scholarly journals SIMULATION MODELLING AS A TOOL FOR RISK ANALYSIS AND DEVELOPMENT OF STRATEGY TO INCREASE REAL ESTATE INCOME

2021 ◽  
Vol 2 (1) ◽  
pp. 97-103
Author(s):  
Lesia Chubuk
Keyword(s):  
Cash Flow ◽  
Simulation Modeling ◽  
Net Present Value ◽  
Flow Simulation ◽  
Cash Flows ◽  
Annual Growth Rate ◽  
Present Value ◽  
Real Property ◽  
Operating Income ◽  
Grain Elevator

The purpose of th article is to substantiate the possibility of applying methods for assessing the effectiveness and risks of investing for the analysis of income in the strategic management of real property. Methodology. The methodical bases of sensitivity analysis and simulation modeling of cash flows of real property income are stated. Results. The critical factors of costs and revenues affecting net present value of total cash flow from grain elevator real property object have been revealed. It is evidenced that the most significant factors influencing the amount of cash flows are the volume of sales of grain elevator services, to a lesser extent the total costs and the lack of sensitivity of net present value to staff salary variations. Simulation modeling of the change in net present value due to the change of the most significant uncertain factors was performed, which confirmed the assumptions about the efficiency of the investigated real property. The key factors are the main services that generate net operating income and critical expenses. Namely, services: storage, drying, shipment by road and rail, costs: fuel for drying, electricity, fuel for transportation of grain, staff salaries. For each factor, the relevant limits of change were established (determined by experts taking into account the average annual growth rate of the indicator) and cash flow simulation was performed. Practical implications. Statistical analysis of the model's behavior under the influence of random factors shows that the most probable value of the net present value of cash flows will be positive, despite the simulation of a significant change (+/- 40%) in electricity and fuel consumption factors for grain transportation. The values of the simple and discounted payback period also confirm the efficiency of the elevator property functioning. The indicator of the stability level demonstrate the need of planning input cash flows sources to cover the output cash flows. Value/originality. The expected profitability of grain elevator real property is largely determined by the factor of the volume of basic services sales (storage, drying, shipment and transport of products). This creates the preconditions for the subsequent assessment of the value of grain elevator real property based on the methodology of the income approach.

scholarly journals Methodical approaches to the assessment of investment attractiveness of agricultural enterprises

2019 ◽  
Vol 21 (93) ◽  
pp. 63-69
Author(s):  
R. M. Myniv
Keyword(s):  
Cash Flow ◽  
Net Present Value ◽  
Cash Flows ◽  
Rate Of Return ◽  
Internal Rate Of Return ◽  
Present Value ◽  
Investment Projects ◽  
Agricultural Enterprises ◽  
Internal Rate ◽  
Dynamic Methods

Evaluation of investment efficiency is central to the process of justifying and selecting possible options for investing in investment projects, and is therefore a key to successful implementation of investment activities of agricultural enterprises. The main directions of financing of investment projects of agricultural enterprises are: purchase or construction of unfinished construction objects, new construction, expansion of existing enterprises, reconstruction of existing enterprises and technical re-equipment of existing enterprises. Two main groups of methods of assessing the cost-effectiveness of investment projects have become most widespread: static and dynamic. Static methods involve the calculation of indicators based on undiscounted cash flows. Dynamic methods, on the contrary, take into account the change in the value of money over time and imply bringing the values of all cash flows to the same period by discounting or compounding. Dynamic methods for assessing the effectiveness of investment projects include the following basic methods that rely on most modern Ukrainian enterprises, such as net present value cash flow (NPV), internal rate of return (IRR), payback period (DPP) and project profitability index (PI). On their basis the basic methods of selection of investment projects of agricultural enterprises are formed. Net Present Value (NPV) calculation. is based on comparing what will be invested in the future with what is invested now. The Profitabale Index (PI) is directly related to net present value and is defined as the ratio of the discounted cash flow to initial investment. The IRR (Internal Rate of Return) is the discount rate at which the projected cash inflows are equal to the project's discounted cash flows. As indicators of the effect in calculating the overall efficiency of investments, it is advisable to use changes in the following values of growth: revenue from the sale of enterprise products; gross income; profit before tax; net profit; cash flow; clean products. Gross and net investment should be included in the costs. The use of qualitative methods in investment analysis is due to the following reasons: the subjectivity of the phenomena or characteristics studied; lack or lack of necessary information; inability to analyze objective and acceptable methods; lack of research object (to be created during project implementation). Quantitative methods for evaluating agricultural investment projects include methods of probability theory and mathematical statistics, as well as economic and statistical methods.

scholarly journals Assessment of Investment Projects Based on Economic Flow and Not in Cash Flows

2019 ◽  
Vol 8 (5) ◽  
pp. 133
Author(s):  
Halil Kukaj ◽  
Fisnik Morina
Keyword(s):  
Cash Flow ◽  
Net Present Value ◽  
Cash Flows ◽  
Present Value ◽  
Global Competitiveness ◽  
Investment Projects ◽  
Cash Flow Statement

In terms of global competitiveness, taking the investments decisions has a great impact to remain in the market. For this, when evaluating the investing projects it is necessary to apply the methods of profitability and liquidity. However, the question arises, if the profitability evaluation of investing project should be made according to the cash flow or the data from the economical flow statement. The aim of this paper is to give arguments why the economical flow statement should be applied instead of cash flow statement for the evaluation of profitability of investing projects. The paper is based on a hypothetical example whereas arguments are derived while applying the indicators: the Net present value and internal norm of profitability.Keywords: Evaluation of investing project, economical flow, net present value, internal norm of profitability

scholarly journals "What If" Analyses in Investment Decision Making

2012 ◽  
Vol 3 (3) ◽  
pp. 5-16
Author(s):  
Katarína Belanová
Keyword(s):  
Decision Making ◽  
Cash Flow ◽  
Net Present Value ◽  
Investment Decision ◽  
Cash Flows ◽  
Present Value ◽  
Discounted Cash Flow ◽  
Basic Approach ◽  
Investment Decision Making ◽  
Future Cash Flows

In general, each project`s value is estimated using a discounted cash flow (DCF) valuation, and the opportunity with the highest value, as measured by the resultant net present value (NPV) will be selected. The problem with such NPV estimates is that they depend on projected future cash flows. If there are errors in those projections, then estimated net present values can be misleading (a forecasting risk). Basic approach to evaluating cash flow and NPV estimates involves asking “what – if” questions. Accordingly, the paper discusses some organized way s of going about a what – if analysis. Its goal in doing so is to assess the degree of forecasting risk and to identify those elements that are the most critical to the success or failure of an investment. However, as we show in examples, as well as in the practical study, though what – if analysis really allows us to obtain the certain idea of degree of forecasting risk, it does not tell us what to do about the possible errors.

TINJAUAN STUDI KELAYAKAN USAHA BADAN USAHA MILIK DESA (NAGARI) KAMANG HILIA SEJAHTERA KENAGARIAN KAMANG HILIA, KECAMATAN KAMANG MAGEK, KABUPATEN AGAM, PROVINSI SUMATERA BARAT

2018 ◽  
Vol 3 (2) ◽  
pp. 160
Author(s):  
Halkadri Fitra ◽  
Salma Taqwa ◽  
Charoline Cheisviyanny ◽  
Abel Tasman ◽  
Nurzi Sebrina
Keyword(s):  
Cash Flow ◽  
Net Present Value ◽  
Average Rate ◽  
Flow Analysis ◽  
Payback Period ◽  
Rate Of Return ◽  
Internal Rate Of Return ◽  
Present Value ◽  
Internal Rate

Penelitian ini bertujuan untuk melihat kelayakan aspek keuangan usaha grosir sembako Badan Usaha Milik Desa (Nagari) Kamang Hilia Sejahtera di Kenagarian Kamang Hilia Kecamatan Kamang Magek Kabupaten Agam Provinsi Sumatera Barat yang dilakukan pada tahun 2018. Penelitian bersifat deskriptif kuantitatif dengan menggunakan metode cash flow analysis, payback period, net present value, profitability index, internal rate of return, dan average rate of return. Hasil penelitian menunjukkan bahwa nilai net cash flow Badan Usaha Milik Desa (Nagari) Kamang Hilia Sejahtera adalah positif yaitu Rp.21.774.000, nilai payback period adalah 1,15 tahun, nilai net present value positif sebesar Rp.10.680.034,47, nilai profitability index adalah positif 1,37, sedangkan nilai internal rate of return adalah 46,7% dan nilai average rate of return adalah 57,23%. Berdasarkan standar penilaian maka semua metode yang digunakan memberikan kesimpulan bahwa usaha grosir sembako milik Badan Usaha Milik Desa (Nagari) Kamang Hilia Sejahtera dalam kategori layak untuk dilaksanakan.

AN HISTORICAL PERSPECTIVE OF NET PRESENT VALUE AND EQUIVALENT ANNUAL COST

1982 ◽  
Vol 9 (1) ◽  
pp. 103-110 ◽  
Author(s):  
Thomas W. Jones ◽  
David Smith
Keyword(s):  
Cash Flow ◽  
Annual Cost ◽  
Historical Development ◽  
Historical Perspective ◽  
Net Present Value ◽  
Present Value ◽  
Discounted Cash Flow

Net present value and equivalent annual cost are two discounted cash flow criteria for comparing investment proposals. Why have accountants taken to net present value? Why do engineers readily use equivalent annual cost? This paper investigates the historical development of these principles to provide an explanation of why this is so.

scholarly journals Reinvestment Bias When Analyzing Mutually Exclusive Assets

2011 ◽  
Vol 2 (3) ◽  
pp. 71
Author(s):  
Robert J. Sweeney
Keyword(s):  
Net Present Value ◽  
Capital Budgeting ◽  
Cash Flows ◽  
Rate Of Return ◽  
Internal Rate Of Return ◽  
Present Value ◽  
Internal Rate ◽  
Current Period ◽  
The Cost ◽  
Flows Over Time

Capital budgeting decisions generally involve the commitment of resources in the current period to secure positive cash flows over time that generate a rate of return in excess of the cost of the funds invested. The most common techniques used to perform this analysis are the Net Present Value (NPV) and the Internal Rate of Return (IRR).Conceptually, these two techniques are substitutable; i.e. the resulting decision from a NPV analysis is identical to the decision from an IRR analysis. In practice, however, the NPV and the IRR can, on occasion, produce conflicting decisions. Specifically, when analyzing mutually exclusive assets the Net Present Value can support one asset while the Internal Rate of Return supports the other. The purpose of this paper is twofold; first, to highlight structural deficiencies in the conventional application of the NPV and the IRR, and second, to demonstrate a procedure to correct for these structural errors.

Value-Creating Investment Strategies to Manage Risk From Structural Market Uncertainties: Switching and Compound Options in (V)HTR Technologies

2008 ◽  
Author(s):  
Ulrike La¨uferts ◽  
Charlotte Halbe ◽  
Aliki van Heek
Keyword(s):  
Cash Flow ◽  
Discount Rate ◽  
Real Option ◽  
Net Present Value ◽  
Energy Markets ◽  
Present Value ◽  
Technology Investment ◽  
Compound Options ◽  
Managerial Flexibility ◽  
Strategic Value

To measure the value of a technology investment under uncertainty with standard techniques like net present value (NPV) or return on investment (ROI) will often uncover the difficulty to present convincing business case. Projected cash flows are inefficient or the discount rate chosen to compensate for the risk is so high, that it is disagreeable to the investor’s requirements. Decision making and feasibility studies have to look beyond traditional analysis to reveal the strategic value of a technology investment. Here, a Real Option Analysis (ROA) offers a powerful alternative to standard discounted cash-flow (DCF) methodology by risk-adjusting the cash flow along the decision path rather than risk adjusting the discount rate. Within the GEN IV initiative attention is brought not only towards better sustainability, but also to broader industrial application and improved financing. Especially the HTR design is full of strategic optionalities: The high temperature output facilitates penetration into other non-electricity energy markets like industrial process heat applications and the hydrogen market. The flexibility to switch output in markets with multi-source uncertainties reduces downside risk and creates an additional value of over 50% with regard to the Net Present Value without flexibility. The supplement value of deploying a modular (V)HTR design adds over 100% to the project value using real option evaluation tools. Focus of this paper was to quantify the strategic value that comes along a) with the modular design; a design that offers managerial flexibility adapting a step-by-step investment strategy to the actual market demand and b) with the option to switch between two modes of operation, namely electricity and hydrogen production. We will demonstrate that the effect of uncertain electricity prices can be dampened down with a modular HTR design. By using a real option approach, we view the project as a series of compound options — each option depending on the exercise of those that preceded it. At each end of the design phase, the viability will be reviewed conditional on the operating spread at each time step. We quantify the value of being able to wait with the investment into a next block until market conditions are favourable and to be able to abandon one block if market conditions are disapproving. To derive the intrinsic value of this multi block HTR design, it will be compared with a reference investment of a full commitment light water reactor without any managerial flexibility. In another case, we raise the question to what extent product output diversification is a suitable strategy to cope with long term market uncertainty in electricity price. What is the value of a multi-potent technology that is able to produce output for energy markets others than the electricity market? To investigate this, we concentrate on The Netherlands, a country with an intense industrial demand in electricity and hydrogen.

scholarly journals Evaluating Financial Viability of Olive Mills Enterprise in Jordan

2014 ◽  
Vol 6 (4) ◽  
pp. 173
Author(s):  
Bassam Aldeseit
Keyword(s):  
Net Present Value ◽  
Cash Flows ◽  
Rate Of Return ◽  
Cost Ratio ◽  
Financial Viability ◽  
Internal Rate Of Return ◽  
Present Value ◽  
Benefit Cost Ratio ◽  
Olive Oil Mills ◽  
Benefit Cost

The main aim of this study was to evaluate financial viability of olive oil mills enterprise. Thirty olive mills were investigated. A questionnaire was designed to obtain information from mills owners. The information obtained was mainly related to costs and returns. Cash flows were derived from costs and returns items of the enterprise. Three main discounted measures of project worth were used; these were Net Present Value (NPV), the Internal Rate of Return (IRR), and the Benefit Cost Ratio (B/C). The results of this study revealed that olive mills could be a viable encouraging, and profitable enterprise because of its capability to generate a highly positive and acceptable NPV (837966.05 JDs). The IRR (85%) and B/C ratio (2.3) values for this enterprise were economically accepted.

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