Indicators of the commercial effectiveness of the project. Methods for assessing the effectiveness of investment projects

master's student at St. Petersburg State University of Low Temperature and Food Technologies

Scientific supervisor: Doctor of Economics, Professor V.L.Vasilenok

As you know, efficiency is the most important characteristic of enterprises. It refers to the degree to which the best results can be achieved at the lowest cost.

When evaluating projects, the following types of efficiency are used:

· Efficiency of participation in the project;

· The effectiveness of the project as a whole.

The effectiveness of the project as a whole is determined in order to determine the potential attractiveness of the project for its likely participants, as well as for the purpose of finding investors. This type of efficiency includes: public (socio-economic) and commercial efficiency.

The effectiveness of participation in the project is determined in order to determine the feasibility of the project, as well as the interest in the project of its participants. This includes such types of efficiency as: budget efficiency, efficiency of participation in the enterprise project, efficiency of investing in company shares, as well as efficiency of participation of higher-level structures in the project.

Among the variety of types of project effectiveness, we can also highlight the following:

· Economic efficiency – shows the ratio of the costs of implementing the project and its results in accordance with the interests and goals of the project participants in monetary terms;

· Environmental efficiency of the project – reflects the correspondence of costs and results from the point of view of the state and society;

· Social efficiency – this shows the correspondence of the costs and social results of the project under consideration to the goals and social interests of its participants;

· Other types of efficiency.

The most significant types of project efficiency include commercial efficiency, which is directly related to the problem of comprehensive assessment of the efficiency of capital investments, since the project in this case is considered as an investment object.

The assessment of commercial effectiveness is based on the following basic principles:

· Constant or variable prices for goods and services provided for by the project (market prices, that is, prices at which goods are purchased on the free market) are used;

· Cash flows are calculated in the currencies in which the project provides for the purchase of resources and payment for products;

· If the project involves both the production and consumption of certain products, the calculation takes into account only production costs, but does not take into account the costs of its acquisition;

· The calculations take into account taxes, fees, deductions provided for by law, for example, VAT refunds for the resources used;

· Receipt and repayment of loans are not taken into account both in cash flow and in calculations of working capital requirements;

· If the project provides for the simultaneous implementation of several different types of operating activities, then the costs are taken into account for each of them when calculating.

When determining the commercial effectiveness of an innovation investment project, the flow of real money is considered as an effect. When implementing an innovation project, the following types of activities are distinguished: financial, operational and investment. Each of these activities produces cash inflows and outflows. Real cash flow is the difference between the inflow and outflow of cash from operating and investing activities for each period of a given project.

The real money balance is the difference between the inflows and outflows of funds from all 3 types of activities. In addition, at each calculation step the following is calculated:

Flow of real money - this indicator is used in the future to calculate such indicators of the effectiveness of an innovation investment project, such as: net present value, payback period of the project, profitability index, internal rate of return and others.

In order to accept any innovation investment project, it is necessary that the balance of real money be positive in any time period where a given participant in this project incurs expenses or receives income. A negative balance of real money is evidence of the need to attract additional funds (own or borrowed).

Collection of scientific articles
“Russia: potential for innovative development. Collection of scientific articles by graduate students and students",
St. Petersburg: Institute of Business and Law, 2011

Methods for assessing the effectiveness of individual entrepreneurs are divided into simple (static) and dynamic (the discounting process is used).

Simple assessment methods include those that operate with individual, point values of initial data, but do not take into account the entire life span of the project and the inequality of cash flows arising at different points in time. These methods are simple to calculate and quite illustrative, as a result of which they are often used for quick assessment of projects at the preliminary stages of their analysis.

Complex methods are used for a more in-depth analysis of investment projects: they use the concepts of time series, require the use of special mathematical apparatus and more careful preparation of initial information.

In practice, to determine the economic efficiency of investments using a simple method, the calculation of a simple rate of return and payback period is most often used.

Simple rate of return - the economic meaning of which is to estimate what part of investment costs is reimbursed (returned) in the form of profit during one planning interval. By comparing the calculated value of the simple rate of return with the minimum or average level of profitability, the investor can make preliminary conclusions about the feasibility of this investment, as well as whether the analysis of the investment project should be continued.

Payback period is the period during which the project's funds are generated, which includes the amounts of net profit and depreciation used to return the initially invested capital.

Dynamic methods take into account the dynamics of revenues from the project and investments in it over time. This is done by discounting investments in the project and proceeds from the project to the same point in time (usually the beginning of the project).

Cash flows of an investment project. The effectiveness of the investment project is assessed during the calculation period, covering the time interval from the start of the project to its termination.

The billing period is divided into steps - segments, within which the data used to assess financial and economic indicators is aggregated. The calculation steps are identified by their numbers (0, 1,…). Time in the calculation period is measured in years or fractions of a year and is counted from a fixed moment t0 = 0, taken as the base moment (usually the moment of the beginning or end of the zero step is taken as the base moment; when comparing several projects, it is recommended to choose the same base moment for them) .

Cash Flow (CF) is the time dependence of cash receipts (inflows) and payments (outflows) during project implementation, determined for the entire billing period. The cash flow value is denoted by (t).

In cases where we are talking about several flows or about some component of the cash flow, these designations are supplemented with the necessary indices.

At each step, the cash flow value is characterized by:

- an inflow equal to the amount of cash receipts (or results in value terms) at this step (Pm);
- outflow equal to payments at this step (Om);
- balance (active balance, effect) equal to the difference between inflow and outflow (Pm - Om).

Cash flow(t) usually consists of flows from individual activities:

- cash flow from investment activities (t);
- cash flow from operating activities0(t);
- cash flow from financial activities (t).

Cash flow from operating activities includes cash receipts from the sale of goods, works and services, as well as advances from buyers and customers. Payments for raw materials, materials, utility bills, wage payments, taxes and fees paid, etc. are shown as a cash outflow.

When investing activities, cash flows associated with the acquisition and sale of durable property, that is, fixed assets and intangible assets, are shown.

Financial activities involve inflows and outflows of funds from loans, borrowings, issues of securities, etc.

Net cash flow is the sum of cash flows from operating, investing and financing activities. In other words, it is the difference between the sum of all cash receipts and the sum of all payments for the same period.

Cash flows can be expressed in current, forecast and deflated prices.

Current prices are prices without taking into account inflation. Forecast prices are those expected (taking into account inflation) at future calculation steps. Deflated are forecast prices that are reduced to the price level at a fixed point in time by dividing by the general underlying inflation index.

Discounting of cash flows is the reduction of their values at different times (related to different calculation steps) to their value at a certain point in time, which is called the moment of reduction and is denoted by t0.

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

Discounting of cash flow at the m-th step is carried out by multiplying its value by the discount factor calculated by the formula

investment risk business financing

where Km is the discount factor;

E - discount rate;

tm is the moment of the beginning of the step;

t0 is the moment of reduction.

The formula is valid for a constant discount rate, i.e. when E is constant over the economic life of the investment or calculation horizon.

Rate of Discount - From an economic point of view, this is the rate of return that an investor would typically receive from an investment of similar content and degree of risk. Thus, this is the investor's expected rate of return (Opportunity Rate of Return).

The discount rate (E) is an exogenously specified basic economic standard used in assessing the effectiveness of individual entrepreneurs.

The following discount rates differ:

- a commercial;
- project participant;
- social;
- budget.

The commercial discount rate (E) is used to assess the commercial viability of a project; it is determined taking into account alternative efficiency of capital use. In other words, the commercial discount rate is the desired (expected) rate of profitability (profitability), i.e. the level of return on invested funds that can be ensured when they are placed in publicly available financial mechanisms (banks, financial companies, etc.), and not when used in a given investment project. Thus, E is the choice price (opportunity cost) of a commercial strategy that involves investing money in an investment project.

The discount rate of a project participant reflects the effectiveness of participation of enterprises (or other participants) in the project. It is chosen by the participants themselves. In the absence of clear preferences, a commercial discount rate can be used.

Depending on the method by which the uncertainty of the conditions for the implementation of an investment project is taken into account when determining the expected net present value (NPV), the discount rate in efficiency calculations may or may not include a risk adjustment. The inclusion of a risk adjustment is usually made when a project is assessed under a single scenario for its implementation. The discount rate, which does not include risk premiums (risk-free discount rate), reflects the profitability of alternative risk-free investment avenues. The discount rate, which includes a risk adjustment, reflects the profitability of alternative investment directions that are characterized by the same risk as the investment in the project being evaluated.

The risk-free commercial discount rate, used to assess the commercial effectiveness of the investment project as a whole, can be set in accordance with the requirements for the minimum acceptable future return on invested funds, determined depending on the deposit rates of banks of the first reliability category (after excluding inflation).

The risk-free commercial discount rate, used to assess the effectiveness of the enterprise’s participation in the project, is set by the investor independently.

The value of the risk adjustment generally takes into account three types of risks associated with the implementation of an investment project:

- insurance risk;
- the risk of unreliability of project participants;
- the risk of non-receipt of the income provided for by the project.

An adjustment for each type of risk is not introduced if the investment is insured for the corresponding insured event (in this case, the insurance premium is a certain indicator of the corresponding type of risk). However, the investor's costs increase by the amount of insurance payments.

Insurance risk is usually seen as the possibility of:

- confiscation of property or loss of property rights when they are purchased at a price lower than the market price or provided for by the project;
- unforeseen changes in legislation that worsen the financial performance of the project (for example, increasing taxes, tightening requirements for production or manufactured products compared to those provided for in the project);
- changes in personnel in government bodies interpreting legislation of indirect effect.

The amount of adjustment for insurance risk is assessed by experts:

- for foreign countries based on ratings of countries in the world according to the level of country investment risk;
- in Russia, country risk is determined in relation to the risk-free, non-inflationary discount rate.

The risk of unreliability of project participants is usually seen in the possibility of unexpected termination of the project due to:

- misuse of funds intended for investment in this project or for creating financial reserves necessary for the implementation of the project;
- financial instability of the company implementing the project (insufficient supply of its own working capital, insufficient coverage of short-term debt with turnover, lack of sufficient assets to secure loans, etc.);
- bad faith, insolvency, legal incapacity of other project participants (for example, construction organizations, suppliers of raw materials or consumers of products), their liquidation or bankruptcy.

The size of the premium for the risk of unreliability of project participants is determined by experts by each specific project participant, taking into account its functions, obligations to other participants and the obligations of other participants to them. Typically, the adjustment for this type of risk does not exceed 5%, but its value significantly depends on how detailed the organizational and economic mechanism for implementing the project is, and how much the concerns of the project participants are taken into account.

The risk of not receiving project-provided income is primarily due to technical, technological and organizational decisions of the project, as well as random fluctuations in production volumes and prices for products and resources. The adjustment for this type of risk is determined taking into account the technical feasibility and validity of the project, the availability of the necessary scientific and development resources and the thoroughness of marketing research.

The risk of not receiving project income is reduced:

- when receiving additional information about the feasibility and effectiveness of a new technology, about mineral reserves, etc.;
- in the presence of representative marketing research confirming the moderately pessimistic nature of the demand volumes and prices adopted in the project and their seasonal dynamics;
- in the case when the project documentation contains a project for organizing production at the stage of its development.

Investment project performance indicators

The following are recommended as the main indicators used to calculate the effectiveness of an investment project:

· net income;
· net present value;
· internal rate of return;
· indexes of profitability of costs and investments;
· payback period;
· a group of indicators characterizing the financial condition of the enterprise participating in the project.

Net income (other names - BH, Net Value, NV) is the accumulated effect (cash flow balance) for the billing period, where the summation applies to all steps of the billing period.

The most important indicator of project efficiency is net present value (other names - NPV, integral effect, Net Present Value, NPV) - the accumulated discounted effect for the billing period, where NPV and NPV characterize the excess of total cash receipts over total costs for a given project, respectively, excluding and taking into account the inequality of effects (as well as costs, results) relating to different points in time.

The difference between BH and NPV is often called the project discount.

To recognize a project as effective from the investor’s point of view, it is necessary that the NPV of the project be positive; when comparing alternative projects, preference should be given to the project with a large NPV value (if the condition of its positivity is met).

Internal rate of return(other names - IRR, internal discount rate, internal rate of return, Internal Rate of Return, IRR). The internal rate of return is such a positive number Ev that at the discount rate E = Ev the net present value of the project turns to 0, for all large values of E it is negative, for all smaller values of E it is positive.

The payback period (“simple” payback period) is the duration of the period from the initial moment to the payback period. The starting point is indicated in the design task (usually the beginning of step zero or the beginning of operational activities). The payback moment is the earliest point in time in the calculation period, after which the current net income of BH(k) becomes and subsequently remains non-negative.

The payback period taking into account discounting is the duration of the period from the initial moment to the moment of payback taking into account discounting. The payback moment, taking into account discounting, is the earliest point in time in the calculation period, after which the current net present value NPV (k) becomes and subsequently remains non-negative.

Profitability indices characterize the (relative) “return of a project” on the funds invested in it. They can be calculated for both discounted and undiscounted cash flows. When assessing effectiveness, they often use:

· cost profitability index - the ratio of the amount of cash inflows (accumulated receipts) to the amount of cash outflows (accumulated payments);
· discounted cost profitability index - the ratio of the sum of discounted cash inflows to the sum of discounted cash outflows;
· investment return index (IR) - the ratio of the sum of the elements of cash flow from operating activities to the absolute value of the sum of the elements of cash flow from investment activities. It is equal to the ratio of the black hole to the accumulated volume of investment increased by one:

ID = BH/K +1;

· discounted investment return index (DII) - the ratio of the sum of discounted elements of cash flow from operating activities to the absolute value of the discounted sum of elements of cash flow from investment activities. IDI is equal to the ratio of NPV increased by one to the accumulated discounted volume of investments:

IDD = NPV / K +1

The cost and investment return indices exceed 1 if and only if the BH for this flow is positive.

Conclusion: 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. Despite all the other favorable characteristics of the project, it will never be accepted for implementation if it does not provide:

- reimbursement of invested funds from income from the sale of goods or services;
- obtaining a profit that ensures a return on investment not lower than the level desired for the enterprise;
- return on investment within a period acceptable for the enterprise.

Determining the reality of achieving precisely these results of investment activity is the key task of assessing the financial and economic parameters of any project for investing in real assets.

Consider a project whose cash flows are as shown in the table below. The duration of a sample step is one year. It is assumed that inflows are entered into the table with a “+” sign, outflows with a “-” sign, all inflows and outflows at each step are considered to belong to the end of this step, and the reduction point is the end of the zero step. To simplify the example, calculations are made in current prices (excluding inflation). Let's take the discount rate E=10%.

Cash flows (in conventional units)

Index	Number per sample step (m)

1. Cash flow from operating activities f° (m)
2. Tributaries

4. Balance fi(m)
5. Balance of total flow Ф (m) = phi(m) + ф°(m)
6. Balance of accumulated flow
7. Discount factor am (E) =
8. Discounted balance of total flow (p.5 X p.7)
9. BH discounted
10. Discounted investments (p.4 x p.7)

A project is being implemented that includes:

a) cash flow from operating activities (since any cash flow consists of inflows and outflows of funds, cash flow inflows consist of receipts of funds from the sale of goods and services, as well as advances from buyers and customers).
b) outflows can include (payments for raw materials, wages, utility bills, etc.)

During investment activities, cash flows are shown that are associated with the acquisition and sale of tangible and intangible assets, incl. valuable papers. There is another cash flow about the subsequent implementation of the investment project - financial, or flow from financial activities (inflows and outflows associated with loans and issues of securities).

In order to assess the effectiveness of an investment, it is necessary to calculate the first indicator of net income - this is the accumulated effect (cash flow balance).

First, we will find the balance of cash flow from investment activities, and then, as a cumulative total, we will find the net income for the project. For a project to be considered effective, the RR must be positive (line 6).

1. BH is positive, therefore the project can be considered effective.
2. The period and moment of payback are determined (duration of the period in days, months, years).

The duration of the period from the beginning to the moment of payback. The payback point is the earliest period of time in the billing period after which net income becomes positive and no longer becomes negative. The payback period for this project is 5 years. And the payback moment lies at the end of the fourth at the beginning of the fifth step. In order to bring cash flows at different times to an equivalent value at a certain point in time, they resort to discounting cash flows. For this, a discount factor is used, E is the discount rate, i.e. the rate of return that an investor would typically receive from similar investments and degrees of risk (expected rate of return). To calculate net present value, it is necessary to determine the discounted cash flow balance, and then take it on an accrual basis. From line 9 you can see how the period and payback period have changed, as well as the value of the discounting factor; it is positive, therefore the project is effective. To determine the return on investment, it is necessary to find as K - the absolute value of the amount of discounted investment.

To find the profitability index of discounted investments, we use the formula

IDD = 1+NPV/K = 1+ 9.06/241.94= 1.037

In order for a project to be considered effective, the indicator must be greater than 0.

Conclusion: Net income, net present value and the absolute value of the amount of discounted investment are positive, the indicators are greater than 0, which means the project is effective.

Commercial efficiency can be calculated both for the project as a whole and for its individual participants. In this case, the effect at each step of the calculation is a cash flow consisting of inflows and outflows of funds.

The commercial effectiveness of an investment project is assessed based on such indicators as the flow of real money, the balance of real money and the balance of accumulated real money.

Real cash flow is the difference between the inflow (+) and outflow of cash (-) from operating and investing activities for each period of a given project.

The real cash balance is the difference between the cash inflows and outflows from all three activities.

The balance of accumulated real money is the balance of real money, on an accrual basis.

Flow of real money - this indicator is used in the future to calculate such criteria for the effectiveness of an investment project as: net present value, payback period of the project, return on investment index, internal rate of return and others.

A project is considered commercially effective and financially feasible if the balance of real money at each calculation step is greater than zero. If this condition is not met, it is necessary to redesign the cash flows from the implementation of the investment project.

Calculation of indicators of commercial efficiency of individual entrepreneurs is based on the following principles:

Current or forecast prices for products, services and material resources provided for by the project are used;

Cash flows are calculated in the same currencies in which the project provides for the acquisition of resources and payment for products;

Salaries are included in operating costs in the amounts established by the project (including deductions);

If the project involves both the production and consumption of some products (for example, the production and consumption of components or equipment), the calculation takes into account only the costs of its production, but not the costs of its acquisition;

The calculation takes into account taxes, fees, deductions, etc., provided for by law, in particular, VAT reimbursement for the resources used, tax benefits established by law, etc.;

If the project provides for the full or partial binding of funds (deposit, purchase of securities, etc.), the investment of the corresponding amounts is taken into account (in the form of outflows) in cash flows from investing activities, and receipts (in the form of inflows) - in cash flows from operating activities ;

If the project involves the simultaneous implementation of several types of operating activities, the cost of each of them is taken into account in the calculation.

The following tables are recommended as output forms for calculating the commercial efficiency of a project:

Profit and loss statement;

Cash flows with calculation of performance indicators.

To build a profit and loss statement, you must provide information about tax payments for each type of tax.

The assessment of the commercial effectiveness of the project as a whole is made on the basis of performance indicators calculated in accordance with clause 2.8.

2.8. IP performance indicators

The following are recommended as the main indicators used to calculate the efficiency of IP:

Net income;

Net present value;

Internal rate of return;

The need for additional financing (other names - PF, project cost, risk capital);

Indices of profitability of costs and investments;

Payback period;

A group of indicators characterizing the financial condition of the enterprise participating in the project.

Conditions for financial feasibility and performance indicators are calculated on the basis of cash flow fi_m, the specific components of which depend on the type of performance being assessed and are described in Section 4.8.

At different stages of calculations, in accordance with their goals and the specifics of the PF, financial indicators and conditions for the financial feasibility of the individual entrepreneur are assessed in current or forecast prices. Other indicators are determined in current or deflated prices.

Net income (other names - BH, Net Value, NV) is the accumulated effect (cash flow balance) for the billing period:

BH = Sum Phi, (2.3)

where the summation applies to all steps of the billing period.

NPV = Sum Phi alpha (E). (2.4)

NPV and NPV characterize the excess of total cash receipts over total costs for a given project, respectively, without taking into account and taking into account the inequality of effects (as well as costs, results) relating to different points in time.

The difference between BH and NPV is often called the project discount.

Internal rate of return (other names - IRR, internal discount rate, internal rate of return, Internal Rate of Return, IRR). In the most common case of individual entrepreneurs starting with (investment) costs and having a positive BH, the internal rate of return is called a positive number E_v if:

At the discount rate E = E_v, the net present value of the project turns to 0.

This is the only number.

In a more general case, the internal rate of return is such a positive number E_v that at the discount rate E = E_v the net present value of the project turns to 0, for all large values of E it is negative, for all smaller values of E it is positive. If at least one of these conditions is not met, the GNI is considered not to exist.

To assess the effectiveness of an individual entrepreneur, the value of IRR must be compared with the discount rate E. Investment projects with IRR > E have a positive NPV and are therefore effective. Projects with GNI< Е, имеют отрицательный ЧДД и потому неэффективны.

VND can also be used:

For the economic assessment of design solutions, if acceptable values of IRR (depending on the area of application) are known for projects of this type;

To assess the degree of stability of the IP based on the difference between GNI - E (see Section 10);

To establish the discount rate E by project participants based on data on the internal rate of return of alternative areas for investing their own funds.

To assess the effectiveness of an individual entrepreneur for the first k steps of the billing period, it is recommended to use the following indicators:

Current net income (accumulated balance):

BH(k) = Sum Phi;

Current net present value (accumulated discounted balance):

NPV(k)= Sum Phi alpha (E);

The current internal rate of return (current IRR), defined as such a number of IRR(k), that at the discount rate E = IRR(k) the NPV(k) value becomes 0, for all large values of E it is negative, for all smaller values of E - positive. For individual projects and values of k, the current IRR may not exist.

When assessing efficiency, the payback period, as a rule, acts only as a limitation.

The payback period taking into account discounting is the duration of the period from the initial moment to the “payback moment taking into account discounting”. The payback moment, taking into account discounting, is the earliest point in time in the calculation period, after which the current net present value NPV (k) becomes and subsequently remains non-negative.

The need for additional financing (PF) is the maximum absolute value of the negative accumulated balance from investment and operating activities (see below). The PF value shows the minimum amount of external financing for a project required to ensure its financial feasibility. Therefore, PF is also called risk capital. It should be borne in mind that the actual amount of required financing does not have to coincide with the PF, and, as a rule, exceeds it due to the need to service the debt (see example in Appendix 10).

The need for additional financing taking into account the discount (DFT) is the maximum value of the absolute value of the negative accumulated discounted balance from investment and operating activities (see below). The DPF value shows the minimum discounted amount of external financing for the project necessary to ensure its financial feasibility.

Cost profitability index is the ratio of the amount of cash inflows (accumulated receipts) to the amount of cash outflows (accumulated payments).

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

Investment return index (IR) is the ratio of the sum of the elements of cash flow from operating activities to the absolute value of the sum of the elements of cash flow from investment activities. It is equal to the ratio of the black hole to the accumulated volume of investments increased by one;

Discounted investment return index (DII) is the ratio of the sum of discounted elements of cash flow from operating activities to the absolute value of the discounted sum of elements of cash flow from investment activities. IDI is equal to the ratio of NPV increased by one to the accumulated discounted volume of investment.

When calculating the ID and IDD, either all capital investments for the calculation period can be taken into account, including investments in replacing retiring fixed assets, or only the initial capital investments made before the enterprise is put into operation (the corresponding indicators will, of course, have different values).

The cost and investment return indices exceed 1 if and only if the BH for this flow is positive.

The profitability indices of discounted costs and investments exceed 1 if and only if the NPV for this flow is positive.

No. 25 Efficiency of participation in an investment project

ü participation of enterprises in the project - efficiency for enterprises - participants of the IP

ü investing in shares enterprises - efficiency for shareholders of joint-stock companies - participants of individual entrepreneurs

ü higher level structures in relation to enterprises - participants of the IP (national economic, industry, regional, etc. . )

ü budget efficiency IP - the effectiveness of state participation in the project in terms of expenses and revenues of budgets of all levels

ü EFFECTIVENESS OF PARTICIPATION IN THE PROJECT - checking the financial feasibility of the project and the interest of ALL its participants in it (taking into account their financial capabilities)

firstly, static methods were used to calculate the effectiveness of investments, which did not take into account the time factor, which is of fundamental importance for a financial investor;

secondly, the indicators used were aimed at identifying the production effect of investments, i.e. increasing labor productivity, reducing costs as a result of investments, the financial efficiency of which faded into the background.

Therefore, to assess the financial efficiency of a project, it is advisable to use the so-called. “dynamic” methods, based primarily on discounting the cash flows generated during the implementation of the project. The use of discounting allows us to reflect the fundamental principle “tomorrow’s money is cheaper than today’s” and thereby take into account the possibility of alternative investments at the discount rate. The general scheme of all dynamic methods for assessing efficiency is basically the same and is based on forecasting positive and negative cash flows (roughly speaking, expenses and income associated with the implementation of the project) for the planning period and comparing the resulting balance of cash flows, discounted at the appropriate rate, with investment costs .

Obviously, this approach involves the need to make a number of assumptions, which are quite difficult to implement in practice (especially in Russian conditions). Let's consider the two most obvious obstacles.

Firstly, it is required to correctly estimate not only the volume of initial capital investments, but also current expenses and revenues for the entire period of the project. The entire conventionality of such data is obvious even in a stable economy with predictable price levels and structure and a high degree of market knowledge. In the Russian economy, the volume of assumptions that have to be made when calculating cash flows is immeasurably higher (the accuracy of the forecast is a function of the degree of systematic risk).

Secondly, to carry out calculations using dynamic methods, the premise of stability of the currency in which cash flows are assessed is used. In practice, this prerequisite is implemented through the use of comparable prices (with possible subsequent adjustment of the results taking into account projected inflation rates) or the use of a stable foreign currency for calculations. The second method is more appropriate in the case of implementing an investment project together with foreign investors.

Of course, both of these methods are far from perfect: in the first case, possible changes in the price structure remain out of sight; in the second, in addition to this, the final result is also influenced by changes in the structure of foreign exchange and ruble prices, inflation of the foreign currency itself, exchange rate fluctuations, etc.

In this regard, the question arises about the advisability of using dynamic methods for analyzing production investments in general: after all, in conditions of high uncertainty and when making various kinds of assumptions and simplifications, the results of the corresponding calculations may turn out to be even further from the truth. It should be noted, however, that the purpose of quantitative methods for assessing efficiency is not an ideal forecast of the amount of expected profit, but, first of all, to ensure the comparability of the projects under consideration in terms of efficiency, based on certain objective and re-verifiable criteria, and thereby preparing the basis for making the final solutions.

Analysis of the development and dissemination of dynamic methods for determining the effectiveness of investments proves the necessity and possibility of their use for evaluating investment projects. In highly developed industrial countries 30 years ago, the attitude towards these methods of assessing efficiency was approximately the same as in our time in Russia: in 1964 in the USA, only 16% of surveyed enterprises used dynamic calculation methods in investment analysis. By the mid-1980s, this share had risen to 86%. In Central European countries (Germany, Austria, Switzerland) in 1989, more than 88% of surveyed enterprises used dynamic calculation methods to assess the effectiveness of investments. It should be taken into account that in all cases, industrial enterprises were studied, which often make investments due to technical necessity. All the more important is the dynamic analysis of investment projects in the activities of a financial institution that is profit-oriented and has numerous opportunities for alternative investment of funds.

Finally, measures to assess investment risk and the use of methods for taking into account uncertainty in financial calculations, which can reduce the impact of incorrect forecasts on the final result and thereby increase the likelihood of a correct decision, can significantly increase the validity and correctness of the analysis results.

Of the variety of dynamic methods for calculating the effectiveness of investments, the most well-known and often used in practice are the method of estimating the internal rate of return of a project and the method of estimating the net present value of the project. In addition, there are a number of special methods.

Net Present Value (NPV)

This method is based on comparing the value of the original investment (IC) with the total discounted net cash flows it generates over the forecast period. Since the cash inflow is distributed over time, it is discounted using a factor r set by the analyst (investor) independently based on the annual percentage return that he wants or can have on the capital he invests.

Suppose a forecast is made that the investment (IC) will generate, over n years, annual income in the amount of P 1, P 2, ..., P n. The total accumulated value of discounted income (PV) and net present value (NPV) are respectively calculated using the formulas:

. (1)

Obviously, if:

NPV > 0, then the project should be accepted;

NPV = 0, then the project is neither profitable nor unprofitable.

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.

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

, (2)

where i is the projected average inflation rate.

Calculation using the above formulas manually is quite labor-intensive, therefore, for the convenience of using this and other methods based on discounted valuations, special statistical tables have been developed in which the values of compound interest, discount factors, discounted value of the monetary unit, etc. are tabulated, depending on time interval and discount factor value.

It should be noted that the NPV indicator reflects a forecast assessment of changes in the economic potential of an enterprise if the project in question is adopted. This indicator is additive in the time aspect, i.e. the NPV of various projects can be summed up. This is a very important property that distinguishes this criterion from all others and allows it to be used as the main one when analyzing the optimality of an investment portfolio.

Scope and difficulties of the NPV method.

Using the NPV method, you can determine not only the commercial efficiency of the project, but also calculate a number of additional indicators. Such a wide range of applications and the relative simplicity of calculations have ensured that the NPV method is widely used, and currently it is one of the standard methods for calculating investment efficiency recommended for use by the UN and the World Bank.

However, correct use of the NPV method is only possible if a number of conditions are met:

The volume of cash flows within the investment project must be assessed for the entire planning period and tied to certain time intervals. Cash flows within the framework of an investment project should be considered in isolation from the rest of the enterprise's production activities, i.e. characterize only payments and receipts directly related to the implementation of this project. The discounting principle used in calculating net present value, from an economic point of view, implies the possibility of unlimited attraction and investment of financial resources at the discount rate. Using the method to compare the effectiveness of several projects involves using a single discount rate for all projects and a single time interval (defined, as a rule, as the longest available implementation period).

When calculating NPV, as a rule, a constant discount rate is used, but depending on the circumstances (for example, changes in the level of interest rates are expected), the discount rate can be differentiated by year. If different discount rates are used during calculations, then, firstly, formulas (1) and (2) are not applicable and, secondly, a project acceptable at a constant discount rate may become unacceptable.

Return on Investment Index (PI)

This method is essentially a corollary of the net present value method. The profitability index (PI) is calculated using the formula:

Obviously, if:

PI > 1, then the project should be accepted;

PI = 1, then the project is neither profitable nor unprofitable.

The logic of the PI criterion is as follows: it characterizes income per unit of cost; It is this criterion that is most preferable when it is necessary to organize independent projects to create an optimal portfolio in the case of an upper limit on the total investment volume.

In contrast to the net present effect, the profitability index is a relative indicator. Thanks to this, it is very convenient when choosing one project from a number of alternative ones that have approximately the same NPV values, or when completing a portfolio of investments with the maximum total NPV value.

Differences between IRI (PI) and other methods for assessing an investment project

is a relative indicator;
characterizes the level of profitability per unit of capital investment;
represents a measure of sustainability of both the investment project itself and the enterprise that implements it;
allows you to rank investment projects by IRI (PI) value.

Investment Internal Rate of Return (IRR)

The second standard method for assessing the effectiveness of investment projects is the method of determining the internal rate of return of the project (internal rate of return, IRR), i.e. such a discount rate at which the net present value equals zero.

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

The meaning of calculating this coefficient when analyzing the effectiveness of planned investments is as follows: IRR shows the maximum permissible relative level of expenses 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 bank interest rate, above which the project will be unprofitable.

4.The investment sphere is the basis for the reproduction and development of the economic system.

5.The essence of the investment process and its structure.

6. The main participants in the investment process and their functions.

7.Types of investors.

Financial market: essence, types, functions.

10. Contents of the investment project and its types.

11.Phases of development of the investment project.

14.Sections of the business plan and their content.

Summary of the business plan.

Characteristics of the enterprise.

Description of products, services.

Assessment of the sales market and competition.

Marketing plan.

Production plan.

Investment plan.

Organizational plan.

Financial plan.

Cost-effectiveness assessment.

Risk analysis.

Algorithm for changing break-even sales volume in physical terms

Internal rate of return method. The rate of return on investment (irr) is understood as the value of the discount factor at which the npv of the project is equal to zero:

Profitability index method. This method is essentially a corollary of the net present value method. The profitability index (pi) is calculated using the formula

Justification of the economic feasibility of investments in the project. Initial data: Example 1.

Determination of present net worth:

Determination of the internal rate of return:

Determination of the payback period (based on cash flow data).

15. Contents of the method for calculating net present value.

20. Project viability. Analysis of the sensitivity of the project and its break-even limit.

21.Assessment of the social and budgetary effectiveness of the investment project.

Cash flows for calculating budgetary efficiency.

Accounting for costs and benefits to society.

Budget efficiency indicators.

Methods for assessing budget efficiency.

The role of ORV

Procedure for conducting ORV.

Features of ORV

22.Commercial efficiency of the investment project.

23.Social results of investment projects.

24. System of methods for financing investment projects.

25. The essence of leasing and its classification.

26. Essence, types, forms of foreign investment

27.State investment policy of the Russian Federation in the field

28. Basic schemes of project financing and their characteristics.

30. The role of mortgage lending in stimulation

31. The influence of dividend payment policy on the stock price.

32. Risk of investing in securities.

33. The relationship between risk and return of securities.

Portfolio dynamics. The first portfolio structure was determined based on Markowitz theory. Assets for calculation were selected according to three principles:

34. The concept of portfolio investments and investment portfolio.

35.The concept of an effective portfolio.

Main types of investment portfolios. There are many different types of investment portfolios; they can be distinguished according to various criteria, but the main types of investment portfolios are as follows:

36.Types of portfolio, principles and stages of its formation.

37.Assessment of income and risk for a portfolio.

38. Portfolio management strategy.

39.Objects and subjects of capital investments.

40.Rights, duties and responsibilities of capital investment subjects.

41. State regulation of investment

Loan classification

43. Own means of financing capital investments.

44. Borrowed and attracted funds for financing capital investments.

45.The essence of the world market for loan capital.

46.Structure of the world loan capital market.

47. Forms and methods of state regulation

48.Analysis of investment projects.

49. Life cycle of an investment project.

50. Sequence of stages of the IP life cycle

22.Commercial efficiency of the investment project.

The calculation of indicators of commercial efficiency of individual entrepreneurs is based on the following principles: - current or forecast prices for products, services and material resources provided for by the project (market) are used;

Cash flows are calculated in the same currencies in which the project provides for the acquisition of resources and payment for products;

Salaries are included in operating costs in the amounts established by the project (including deductions);

The calculation takes into account taxes, fees, deductions, etc., provided for by law, in particular, VAT reimbursement for the resources used, tax benefits established by law, etc.;

If the project involves the simultaneous implementation of several types of operating activities, the cost of each of them is taken into account in the calculation. The following tables are recommended as output forms for calculating the commercial efficiency of a project:

Profit and loss statement;

Cash flows with calculation of performance indicators.

To build a profit and loss statement, you must provide information about tax payments for each type of tax.

As an (optional) addition, a forecast of the balance sheet of assets and liabilities by calculation steps can also be provided (balance sheet table).

Calculation of cash flows and commercial efficiency indicators. Cash flow from operating activities.

The main influx of real money from operating activities is revenue from sales of products, determined by final (sold externally) products, as well as other and non-operating income.

For the purpose of calculating taxes and dividends, an income statement table is developed.

Cash flow from investing activities.

Cash flow from investing activities includes:

A. Inflows - income (net of taxes) from the sale of property and intangible assets (in particular, upon termination of the project), as well as from the return (at the end of the project) of current assets, a decrease in working capital at all steps of the billing period;

B. Outflows - investments in fixed assets at all steps of the billing period, liquidation costs, investments of funds on deposit and in securities of other business entities, in increasing working capital, compensation (at the end of the project) of current liabilities.

The change in working capital is determined based on calculations of current assets and current liabilities at the end of each step. The impact of loan settlements on the amount of working capital is not taken into account.

In preliminary calculations and in projects with a small amount of working capital, an approximate estimate of working capital is allowed as an expertly determined share of production costs.

Assessment of the commercial effectiveness of the project as a whole

The commercial effectiveness of the project as a whole is assessed on the basis of performance indicators.

Evaluating the effectiveness of investment projects.

Determining an acceptable level of economic efficiency of investments for an investor is the most difficult area of economic calculations associated with the development of a feasibility study, since here it is necessary to bring together all the many factors of the various interests of potential investors, take into account difficult to predict changes in the external environment in relation to the project, as well as the taxation system in an unstable economy. All this becomes much more complicated due to the fact that the effectiveness assessment must be based on relevant information for a very long calculation period.

The problem of assessing the economic efficiency of an investment project is to determine the level of its profitability in absolute and relative terms (i.e., per unit of investment costs, capital), which is usually characterized as the rate of return.

Net income (NI);

Net present value (NPV) or integral effect (another indicator name quite widely used abroad is net present value (or current) value, net present value (NPV));

Profitability index (or profitability index (PI));

Payback period (term for repayment of one-time costs RV);

Internal rate of return (or internal rate of profit, profitability, intemal rate of retum (IRR)).

A number of entities take part in the implementation and implementation of the investment project: shareholders (firms, companies), banks, budgets of different levels.

The income received by society (gross domestic product) from the implementation of effective projects is then divided between them.

The presence of several participants in the investment process predetermines the discrepancy between their interests and different attitudes towards the priority of various project options. The income and expenses of these entities determine the various types of efficiency of the investment project from the perspective of each participant. It should be borne in mind that the positions of project participants are embodied in the initial information and the formation of specific cash flows for calculating performance indicators. Therefore, they may not have the same assessment results, and therefore, decisions about their participation in the project.

Drawing. Types of efficiency of investment projects

The effectiveness of the project as a whole is assessed to present the project and, in this regard, determine the attractiveness of the project for potential investors.

Social efficiency characterizes the socio-economic consequences of the project for society as a whole, i.e. it takes into account not only the direct results and costs of the project, but also costs and results “external” to the project in related sectors of the economy, economic, social and other non-economic effects.

Social efficiency is assessed only for socially significant investment projects that affect the interests of not one country, but several.

For projects that do not require an examination of government bodies, the development of social performance indicators is not required.

The commercial effectiveness of a project characterizes the economic consequences of its implementation for the initiator, based on a very conditional assumption that he makes all the costs necessary for the implementation of the project and uses all its results. Commercial effectiveness is sometimes interpreted as the effectiveness of the project as a whole. It is believed that commercial efficiency characterizes technical, technological and organizational design solutions from an economic point of view.

The most significant thing is to determine the effectiveness of participation in the project. It is determined in order to check the feasibility of the investment project and the interest of all its participants in it. The effectiveness of participation is assessed primarily for the project organizer enterprise (or potential shareholders). This type of efficiency is also called efficiency for the equity capital of the project.

The effectiveness of participation in the project also includes such types as the effectiveness of participation in the project of higher-level structures (financial and industrial groups, holding structures), the budgetary efficiency of the investment project (the effectiveness of state participation in the project in terms of expenses and revenues of budgets of all levels).

The system of indicators determined to evaluate the listed types of efficiency and the methodological principles for their calculation are the same. The differences lie in the initial parameters that form the real cash flows for the project in relation to each type of efficiency. In other words, a unified and interconnected system of project parameters is embodied in performance indicators that are uniform in economic nature, depending on the scope of their application in the economic environment that they should characterize. Some exceptions are indicators of social efficiency. It is not always possible to take into account “external” effects in monetary terms. In some cases, when these effects are very significant, but it is not possible to evaluate them, only a qualitative assessment of their influence is inevitable.

The assessment of upcoming costs and results when determining the effectiveness of an investment project is carried out within the calculation period (calculation horizon).

The calculation horizon is measured by the number of calculation steps. The calculation step when determining performance indicators within the calculation period can be a month, a quarter or a year.

The costs incurred by the participants are divided into initial, current and liquidation, which are carried out respectively at the stages of construction, operation and liquidation.

For the valuation of results and costs, basic, world and estimated prices can be used.

Basic prices are understood as prices prevailing in the national economy at a certain point in time tb. The base price for any product or resource is considered unchanged throughout the entire billing period.

Measuring the economic efficiency of a project in basic prices is carried out at the stage of feasibility studies of investment opportunities.

At the stage of the feasibility study (TES) of an investment project, it is mandatory to calculate economic efficiency in forecast and estimated prices. At the same time, it is recommended to carry out calculations in base and world prices.

The forecast price Ct of a product or resource at the end of the t-th calculation step is determined by the formula:

Tt = Tsb J(t,tn), (1)

where Central Bank is the base price of a product or resource; J(t,tн) – coefficient (index) of changes in the prices of products or resources of the corresponding group at the end of the t-th step in relation to the initial moment of calculation tн (at which prices are known).

For projects developed by order of government bodies, the values of price change indices for certain types of products and resources should be established in the design assignment in accordance with forecasts of the Ministry of Economy of the Russian Federation.

Estimated prices are used to calculate integral performance indicators if the current values of costs and results are expressed in forecast prices. This is necessary to ensure comparability of results obtained at different levels of inflation.

Estimated prices are obtained by introducing a deflation multiplier corresponding to the general inflation index. When developing and comparatively evaluating several options for an investment project, it is necessary to take into account the impact of changes in sales volumes on the market price of products and the prices of consumed resources.

When assessing the effectiveness of an investment project, the comparison of indicators at different times is carried out by reducing (discounting) them to the value in the initial period. To bring costs, results and effects at different times, the discount rate (E) is used, equal to the rate of return on capital acceptable to the investor.

Technically, it is convenient to bring the costs, results and effects that take place at the t-th step of calculating the project implementation to the base point in time by multiplying them by the discount factor t, determined for a constant discount rate E, as:

where t is the number of the calculation step, t = 0,1,2,...T, (T is the calculation horizon).

If the discount rate changes over time and at the t-th step of calculation is equal to Еt, then the discount factor is equal to

And for t > 0.