Market-based measures and their impact on green shipping technologies

In the strategy on the reduction of greenhouse gas (GHG) emission of the International Maritime Organization (IMO), market-based measures (MBMs) are considered feasible mid-term measures. Thus, the relevance of MBMs for the shipping industry can be expected to grow in the future and, consequently, carbon and other GHG emissions will impact the investment appraisal for greening technologies. This paper illustrates the impact of carbon pricing on the valuation of greening technologies (especially wind-assisted propulsion technologies) and on the relevant decision-making. In this regard, the straightforward approach of a direct acquisition and installation of the respective technology is considered and compared against innovative financing models, such as shared savings. Hence, the Fuzzy Pay-Off Method (FPOM) is applied in order to visualize the risks and chances linked to MBMs. Due to the economic life of greening technologies, the results are already relevant for today’s investment appraisals, even though carbon pricing has not been enforced so far.

Capital budgeting practices and political risk: evidence from Lebanon

Purpose This paper aims to examine how capital investment projects are appraised in Lebanon; whether the risk is incorporated into this process by Lebanese firms and the impact of political risk on the capital budgeting process. Design/methodology/approach This paper uses a questionnaire survey to investigate the capital budgeting practices of companies located in Lebanon, which is a country characterised by a high level of political risk. Findings Lebanese companies tend to use more than one method of investment appraisal and, increasingly, they are using sophisticated discounted cashflow techniques alongside the payback period. The most widely used methods to evaluate risk include scenario and sensitivity analysis. Finally, political risk plays an important role in the capital budgeting processes of Lebanese companies. Originality/value The paper reports on whether the methods of capital investment appraisal used throughout advanced Western economies are used in the context of an emerging economy. In addition, Lebanon is an ideal research site to study capital budgeting as the conflicts in the country of the past 50 years have required sizeable new expenditure on capital projects; the country is characterised by high levels of political risk which may lead corporate managers to use different approaches to investment appraisal and it provides an opportunity to study capital budgeting decisions by private, unlisted firms.

Factors Affecting the Implementation of Environmental Management Accounting Practices through New Institutional Sociology Perspective: A case of an Apparel Manufacturer in Sri Lanka

The emergence of contemporary business environment and technologies, customer driven business perspective, and transparent and accountable business practices have led different stakeholders to demand information in relation to the management of the environment. Consequently, organizations tend to develop their strategies in line with achieving these financial and environmental performances. The apparel industry is one of the significant contributors in the Sri Lankan economy and it can be seen that Environmental Management Accounting (EMA) is often practiced in this industry. However, it is a matter of consideration for the real reason behind the adoption and implementation of Environmental Management Accounting Practices (EMAPs) in this industry. Accordingly, this study is focused on identifying the actual factors that have influenced a manufacturer in the apparel industry in Sri Lanka to adopt and implement EMAPs with the perspective of the New Institutional Sociology Theory. This study takes a case study approach. Therefore, one of the leading manufacturing companies in the apparel industry was selected as the case company. The primary data were collected through a semi-structured interview and questionnaire survey. The validity of findings was assessed through data triangulation. It was identified that the environmental cost accounting, environmentally induced capital expenditure and revenue are the mostly used EMAPs whereas the payback period method is often applied in the organization for investment appraisal activities. In terms of factors that have influenced to adopt and implement EMAPs through the Institutional Theoretical Perspective, it was found that coercive isomorphism was the most significant factor whereas the least influential factor was the normative isomorphism on the adoption and the implementation of the EMAPs in the organization. In terms of coercive isomorphism, the government regulations are the most influential force on this adoption and the implementation. Further, the study found some reasons behind the adoption of more Physical EMAPs (PEMAPs) than the Monetary EMAPs (MEMAPs) by the organization. The study contributes to minimize the gap by revealing the types of EMAPs that have been adopted and implemented and revealing the actual factors that have led to adopt and implement those practices in a manufacturer of the apparel industry.

Features of the investment valuation mechanism in the context of global economic uncertainty

The purpose of the study was to identify the most effective method of investment appraisal in the context of global economic uncertainty. The scientific novelty of the article lies in the fact that a macroeconomic factor of uncertainty is the global pandemic, but not the classic economic crisis. The practical significance of the study lies in the fact that the obtained recommendations and conclusions can be used by investors and analytical agencies when assessing the investment attractiveness of individual companies.

A Stochastic Approach for Product Costing in Manufacturing Processes

Nowadays, manufacturing companies are characterized by complex systems with multiple products being manufactured in multiple assembly lines. In such situations, traditional costing systems based on deterministic cost models cannot be used. This paper focuses on developing a stochastic approach to costing systems that considers the variability in the process cycle time of the different workstations in the assembly line. This approach provides a range of values for the product costs, allowing for a better perception of the risk associated to these costs instead of providing a single value of the cost. The confidence interval for the mean and the use of quartiles one and three as lower and upper estimates are proposed to include variability and risk in costing systems. The analysis of outliers and some statistical tests are included in the proposed approach, which was applied in a tier 1 company in the automotive industry. The probability distribution of the possible range of values for the bottleneck’s cycle time showcase all the possible values of product cost considering the process variability and uncertainty. A stochastic cost model allows a better analysis of the margins and optimization opportunities as well as investment appraisal and quotation activities.

Investment appraisal: Akwaaba university hostel projectInvestment appraisal: Akwaaba university hostel project

Learning outcomes After completing this case, students should be able to: identify and compute relevant cash flows in relation to a real estate project and compute the net present value (NPV). Determine the target return or cost of capital (by looking at historical economic indicators). Design or formulate a sensitivity analysis to determine the drivers of the project value. Evaluate real estate and other investments taking qualitative and quantitative factors into consideration. Demonstrate the computation of a break-even rate to determine the minimum or maximum revenue or cost required for a project to be viable. Case overview/synopsis This case study is about the Golden Beak Securities Pension Fund that wanted to invest in a Hostel Project in one of the universities in Ghana. Most universities in Ghana faced an acute shortage of on-campus accommodation. Also, the Government of Ghana, in 2017, implemented a programme to make Senior High School in Ghana free. This was expected to increase the number of students who will enter the existing universities. The project was therefore seen as strategic, as it would help ease the pressure of on-campus accommodation while providing diversification for the pension fund. As part of the investment committee’s (IC) quest to improve the skill set available to it, especially in relation to real estate investments, Esi Abebrese was appointed as one of the members of the IC of GSB. Her main task was to collect information on key macroeconomic variables, as well as granular information on project costs and revenues and conduct investment appraisal. Esi was scheduled to make a presentation to the IC on the 15th of October 2019 following which the Committee will debate and make a decision. The project had an estimated cost of GH¢52m with a total number of 3,424 student beds and ancillary facilities. Undertaking the project required moving funds from investments in money market securities with one of the banks in Ghana. The investments in the money market securities were currently yielding about 16% a year. The determination of the cost of capital was critical and Esi and Nana eventually settled on a long-term weighted average cost of capital of 14%. This was after considering the trend of inflation, monetary policy rates, treasury rates, stock market returns and a report on returns on commercial real estate properties in Ghana. An exit capitalisation rate of 20% was also estimated for the purposes of determining the value of the property at the end of the investment horizon. Esi also obtained estimates of cost and revenue for the project and proceeded to carry out a feasibility analysis on the project. This consisted of an NPV analysis and sensitivity analysis on various factors to determine the drivers of the project value. The IC had to take several factors (both quantitative and qualitative) into consideration before making a decision. Esi believed that these factors included the diversification of the fund’s assets, the return on investment, potential oversupply of hostel accommodation, the social responsibility of providing student accommodation and the impact of any prolonged shutdown of the university. Complexity academic level Masters/advanced undergraduate. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes. Subject code CSS 1: Accounting and Finance.

A Case Study of Green Energy Roofs in Taiwan Using Financial Analyses

As part of the low-carbon policy and development in Taiwan, the Bureau of Energy introduced the “Green Energy Roofs Project” in 2017, which encouraged homeowners to install green energy roofs. However, the incentives of homeowners and solar photovoltaic operators to participate in this Project were low. The aim of this study is to propose and evaluate alternative models for investing green energy roofs. The contributions of this study are that, first, we consider factors such as risk management schemes and crowdfunding that have not been considered in evaluating green energy roofs project. In addition, this study provides a solution to Taiwan government’s current dilemma about how to encourage homeowners to install green energy roofs. This study adopts five common investment appraisal methods (including payback period, discounted payback period, net present value, internal rate of return and profitability index) to evaluate four different models for investing green energy roofs. The results show that when homeowners are fully responsible for installation costs of green energy roofs with partial funds borrowed from banks and with consideration of risk management, the homeowners have better investment returns. Therefore, the Taiwan government could consider the alternative strategy proposed in this study for promoting green energy roofs so that the country can x`move a bigger step forward towards the goal of being nuclear-free.

A simulation-based binomial model for building development appraisal

Purpose Building developments are often capital intensive, have a long payback period and many associated risks and uncertainties. This makes investments in building projects to be a big challenge. This study aims to develop a computerized simulation-based binomial model (CSBBM) for building investment appraisal with a view to improving the economic sustainability of proposed building projects. Design/methodology/approach Mathematical equations and algorithms were developed based on the binomial method (BM) of real options analysis and then implemented on a computer system. A hybrid algorithm that integrates Monte Carlo simulation (MCS) and BM was also developed. A real-life project was used to test the model. Sensitivity analysis was also conducted to explore the influence of input variables on development option value (DOV). Findings The test result shows that the model developed provides a better estimate of the value of an investment when compared with traditional net present value technique, which underestimate the value. Moreover, inflation rate (i) and rental value (Ri) are the most sensitive variables for DOV. An increase in i and Ri by just 5% causes a corresponding increase in DOV by 202% and 132%, respectively. While the least sensitive variable is the discount rate (r), as an increase in r by 5% causes a corresponding decrease in DOV by just 9%. The CSBBM is capable of determining the optimal time of development of buildings with an accuracy of 80.77%. Practical implications The hybrid model produces higher DOV than that of only the BM because MCS considers randomness in uncontrollable variables. Thus, building investment decision-makers should always use MCS to complement the BM in an investment analysis. Originality/value There is limited evidence on the use of this kind of hybrid model for determining DOV in practice.

Commercialisation of African palm weevil larvae for employment creation and nutritional security in rural Ghana: a financial feasibility approach

Edible insects are increasingly recognised as a source of nutritional security, poverty reduction and overall household wellbeing, particularly in rural sub-Saharan Africa. In Ghana, for instance, edible insects such as the African palm weevil larvae are integral part of traditional dishes, which are widely consumed among different strata of the Ghanaian society. Following the limited supply of these larvae from the traditional source, deliberate efforts at domestication are being promoted as an investment option in Ghana. This paper uses the case study approach based on data from a modern weevil larvae (akokono) micro-farm in the Ashanti region to analyse the financial viability of an insect-based business to guide future investment decisions. Standard capital budgeting tools such as net present value (NPV), benefit-cost ratio (BCR), internal rate of return (IRR) and payback period were employed to assess the financial viability of an akokono micro-farm of 5.47×7.62 m dimension. The results show that a capital expenditure of Gh₵ 5,333.17 (US$ 935.61) is required to establish the akokono micro-farm. With a five-year project life and cost of capital of 33.5%, the investment appraisal generates a positive NPV (Gh₵ 6,065.89 = US$ 1,164.3), BCR that is greater than unity (1.34), and an IRR (37%) which is above the current lending rate on the financial market in Ghana. The paper concludes that domestication of palm weevil larvae is financially viable at the micro-scale even in the face of pessimistic assumptions. These findings have practical implications for small-scale enterprise development in addressing problems of malnutrition and unemployment among vulnerable groups like women and youth in the rural economy of Ghana.