Project performance indicators, which we will consider in this article, will help you competently assess the prospects for investment in a particular project and objectively confirm your forecast.

You will learn:

• For what purpose do they evaluate investment projects?
• What performance indicators exist?
• What financial indicators are used in evaluating investment projects.
• How the project is assessed.
• How are financial performance indicators of projects calculated?
• What mistakes should be avoided when assessing project performance indicators.

Main financial indicators of project effectiveness

Modern trends in the economy provide for the widespread attraction of investors for more dynamic and successful development of business projects. Accumulating investment funds through placing them in promising projects makes it possible to make a profit. However, to get the most out of your investment, you need to carefully evaluate what's on the investment market. This assessment involves the use of various economic analysis techniques. Any investment project contains the development of a phased program and plan for investing capital coming from the investor with the final result in the form of profit. When assessing an investment project, it is necessary to obtain a detailed answer to the following questions:

• How profitable is the enterprise that attracts investments;
• How long will it take for the project to recoup its investment?
• How well-developed are the risks in the invested niche?

The main criteria for the effectiveness of an investment project are:

• net present value (net present value), or NPV;
• internal rate of return (IRR);
• modified internal rate of return (MIRR);
• profitability index (PI);
• payback period for initial investments (PP);
• discounted payback period (DPP);
• weighted average rate of return on investment (ARR).

Some economists, when analyzing the effectiveness of a project that attracts investment, do not use all the indicators described above. To get their bearings, they just need to calculate the three or four most important ones. Of course, the possibility of a detailed analysis is influenced by the direction in which the investment is planned.

Project performance indicators are refracted to a specific entity accepting investments, regulated by the Methodological Guidelines. For example, they may include:

1. to a specific company;
2. to an investing legal entity or individual;
3. to an indefinite number of shareholders;
4. to other, more complex structures;
5. to budgets of different levels;
6. to society as a whole.

Naturally, there are some differences in the criteria by which the effectiveness of the project is assessed for each of the above-mentioned groups of people or individuals.

• public outcry in case of successful implementation of the project (involves analysis of the impact of the results on the economy, ecology, and social sphere);
• the effectiveness of the project in terms of the financial component for its organizer (the extent to which the final result compensated and exceeded its cost part, allowing for maximum use of its results).

A preliminary assessment of the effectiveness of the project is carried out to provide a certain guarantee of its feasibility, to study the interests of all potential investors - representatives of the banking sector, companies, shareholders, multi-industry associations, federal and local budgets. It should reflect:

• the degree of efficiency of enterprises participating in the investment project (the effectiveness of the project itself for the latter);
• investment activity of shareholders participating in the project;
• the effectiveness of the activities of structures providing regional, sectoral, national economic and other leadership;
• budgetary efficiency – participation of government agencies in the form of involvement of expenditure and revenue items of budgets of all levels.

Investment project performance indicators

When developing and promoting the idea of ​​an investment project, the company must present the internal and external aspects of the investment attractiveness of the project in order to:

• do not make a mistake with the choice of investors;
• select the most effective lending (investment) conditions;
• choose favorable risk insurance conditions.

The most interested person in the study of project performance indicators is, of course, the investor. Moreover, participation in only one investment project may not recoup the investment, so often the decision to invest is made when evaluating several projects at the same time.

In such a situation, the following are assessed:

• the effectiveness of investment projects that are not related to each other (participation in one does not interfere with or contradict participation in the other);
• the effectiveness of projects that often have diametrically opposed implementation schemes (participation in one excludes participation in the other).

Based on existing methods, you can evaluate a single project or carry out calculations for several proposed projects in order to select the most suitable one.

The investment attractiveness of projects that have a chance to be supported by the state is assessed using the Methodology for calculating indicators and applying criteria for the effectiveness of regional investment projects, which was approved by order of the Ministry of Regional Development of the Russian Federation No. 493 of October 30, 2009.

The practitioner tells

Create a unified algorithm for assessing the effectiveness of investment projects

Dmitry Kalaev,

Deputy General Director of the Naumen enterprise, Moscow

For objectivity, it is advisable to abstract the mechanism for selecting applicants for investment. This is done as follows: regulations for the preparation of an investment project are drawn up, and a business plan template is specially developed. However, projects applicants for investment are presented according to a single scheme. Their assessment is also carried out impartially.

The criteria for selecting projects are as follows:

1. Compliance with the strategic guidelines and profile of the main activity of the enterprise. In this case, even if the profitability of the project is not the highest, its implementation will be a priority.
2. The relationship between the planned profitability of the project and the potential risks during its implementation. A well-structured financial policy of an enterprise should always take into account the fact that the higher the profitability of production, the greater the risks that accompany it, as a rule. And risk analysis must be carried out systematically.
3. Taking into account the availability of specialized production, professionally trained personnel and management, finances necessary for the successful implementation of the project.

It happens that the number of projects under the strategic control of the general director is such that “related” ones can create difficulties for managing the main business.

Baseline indicators for assessing project effectiveness

The amount of starting information directly depends on the stage at which the project’s effectiveness is assessed. However, general information should include:

• the main problem that the project must solve;
• characteristics of production facilities and technologies used, structure of the product produced (goods, services);
• the start and end dates of the project, the time required to prepare project documentation, information about the economic resources of the region.

1. At preparing a package of documents to attract investors needs to be specified:

• timing of the project (start-finish);
• the total amount of financing required;
• planned financial result as the project develops, broken down by year;
• costly part of production by year of project implementation.

1. At the next stage it is necessary detailed investment justification. To do this, you need to provide a calculation of the project’s economic efficiency indicators:

• investment funds must be tied to the timing and stages of work. It is necessary to structure in detail the technological features of the work being carried out (engineering, construction and installation, using stationary, mobile equipment, etc.);
• planned income after the launch of the project, indicating time periods.

1. Feasibility study stage is carried out according to the Methodological Recommendations and includes:

• information about the project and potential investors;
• economic environment of the project;
• efficiency of project implementation;
• share of investor financing;
• share of financing from operating activities;
• cash flow from financing activities.

General information about the project should contain:

1. profile of the production being created, range of products (works, services);
2. geographical location of the enterprise;
3. technological features of production, a list of resources involved, as well as the way in which the sale of manufactured products will be organized.

To assess the degree of participation of each investor, information about the composition of the company and its personnel must be provided. If employees have several specialties, all of them must be indicated with a detailed description of the work performed.

For investors who have already decided at the settlement stage, it is advisable to have detailed information about creditworthiness, production volume and personnel.

In fact, in order to have an idea of ​​the potential of an investor enterprise, it is necessary to know its production capacity, represented in physical terms by specific types of products, the technological processes used at this enterprise and the corresponding equipment fleet. Information about the volume of production space, depreciation potential, the availability of qualified personnel, intangible assets represented by certificates, licenses, patents, and copyright certificates would be useful.

When the implementation of a project requires registration of a legal entity as a joint stock company, information on the size of the authorized capital and detailed information on the composition of shareholders will be needed.

Taking into account the different contribution (financial, personnel, material) of each concession participant, the different level of relationships between them, information about them must contain in detail all the described elements. In addition, it is necessary to set out the internal and external organizational and economic conditions for the possibility of implementing the project.

Information about the economic environment of the project includes:

• an estimated estimate of the general inflation index, as well as a forecast of absolute or relative (in relation to the general inflation index) price dynamics for certain goods (services) and materials for the entire period of the project;
• expected fluctuations in exchange rates or the internal foreign currency inflation index for the entire period of project implementation;
• information about the taxation system.

The effectiveness of the project is assessed during the specified start and end dates of the project, which coincides with the completion of its implementation.

Within certain time periods, information is accumulated, which will later be used to calculate the economic efficiency indicators of the project. These segments, or calculation steps t, are designated by numbers (0, 1, ...). The time interval in the calculation period is measured in years or fractions of a year and is counted from a fixed moment t 0 = 0, taken as the base. The duration of steps can be set arbitrarily.

Typical mistakes in calculating project performance indicators

When studying the indicators of a project’s investment attractiveness, one must be extremely careful to avoid making a mistake, for which you will subsequently have to pay dearly.

Errors come in several categories, for example those associated with biased risk assessment:

• when the estimated sales volumes of the finished product (the result of investments) are overestimated in comparison with the real ones;
• when an insufficiently thought-out marketing strategy does not allow for maximum consumer coverage.

1. Errors caused by the incorrect choice of project calculation methodology (when the result obtained from the implementation of the project is replaced by the result of the company’s core activities). These errors most often arise in projects aimed at restructuring or reorganizing a company (or group of companies), or when the production of a completely new product is organized in multi-industry companies.

The main mistake of these projects is the use of the method of pure assessments of the company's performance instead of incremental or comparative methods.

1. Errors associated with financial and economic calculations:

• incorrect calculation of the composition of investment (one-time) expenses for the project;
• errors due to underestimation of funding sources and incorrect forecast of project debt;
• errors associated with incorrectly predicted depreciation charges for the project (such errors are made in 90% of projects);
• errors due to underestimation of the tax burden of the project.

When calculating the timing of an investment project and its profitability, it is important not to make a mistake in determining:

1. Equipment costs

The real cost of equipment depends on the correct determination of its quantity, type, and configuration. You need to make sure in advance of its quality, and also that all overhead costs are taken into account, and not just the purchase price.

1. Project implementation period

The timing of the project is significantly influenced by the organization of supply and installation of equipment (were there any delays), and whether there were any failures at the production launch stage. To ensure maximum efficiency, it is necessary that investments are received within the specified time frame and in the optimal volume.

1. Production and sales volumes

It is advisable to include at least two sales forecasts in the business plan: unfavorable and successful. Then, given certain realities, the error will not be so noticeable.

1. Cost

It is necessary to carefully consider and detail the current costs of the investment project. Check the funds included in the wage fund, energy costs, etc. When materials and raw materials are supplied by foreign partners, you need to check whether the exchange rate is taken into account in the calculations.

And finally, we conduct a qualitative and quantitative analysis of potential risks in order to minimize their impact on the economic efficiency of the project.

The practitioner tells

To minimize errors in calculations, use software

Anastasia Martyanova,

Financial Director of Donskoy Confectioner LLC

Typically, calculations of investment project performance indicators are carried out by the economic services of interested companies. To avoid errors in calculations, employees of such services must:

• correctly take into account net present value;
• objectively forecast sales receipts with graphical display of amounts for the reporting period, etc.;
• adequately calculate the discount rate, taking into account macroeconomic indicators;
• ensure that there are no errors when calculating the risk premium;
• Competently draw up a budget for the project.

To improve the quality and reliability of calculations of the required amount of investment, it makes sense to assign a special department to deal with these issues. Then both planning and control will be “in one hand” (see “How to organize the work of the investment department”). If we are talking about preparing large-scale projects with a large number of quantities, it is better to use not only office programs such as Excel, but also software packages whose profile is making forecasts of investment projects. These programs significantly reduce the risk of calculation errors.

Information about the experts

Dmitry Kalaev, Deputy General Director of Naumen, Moscow. The Naumen company is a domestic company specializing in the creation of software systems for business and government agencies. Created in 2001. He is engaged not only in writing and development, but also in the implementation and maintenance of software projects based on his own solutions. Naumen's services are used by telecom operators, banks, financial groups, heavy industry companies, trade and manufacturing holdings, and state-owned enterprises. Staff - 230 people.

2.4. Project financing. Economic efficiency of project implementation and risk assessment.

The project is planned to be financed with the initial investment of the customer (investor), corresponding to the estimated cost of the project - 18,090.55 thousand rubles. The expected payback of the project is 1 year (commercial enterprises will begin to function immediately after the commissioning of the facility - the customer plans to sell commercial space and apartments and receive a one-time income, it is also assumed that the housing stock will be 100% occupied - the purchase of new apartments by residents - within 6 months after delivery object).

The housing department of the Perekrestok residential complex is designed for 20 apartments - 10 two-room and 10 three-room apartments with a total living area of ​​1,540.98 m2. The total living area of ​​3-room apartments is 924.90 m2, 2-room apartments are 616.08 m2. The total area of ​​commercial premises is 290.56 m2.

Estimated cost:

2-room apartment – ​​31.9 thousand rubles

3-room apartment – ​​38.1 thousand rubles.

Commercial space – 36.7 thousand rubles.

In total, the forecast revenue from the customer’s sale of a residential and commercial complex at planned prices will be:

Ext. = 31.9 * 616.08 + 38.1 * 924.9 + 36.7 * 290.56 = 65,661.9 thousand rubles.

Let's calculate the financial indicators of the project (Table 9)

Table 9. Calculation of financial indicators of the project.

In terms of profitability, the project took a high position. We will calculate the gross margin of the project and also find the break-even point.

1) Gross margin (GM) is a measure of the efficiency of a company's production activities.

Obviously, the higher the VM, the better.

In our case, the calculation gave the following results:

For this investment and construction project:

TB = 10458.2 / (65661.9 – 7632.35) * 65661.9 = 11,819.14 thousand rubles.

That is, even with a noticeable decrease in revenue, the project has a certain margin of safety.

When assessing investment performance, these indicators are usually calculated: NPV (net present value), IRR (internal rate of return) and PI (investment return index).

The method for calculating NPV is to sum up modern (recalculated to date) values ​​of net effective cash flows for all planning intervals throughout the study period.

For a one-time investment, the calculation of net present value can be represented by the following expression:

i – discount rate (0% - payback of the project is no more than a year, discount is not applied). For this project option: IC = 18,090.55 R1 = 65661.9

NPV = (65661.9/1) – 18090.55 = + 47 571.35 (The value of the indicator coincided with the balance sheet profit indicator due to the lack of discounting in the short term)

The investment return index (PI) is closely related to the indicator of the net modern value of investments, but, unlike the latter, it allows us to determine not an absolute, but a relative characteristic of investment efficiency. The return on investment index (PI) for a one-time investment is calculated using the following formula:

where IC is the total investment costs of the project.

The return on investment index answers the question: what is the level of project-generated income received per unit of capital investment.

For one-time investments, this indicator is equal to:

PI times = 65,661.9 / 18,090.55 = 3.63

Internal Investment Rate of Return (IRR)

The interpretative meaning of the internal rate of return is to determine the maximum cost of capital used to finance investment costs, at which the owner (holder) of the project does not incur losses.

The internal rate of return (IRR) is calculated by iteratively selecting a discount rate such that the net present value of the investment project becomes zero. Two values ​​of the discount factor are selected at which the NPV function changes its sign, and the formula is used:

IRR = i1 + NPV(i1) / (i2 - i1)

i1 – discount rate at which the net present value has a negative value

i2 is the last discount rate at which NPV has a positive value

In this case, calculating IRR is not practical, since the discount rate is not expected to change during the year of project implementation.

In this article we will consider the main indicators for assessing the effectiveness of investments in projects. In particular, we will consider the calculation of the following indicators of an investment project:

1. Net Present Value – NPV (Net Present Value)
2. Discounted Profitability Index - DPI (Discounted Profitability Index)
3. Profitability Index – PI (Profitability Index)
4. Internal rate of return -IRR (Internal Rate of Return)
5. Modified internal rate of return - MIRR (Modified Internal Rate of Return)
6. Weighted average cost of capital – WACC (Weight Average Cost of Capital)
7. Payback period – PP (Payback Period)
8. Discounted Playback Period -DPP (Discounted Playback Period)
9. Integral present value – GPV (Gross Present Value)
10. Simple return on investment - ARR (Accounting Rate of Return)

NPV, net present value
Net present value is one of the most important indicators for calculating the effectiveness of an investment project, used in investment analysis. It is calculated as the difference between the discounted value of cash receipts from the investment project and the discounted costs of the project (investment). Calculated by the formula:

Where:



n – sum of the number of periods.

DPI, discounted profitability index
The indicator is calculated by dividing all time-discounted investment income by all discounted investments in the project. Formula for calculating the indicator:

Where:
CFt – cash flow from the investment project in period t;
It – costs of the investment project in period t;
r- discount rate;
n – sum of the number of periods.

PI, profitability index
Shows the relative profitability of an investment project per unit of investment. Formula for calculating the indicator:
PI=NPV/I

IRR, internal rate of return
This is the discount rate (IRR=r) at which NPV= 0 or, in other words, the rate at which discounted costs equal discounted revenues. The internal rate of return shows the expected rate of return on a project. One of the advantages of this indicator is the ability to compare investment projects of different duration and scale. An investment project is considered acceptable if IRR>r (discount rates). The IRR is calculated using the formula below:

Where:
CFt – cash flow from the investment project in period t;
It – costs of the investment project in period t;
r is the discount rate (sometimes called the barrier rate);
n – sum of the number of periods.

GPVIntegral present value
It is a rare indicator of investment analysis that shows the true discounted utility of an investment. Calculated using the formula:
GPV=NPV + LV x D
Where:
NPV - net present value;
LV-liquidation cost;
D-discount factor.

ARR, simpleprofitabilityinvestment
The indicator is the inverse of the payback period for investments in an investment project (PP). Calculation formula:
ARR=NP/I
Where:
NP-net profit;
I-investments in the project.

We have moved on to the final conversation in the “Business Planning” series.

Key Performance Indicators is a whole assessment system that helps the organization determine the achievement of strategic and tactical goals. Their use provides an opportunity for an organization to assess its position and assist in assessing the implementation of its strategy.

Business project performance indicators are:

1. Profit
2. Profitability
3. Financial strength margin
4. Payback period - PBP,
5. Accepted discount rate –D
6. Discounted payback period - DPBP
7. Net Present Value - NPV
8. Internal rate of return - IRR
9. Repayment period for borrowed funds - RP
10. Loan debt coverage ratio (repayment of borrowed funds)

The main performance indicator any enterprise is profit, as the most important indicator of the organization’s performance.

The next indicator characterizing the efficiency of an enterprise is profitability.

Profitability means profitability, profitability of the enterprise.

Profitability is the result of the production process.

The main profitability indicators are:

1). Product and sales profitability

2). Return on investment of the enterprise

3). Return on assets

4). Profitability of production

5). Overall profitability

It is formed under the influence of factors related to:

— with increased efficiency of working capital

- cost reduction

— increasing the profitability of products and individual products.

Profitability and profit– indicators that clearly reflect efficiency of the enterprise, the rationality of the enterprise’s use of its resources, the profitability of areas of activity (production, business, investment, etc.).

Based on the level of profitability, one can assess the long-term well-being of the enterprise, i.e. the ability of a business to earn a sufficient return on investment.

For long-term creditors of investors who invest money in the equity capital of an enterprise, profitability is a more reliable indicator than indicators of financial stability and liquidity, determined on the basis of the ratio of individual balance sheet items.

Thus, we can conclude that profitability indicators characterize the financial results and efficiency of the enterprise.

REFERENCE:

Profit – This is the portion of revenue remaining after reimbursement of all costs of production and marketing of products.

Profitability is the profitability of an enterprise or business activity. Profitability is calculated simply: it is the quotient of profit divided by costs or resource consumption.

Profitability- this is the state of the company when the amount of revenue from the sale of products covers the costs of production and sale of these products.

(short example table)

Profitability threshold

The profitability threshold is such sales revenue at which the enterprise does not have a loss, but does not yet have a profit.

The profitability threshold is an indicator characterizing the volume of product sales at which the enterprise's revenue from the sale of products (works, services) is equal to all its total costs. That is, this is the sales volume at which the business entity has neither profit nor loss.

The profitability threshold is determined by the formula:

PR=Zpost/((VR-Zper)/VR),

where PR is the profitability threshold,

Zpost - fixed costs,

Zper – variable costs,

VR – sales revenue.

Sensitivity and Profitability Analysis.

The size of profits and losses depends largely on the level of sales, which is usually a value that is difficult to predict with any certainty. In order to know what level of sales will be required to achieve profitability of the enterprise, it is necessary to analyze certain factors. It will allow us to determine the number of units of products or services that need to be sold in order to reach the break-even point - operating without profit or loss.

You might think that break-even analysis allows you to answer the question: “How many products do you need to sell for the company to become profitable?” When products are sold, part of the proceeds goes to cover fixed costs:

This portion, called gross profit, is equal to the selling price minus direct costs. Therefore, to perform the analysis, gross profit must be multiplied by the number of products sold: the break-even point is reached when the total gross profit becomes equal to fixed costs.

the minimum volume of production and sales of products at which costs will be offset by income, and with the production and sale of each subsequent unit of product the enterprise begins to make a profit. Break-even point can be determined in units of production, in monetary terms, or taking into account the expected profit margin.

Break-even point formula:

TB =(V x PZ) / (V – PZ)

B – revenue

FZ – fixed costs

PR - variable costs

Break-even chart

TB- break even - _______ m 3

IN– revenue – _________ rub. in year.

N– production volume – ________ rub. in year.

Zper– variable costs – _________ rub. in year.

Salary– fixed costs – ________ rub. in year.

Financial indicators

Financial strength margin

The margin of financial strength of an enterprise is the difference between the achieved actual sales revenue and the profitability threshold.

Determined by the formula:

ZFP=VR-PR,

where ZFP is the margin of financial strength,

VR – sales revenue,

PR – profitability threshold.

The margin of financial strength, or safety margin, shows how much production can be reduced without incurring losses.

The higher the financial strength indicator, the lower the risk of losses for the enterprise.

Formulas:

Net Present Value: NPV = FC N / (1 + D) N
Discount rate: D = I/FV = (FV-PV)/FV
Payback period: PBP = I/(Dp + Am)
Discounted payback period: DPBP = Т t1 CFt x (1 + r) t > CF 0
Internal rate of return: IRR = r 1 + NPV 1 / (NPV 1 - NPV 2) x (r 2 - r 1)
Repayment of borrowed funds:

Net present value method — NPV.

NPV, net present value - the amount of the expected flow of payments reduced to the current (at the present time) value. Reduction to current value is carried out at a given discount rate

This method takes into account the time dependence of cash flows. If the calculated net value of the payment stream is greater than zero (NPV>0) , then during its life the project will recoup the initial costs and ensure a profit.

A negative NPV value means that the specified rate of return is not achieved and the project is unprofitable. At NPV=0 the project only covers costs, but does not generate income. However, such a project has arguments in its favor - if it is implemented, production volumes will increase, i.e. the company will increase in scale.

Formula for calculating NPV:

For a cash flow consisting of N periods (steps), we can write:

FC = FC 1 + FC 2 + … + FC N,

FC – total cash flow

FC 1, etc. – cash flows of all periods

NPV = F.C. 1 / (1 + D) + F.C. 2 / (1 + D) 2 + F.C. 3 / (1 + D) 3 …………..etc.

Where D is the discount rate. It reflects the rate at which the value of money changes over time; the higher the discount rate, the greater the rate.

Discounting calculation.

Discounting Discounting

Discounting calculation formula:

PV=FV*1/(1+i)n

PV is the present value of benefits or costs.

FV - future value of benefits or costs

i is the interest rate or discount factor in current or real terms

n is the number of years or service life of the project

Discount rate.

Discount rate (discount coefficient) is the interest rate used to convert future income streams into a single present value. The discount rate is used when calculating the discounted value of future cash flows NPV .

PV- initial amount.
F.V.- increased amount.
I= (FV - PV) - interest money, interest.

Interest rate calculation formula:

r= I/PV = (FV-PV)/PV

Interest rate- this is the amount indicated as a percentage of the loan amount that the recipient of the loan pays for using it for a certain period (month, quarter, year).

Usually the interest rate is known from the terms of the financial transaction (for example, from the terms of a deposit or loan agreement), then for the accumulated amount you can write:

FV = PV*(1+r).

Thus, knowing the interest rate and the initial amount, we determine the accrued amount.

Formula for calculating the discount rate:

d= I/FV = (FV-PV)/FV

Knowing the discount rate and the accrued amount, we solve the discounting problem (we determine the initial amount):

PV = FV*(1-d).

The discount rate and interest rate are related by the following ratios:

r = d * (FV/PV)
d = r * (PV/FV)

In addition, because The interest rate is determined in relation to the initial amount, and the discount rate - to the accrued amount, the interest rate is greater than the discount rate.

Payback period of the project.

Payback period- the period of time required for the income generated by an investment to cover the costs of the investment. In this case, the time value of money is not taken into account. This indicator is determined by sequential calculation of net income for each period of the project. The point at which PV takes a positive value will be the payback point. However, there is a disadvantage to the payback period. It lies in the fact that this indicator ignores all cash receipts after the moment of full reimbursement of initial expenses. When choosing from several investment projects, if we proceed only from the payback period of investments, the amount of profit created by the projects will not be taken into account.

Formula for calculating the payback period of a project:

PBP = I/(Dp + Am)

I – investments

Дп – cash flow for one period

Am - depreciation

Discounted payback period.

Discounting- this is the reduction of all cash flows (payment flows) to a single point in time. Discounting is the basis for calculating the value of money taking into account the time factor.

Formula for calculating the discounted payback period:

DPBP = min_t, at which the amount Tt1 CFt x (1 + r) t > CF 0

t is the number of periods;

CF t is cash flow for the t-th period;

r - discount rate, equal to the weighted average cost of capital

CF 0 is the value of the initial investment in the zero period.

DPP = IC/ PV t

where DPP is the discounted payback period, years;

IC - the amount of investment aimed at implementing the project;

PV t is the average amount of cash receipts in the period t.

Internal rate of return.

Internal rate of return — IRR (GNI) is the interest rate at which the net present value (NPV) is 0. NPV is calculated based on the stream of payments discounted to today.

Formula for calculating internal rate of return:

IRR = r 1 + NPV 1 / (NPV 1 - NPV 2) x (r 2 - r 1)

Where r 1 — the value of the selected discount rate,

with which NPV i > 0 (NPV i< 0);

r 2— the value of the selected discount rate,

with which NPV 2< 0 (7VPV 2 > 0).

Repayment of borrowed funds.

Borrowed funds or debt capital- received in the form of a debt obligation. Unlike equity, it has a finite period and is subject to unconditional return. Typically, interest is accrued periodically in favor of the lender. Examples: bonds, bank loan, various types of non-bank loans, accounts payable.

Long-term loans can be repaid in a series of annual, semi-annual or monthly payments. Use an amortization table to determine the annual payment when you know the amount borrowed, the interest rate, and the loan terms.

There are several ways to calculate the repayment period of borrowed funds:

— equal amounts of payments over a period of time (depreciation);

- equal principal payment for a period of time

- equal payments over a specified period of time with a lump sum payment at the end to pay off the balance.

Repayment principles:

To calculate the payment amount, all loan terms must be known:

- interest rate

– payment terms (for example, monthly, quarterly, annually)

— loan length

- loan amount.

Borrowers must understand:

— how loans are amortized

— how to calculate the principal amount and interest of the payment.

This information is valuable if you are planning to get a loan or investment. There is a loan repayment calculator program.

Loan term- a bank loan for a certain amount, which is indicated by a repayment schedule and a floating interest rate.

Redemption- the act of payment of previously borrowed funds from the lender. Redemption usually comes in the form of periodic payments, usually including principal plus interest in each payment.

Repayment schedule— a schedule of periodic loan payments, indicating the amount of principal and interest.
To calculate the next month's interest and principal, subtract the principal monthly payment one from the loan balance, and then repeat the steps above.

A standard amortizing loan has a constant payment over the life of the loan.

The formula for calculating standard loan amortization is:

Sak x (Prst x Kper x Ts)

Prst - interest rate

Nper - number of periods.

Тс - initial loan amount

Monthly repayment of part of the loan with interest payment, this is a method of calculating a loan that provides for monthly repayment of a pre-agreed, same part of the loan and monthly payment of interest.
Amount of the next payment on loan determined according to the formula:

V = pV/n

Amount of the next payment by percentage determined according to the formula:

I = pV * rate

With a mortgage, payments can be calculated using an annuity or differentiated scheme.

Annuity– This is an equal monthly payment throughout the entire loan period.

Differentiated payments involve a monthly reduction in the amount that is paid to repay the mortgage loan.

Formula for calculating annuity payment has the following form:

AP = SK x PS / (1 – (1 + PS) – m)

SC - loan amount;
PS - interest rate in shares per month, i.e., if the annual % rate is 18%, then PS = 18/(100×12);
m – the number of months for which the loan is taken out.

Used by banks formula for calculating differentiated payments looks like that:

Rmp = (Osz / Km) + (Osz x PrS x Kdvm / Kdvg)

Osz – the balance of the loan debt as of the settlement date.

PrS – interest rate

Km – the number of months (or rather, even the number of full payment periods) remaining until the loan is fully repaid.

Kdvm – number of days in the billing month.

Kdvg – number of days in a year.

Coverage ratio

Coverage ratio is calculated as the ratio of short-term liquid assets (cash, marketable claims and marketable inventories) and short-term liabilities.

Formula for calculating the coverage ratio:
KTL = OA/KP

OA - current assets

KP – short-term liabilities

Current ratio(or total debt coverage ratio, or coverage ratio) characterizes the degree to which current assets are covered by current liabilities, and is used to assess the ability of an enterprise to fulfill its short-term obligations.
Odds liquidity characterize the solvency of the enterprise not only at the moment, but also in case of emergency circumstances.

Total liquidity ratio calculated as the ratio of current assets to current liabilities. With its help, the ability of an enterprise to pay short-term obligations on time using available current assets is quantified. A value between 1.5 and 2.5 is considered normal, depending on the industry

Financial strength margin

Financial strength margin– this is the difference between the values ​​of real “Revenue from sales” and the break-even point. Zpf shows how much sales volumes of a product can be reduced before the break-even point is reached. If profitability is negative, then the indicator of the margin of financial strength is not considered (there is no margin).

Formula for calculating the financial safety margin:

(in value terms)

Zpf = V – Tb

B – revenue

TB – break-even point

Financial strength margin(in relative terms)

Zpf= Ov – Tb x 100%

Ov - revenue volume

TB – break-even point

Good luck to you in all your endeavors, and remember, I provide all the formulas and calculations you are interested in upon your request!

Sincerely yours, Kruglova Lanita.

The main financial results characterizing this project are profit and level of profitability. For this project, the economic benefit lies in generating income from the provided communication services for individuals. Income is projected to be as follows.

Table 5.9

Expected income

Assessment of the economic efficiency of an investment project

On Based on a study of the market for communication services provided by the enterprise, the possibility of increasing effective demand for these services in the forecast period was determined. In this regard, the economic feasibility of installing equipment for the provision of services is being considered in order to increase sales volumes. Taking into account production costs in the form of operating costs, and the planned income, we will calculate economic efficiency indicators.

The main criteria used in the evaluation of investment projects are:

Net present value (NPV).

Profitability Index (PI).

Internal Rate of Return (IRR).

Project payback period (Payback Period, PP).

The net present value (NPV) method is based on comparing the value of the original investment with the total discounted net cash flows it generates over the projected period. Because The cash inflow is distributed over time, it is discounted using a coefficient r set by the investor himself, based on the annual percentage of return that he wants or can have on the capital he invests.

Incoming flows represent the amounts of revenue received from the sale of services to subscribers, outgoing flows represent the costs associated with the implementation and maintenance of the project. Data on the balance of cash flows and net profit for 3 years of the project’s operation are given in table. 5.10.

Gross profit is the final financial result of an activity, representing the difference between the total amount of income and cost (current costs):

P VAL = D - S,

D - total amount of income;

P VAL = 2,952,000 - 1,422,724 = 1,529,276

Income tax:

Npr = 0.2 * Pval = 0.2 * 1,529,276 = 305,855 rub.

Pch = Pval-Npr = 1,529,276 - 305,855 = 1,223,421 rub.

R = (F/W) * 100% = (1,223,421 / 1,422,724) * 100% = 85%

P VAL = D - S,

D - total amount of income;

C - cost (current costs);

P VAL = 4,797,000 - 1,451,445 = 3,345,555

Income tax:

Npr = 0.2 * Pval = 0.2 * 3,345,555 = 669,111 rub.

Pch = Pval-Npr = 3,345,555 - 669,111 = 2,676,444 rub.

The level of profitability can be calculated as the ratio of gross or net profit to the amount of costs, expressed as a percentage:

R = (F/W) * 100% = (2,676,444 / 1,451,445) * 100% = 184%

Therefore, the profitability is 84%.

P VAL = D - S,

D - total amount of income;

C - cost (current costs);

P VAL = 6,642,000 - 1,487,462 = 5,154,538

Income tax:

Npr = 0.2 * Pval = 0.2 * 5,154,538 = 1,030,908 rub.

Pch = Pval-Npr = 5,154,538 - 1,030,908 = 4,123,630 rub.

R = (F/W) * 100% = (4,123,630 / 1,487,462) * 100% = 277%

Profitability ratio: per 1 rub. of the company's invested costs will return 6 rubles. total income.

Table 5.10

Balance of cash flow for the project, rub

When comparing the adjusted income by year of project implementation and the volume of capital investments, amounting to 6,740,811 rubles, it is clear that during the first two years the project does not pay for itself: the amount of income for the first and second years of implementation is less than the volume of capital investments. The part of capital investments carried over to the third year of project implementation amounts to

6,740,811 - 1,529,276 - 3,345,555 = 1,865,980 rub. (RR=2 years)

Let us determine for what part of the third year the remaining part of capital investments will be fully recouped by income:

PPi = 1,865,980 / 5,154,538 = 0.36 years or 3-4 months.

The payback period of the project is 2 years 4 months.

The discount factor is determined by the following formula:

rр = i + rо + i·rо, (5.13)

i is the inflation rate announced by the Government of the Russian Federation for the current year;

rо - the nominal discount rate is determined by the percentage rate of attracted credit resources, the refinancing rate established by the Central Bank of the Russian Federation, or the price of capital (WACC).

Let's take the market rate for commercial loans as the basis for calculating the discount multiplier. The refinancing rate established by the Central Bank of the Russian Federation on December 26, 2011 is 8%, the inflation rate announced by the Ministry of Economic Development of the Russian Federation for 2012 is 9% per annum, the required discount rate for the flow of payments:

rр = 0.09+0.08+0.09?0.08 = 0.1772 or 17.72%.

Therefore, 17.72% is the real discount rate taking into account inflation.

The essence of the net present value method (NPV method): the modern net value of the input cash flow (capital investments) is compared with the modern value of the output cash flow due to these capital investments. The difference between the first and second is the net modern cost of the project - a value whose value determines the decision.

Ko - capital investments;

Pi is the total cash flow of the i-th period;

Let's calculate the net present value for the third period:

> 0, therefore, the project is profitable and should be accepted.

The internal rate of return of a project IRR is understood as the value of the discount coefficient (r), at which the NPV of the project is equal to 0.

The practical application of this method comes down to sequential iteration, with the help of which a discount factor is found that ensures the equality NPV = 0.

Based on the interest rates on loan capital existing at the time of analysis, two values ​​of the discount factor i1 are selected< i2 (i1=2, i2=2,1), таким образом, чтобы в интервале (i1; i2) функция NPV = f(i) меняла свое значение с “-” на “+“. Далее используем формулу:

The meaning of calculating this coefficient when analyzing the effectiveness of planned investments is as follows: IRR shows the maximum allowable level of expenses that can be associated with the project. Thus, the maximum permissible relative level of expenses that can be invested in this project so that it pays off in 3 years is IRR = 2.006.

The economic meaning of this indicator is that the enterprise can make any investment decisions, the level of profitability of which is not lower than the current value of the price indicator of sources of funds for a given project.

Project profitability index (PI). This ratio of total discounted net profit to total capital investment is defined as:

Ko - capital investments;

Pi - net profit of the i-th period;

r - discount factor.

Substituting the above-determined values ​​of net profit, capital investments in the project and the real discount rate, we obtain that PI for the third and fourth periods will be equal to:

Profitability index PI3>1, therefore, the project will pay off in three years.

Table 5.22

Project performance indicators

Chapter Conclusions

The internal rate of return of this project is 2.066, and the payback period of the project is 2 years 4 months. When calculating the project assessment using the net present value (NPV) method, the following results were obtained: the project pays off in 2.4 years (NPV3 = 127,435 rubles). When calculating the profitability index, the project also pays off in 2.4 years (PI3=1.12). This system of performance indicators is suitable for evaluating an investment project.