now have to rely exclusively on their own funds, which are generally not enough to implement new and complete existing projects, not to mention those companies that carried out construction exclusively with borrowed funds.

Nevertheless, promising investment projects continue to exist on the market, and the use of the correct methodology for assessing them is still relevant. In this case, it is necessary, of course, to make amendments to the values ​​of current indicators for the cost of credit resources, exchange rates, discount rates and other indicators, and to modernize the general approach to the formation of project financing sources.

Table 1. Project estimate

Table 2. Cash flow statement

1 - Tslaf V. Evaluation of non-commercial investment projects // New markets. 2002. No. 3.

3 - Zavlin P.N. Assessing the economic efficiency of investment projects: Modern approaches. - St. Petersburg: Nauka, 1995.

4 - Zavlin P.N., Vasiliev A.V. Assessing the effectiveness of innovations. - St. Petersburg: Publishing house "Business Press", 1998.

5 - Kovalev V.V. Methods for evaluating investment projects. - M.: Finance and Statistics, 2000. P. 54.

6 - Beret V., Khavrapek P.M. Guidelines for preparing industrial feasibility studies. - M: Interexpert, 1995.

7 - Blech Yu., Goetze U. Investment calculations / Edited by A.M. Chuikina, L.A. Galutina. - Kaliningrad: Amber Tale, 1997.

8 - Foreign investments in St. Petersburg // Economics and life. St. Petersburg regional issue. 1997. No. 6.

9 - Gitmap L.J., Jonk M.D. Fundamentals of investing. - M.: Delo, 1998.

10 - Gazeev M.X., Smirnov A.P., Khrychev A.N. Indicators of investment efficiency in market conditions. - M.: PMB VNIIOENGa, 1993.

11 - Financial analysis of the company's activities. - M.: East service, 1994.

12 - Cash flow of an investment project is a dependence on the time of cash receipts and payments during the implementation of the project generating it, determined for the entire billing period covering the time interval from the start of the project to its termination (see: “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, the Civil Code of the Russian Federation on construction, architectural and housing policy No. VK 477 dated June 21, 1999).

13 - All assumptions are based on in-depth market analysis, using data from well-known analytical companies.

14 - Mindich D.A. Finance for a growing business. - M.: JSC "Expert RA", 2007.

The innovation process is accompanied by an investment process, since investments- monetary costs of enterprises, the results of which are manifested over a long period of time or over a long period. Therefore, the effectiveness of innovation is assessed based on the approach generally accepted in a market economy. assessing the effectiveness of investment projects.

The effectiveness of an investment project can be assessed taking into account the socio-economic consequences of its implementation for society as a whole and taking into account the financial consequences only for the entity (operator) implementing the project, on the assumption that it makes all the necessary costs and receives all its results. In the first case, public (socio-economic) is determined, and in the second - commercial viability investment project.

The main principles for assessing the effectiveness of an investment project are:

Review of the project throughout its life cycle;

Modeling the cash flow associated with the implementation of the project:

Taking into account the time factor.

Most often, the estimated period (life cycle) of an investment project is justified:

Depletion of hydrocarbon reserves;

Depreciation of the main (defining) part of fixed assets;

The cessation of market needs for manufactured products.

Monetary flow represents the time dependence of cash receipts and payments during the implementation of the project generating it during the billing period. To form it, a certain time interval is selected (month, quarter, year), for which the balance (difference) of expected cash inflows and outflows is determined, which can be either negative or positive. When assessing investment projects in the oil and gas industry due to their long life cycles, this interval is usually chosen to be equal to a year. Therefore, cash flow represents a sequence (within an accounting period) of annual balances of cash inflows and outflows.

Cash flow is the initial basis for calculating all performance indicators of an investment project. It usually consists of flows from individual activities:

Cash flow from investing activities;

Cash flow from operating activities;

Cash flow from financing activities. Cash flow from investing activities mainly

characterized by cash outflows, which include pre-project costs, capital investments, costs to increase working capital, liquidation costs, which can be transformed when modeling cash flow and funds invested in creating a liquidation fund.

Cash flow from operating activities is formed by revenue from sales of manufactured products, production costs and the totality of taxes paid.

Financial activities include transactions with funds external to the investment project being evaluated, i.e. coming for its implementation not at the expense of the project. Cash flow from financial activities is formed by investments of equity capital and borrowed funds, costs of repaying and servicing loans and issued debt securities, and paying dividends on the company's shares. Cash flows from financial activities are taken into account when it is necessary to assess the effectiveness of the investment project for each of the participants in its implementation.

When modeling cash flow, current and forecast prices can be used. Current (permanent) prices that do not take into account inflation are called. Forecast are the prices expected in the future, taking into account projected inflation. Cash flows expressed in forecast prices must be deflated by dividing by the expected overall underlying inflation index to eliminate the impact of inflation on performance measures.

When assessing the effectiveness of an investment project, along with the concept of cash flow, the concept is used accumulated cash flow. The accumulated cash flow is determined (at each interval of the billing period) as the algebraic sum of the balances of all previous intervals.

Taking into account the time factor (achieving comparability of funds at different times) is carried out using the operation of discounting monetary values.

Discounting a cash flow is the reduction of its interval (annual) cash balance values ​​to their value at a certain point in time, which is called the moment of reduction. The beginning of the first year of the calculation period is most often chosen as the reduction point (when evaluating oil and gas projects).

The main economic standard used in discounting is discount rate(E), expressed as fractions of a unit or as a percentage per year.

The discount rate used in assessing commercial efficiency reflects the annual interest received on invested capital, below which a potential investor (investors) considers financing an investment project unacceptable. Each business entity individually assesses the required rate of return on invested capital, taking into account the possibilities of alternative use of capital, its financial condition and the risks associated with the implementation of the project.

Discounting the cash flow balance corresponding to year t is carried out by multiplying its value by the discount factor (a), calculated by the formula:

where E n is the discount rate; t is the current year of the billing period.

The main indicators when assessing the commercial effectiveness of an investment project are:

Net present value;

Internal rate of return;

Need for additional funding;

Profitability indices;

Payback period.

The most important indicator of the effectiveness of an investment project is net present value (NPV, NPV). It corresponds to the value of the accumulated discounted cash flow and is defined as the algebraic sum of discounted values ​​of annual balances for the calculation period.

In oil and gas field development projects, the NPV is calculated using the following formula:

where V. is revenue from sales of products in year i;

T - calculation period of assessment;

K - capital investments in field development in year i;

E - operating costs (production) in year i Les depreciation deductions and taxes included in the cost of extracted products;

N. - tax payments in year i;

A. - depreciation charges in year i.

Net present value is the amount of income reduced to the initial moment of the project, which is expected after reimbursing the invested capital and receiving an annual percentage equal to the discount rate chosen by the investor.

If the NPV value is positive, investment project i is considered profitable, which indicates the feasibility of financing and implementing the project.

When choosing the most effective project option (among alternatives), preference is given to the option characterized by the highest NPV value.

Another important indicator of the effectiveness of an investment project is internal rate of return (profitability) (VND, VNR). The value of this indicator corresponds to the annual interest expected to be received on the capital invested in the project. In the most common cases (cash flow is characterized by one investment cycle), this is the value of the variable discount rate at which the net present value goes to zero. IRR is determined based on solving the following equation:

To solve such an equation, iterative methods are used.

With a number of assumptions, it is assumed that the value of the IRR corresponds to the annual interest rate of the loan for the full financing of the investment project, at which the enterprise - the borrower and is able to pay the lender, but its profit is equal to zero.

To assess the effectiveness of an investment project, IRR is compared with the discount rate. If the IRR value is greater than the discount rate, the NPV is positive and the investment project is effective. If the IRR value is less than the discount rate, the NPV is negative and the investment project is ineffective,

Payback period call the duration of the period from the initial moment of project implementation to the moment of payback. The payback point is the earliest point in time in the calculation period, after which the accumulated discounted cash flow becomes positive and subsequently remains non-negative (payback period taking into account discounting).

The payback period (T*) can be determined from the following equality:

Need for additional funding- the maximum value of the absolute value of the negative accumulated discounted cash flow balance of the investment project. This value shows the minimum discounted amount of project financing required for its financial feasibility. This indicator is sometimes called capital-1Ш risk.

Return Indices (PI) characterize the “return of the project” on the money invested in it. The return is measured by the number of monetary units received for each invested monetary unit during the billing period of the project with accounting for discounting.

Discounted cost profitability index- the ratio of the sum of discounted cash inflows to the sum of discounted cash outflows.

The discounted cost return index (R) is calculated using the following formula:

Where E.- operating costs in year i, taking into account depreciation and taxes included in the cost of production;

H*i - taxes in year i, not included in the cost of extracted products.