Abstract: Assessing the commercial effectiveness of an investment project. Methods for assessing the effectiveness of investment projects Concept and methodology for determining commercial effectiveness

By whom and how is the effectiveness of the project determined?

IP methods and performance indicators

Assessment of the commercial effectiveness of individual entrepreneurs

An example of assessing the commercial effectiveness of an individual entrepreneur

By whom and how is the effectiveness of the project determined?

IP methods and performance indicators

Assessment of the commercial effectiveness of individual entrepreneurs

An example of assessing the commercial effectiveness of an individual entrepreneur

More on topic 7.3. Indicators of commercial efficiency of an investment project:

For rate commercial efficiency investment project, a profit forecast and a movement forecast are determined Money and integral performance indicators.

10.1. Profit forecast

The profit forecast over time is made by comparing the income and expenses of the enterprise based on a comparison of the expected values of sales revenue, planned adjusted costs, and financial debt obligations of any type.

A profit forecast is necessary to assess the current economic (operational) activities of an enterprise.

When performing a forecast, the following are sequentially determined:

· profit from sales, as the difference between sales revenue, calculated without value added tax, and the operating costs of the enterprise (the full cost of production, including production, management and commercial costs);

· profit before tax. In the example of a business plan, this value is less than the profit from sales on financial obligations to the budget. Financial obligations before the budget, taken into account when calculating profit before tax - property tax.

In accordance with the current instructions for calculating property tax, an enterprise is exempt from tax during the first year of its activity. When calculating the tax, the depreciation of the enterprise's fixed production assets is taken into account, i.e. the base for calculating the tax is the residual value of the assets. Tax rate - 2.2%;

· taxable profit. In the absence of income tax benefits, taxable profit is the same as profit before tax. To the list of main preferences for investors in accordance with the legislation of individual regions for the most significant business projects, the regional government can provide tax benefits in terms of taxes credited to the regional budget, as well as subsidies for partial reimbursement of the costs of paying interest on loans;

· net profit. Less profit before tax by the amount of income tax. In addition, in this business plan, due to net profit interest on the loan is reimbursed at a rate exceeding the discount rate of the Central Bank of the Russian Federation.

Continuation of the example

Property tax calculation

Initial cost permanent assets– 1108874 thousand rubles. Fixed production assets are put into operation during periods t0and the first half of t1(Table 6.2).Annual wear and tear is 70,968 thousand rubles. For periods t0, t1 and half of t2, the enterprise is exempt from transferring property taxes to the budget.

Table 10.1

Calculation of property tax, thousand rubles.

Sample time	Commissioning of fixed production assets	Annual wear and tear	Residual value of fixed production assets	Property tax

*) tax is ½ of the calculated value: 1002422·0.022/2=11027 thousand rubles.

Table 10.2

Profit forecast, thousand rubles.

Name of items
1. Sales volume, t
2.Sales volume, thousand rubles.	-	752760	1279692	1279692	1279692	1279692	1387200	1387200	1387200	1366800	1366800
3.Operating costs	-	481070	687126	677946	668766	668766	668766	668766	668766	668766	668766
including depreciation charges
4. Profit from sales		271690	592566	601746	610926	610926	718434	718434	718434	698034	698034
5. Financial obligations, including:					18931
-property tax
6. Profit before tax		271690	581539	581254	591995	593557	702626	704187	705748	686910	688471
7. Income tax benefits
8. Taxable income		271690	581539	581254	591995	593557	702626	704187	705748	686910	688471
9. Income tax (20%)		54338	116308	116251	118399	118711	140525	140837	141150	137382	137694
10. Interest on a loan at a rate exceeding discount rate Central Bank		6732

11. Net profit	-	210620	460743	462759	473596	474845	562101	563350	564599	549528	550777
The same on a cumulative basis	-	210620	671363	1134122	1607719	2082564	2644665	3208014	3772613	4322141	4872918

10.2. Cash flow forecast

The cash flow forecast shows the relationship between the sources and directions of use of the project’s financial resources (the so-called “cash flow” method). Associated with the assessment of the cash flow forecast is the “budgetary” approach to determining the financial viability of the project.

The presence of profit is not the only criterion for the effectiveness of investment projects. The need to prepare a cash forecast is dictated by the fact that the concepts of income and expenses used in the profit forecast do not coincide with cash flow. For example, depreciation charges reduce profits, but do not affect the company’s cash flow, etc. In addition, the cash flow forecast is broader than the profit forecast due to the fact that it covers not only the operating, but also the financial and investment areas of the enterprise’s activities .

Cash inflows include:

· revenue from product sales;

· attracting a loan;

· attracting funds from third-party investors;

· retained earnings from previous periods;

· depreciation deductions.

Cash outflows include:

· investments in permanent assets;

· operating costs associated with the current activities of the enterprise;

· repayment of the loan and interest on the loan not included in the cost of production;

· settlements with the budget (tax withdrawals);

Dividend payments to shareholders are not counted as an outflow of real cash because they are paid out of the enterprise's net income.

The total cash flow for the entire calculation horizon (on an accrual basis) must be equal to the sum of retained earnings for the same period and used depreciation charges minus loan repayment amounts.

table 10.3

Cash flow forecast, thousand rubles.

Name of items	Calculation horizon

Cash inflow	816000	1196244	1350660	1350660	1350660	1350660	1458168	1458168	1458168	1437768	1437768
-investor funds
-borrowed funds
-own funds
- sales revenue
-depreciation deductions		35484	70968	70968	70968	70968	70968	70968	70968	70968	70968
Cash outflow	816000	1031740	900549	898533	806096	804847	825099	823850	822601	817272	816023
-investments
-operating costs
- loan repayment
-interest for using the loan at the expense of net profit
-property tax
-income tax
Total Cash Flow	0	164504	450111	452127	544564	545813	633069	634318	635567	620496	621745
The same on a cumulative basis	0	164504	614615	1066742	1611307	2157120	2790189	3424506	4060073	4680569	5302314

Check: 5302314 = 4872918 (net profit amount) + 674196 (JSC amount) – 244800 (loan repayment)

The sustainability of the project from the point of view of its participants assumes that at each step of the calculation the amount of the accumulated cash flow balance must be non-negative. Moreover, it is recommended that it be at least 5% of the amount of net operating costs at each calculation step.

A negative balance of accumulated money indicates an additional need for financing for the project. If necessary, additional sources of funding can be provided. These include, in particular, the results of reinvestment of free funds - investing part of the positive total flow into deposits or debt securities. This technique should be used as an exception, since free funds can be used directly in production with greater returns than when they are placed on deposit.

When placing free funds on interest-bearing deposits, the inflow is considered to be the annual amount of interest on them (deposit income DD), which is determined taking into account the period of placement of free funds and the tax on interest amounts:

where b0, b1, bn -1 – the balance of the total cash flow of the current year; d – deposit interest rate, units; n – profit tax rate, units; n – the period for which the deposit is placed.

10.3. Assessment of integral indicators of investment efficiency

The assessment is carried out by discounting the costs and results of the enterprise. Discounting takes into account the time factor and the reduction in the value of monetary resources in the future. This is the process of bringing costs, results and effects at different times to their value at a point in time, which is called the moment of reduction and is denoted by t0.

The reduction is carried out using the discount factor “α”:

WhereE – discount rate, which is determined at the level of the future predicted return on funds invested in the project.

To continue calculations for the project, the projected rate of return on capital must be justified.

The rate of return on capital (discount rate E) can be determined by direct counting. In this case it includes:

A)risk-free income , i.e., the return that an investor receives for using his money, assuming that his investment is absolutely safe.

The risk-free commercial discount rate is determined by various techniques. For example:

-at the long-term rate of return (not<2 лет) государственных облигаций, т. к. государственные облигации часто используются в качестве индикатора «безрискового дохода»;

At LIBOR (London Interbank Offered Rate) – the weighted average interest rate on interbank loans provided by banks operating in the London interbank market;

At the EUROBOR rate (European Interbank Offered Rate) - the weighted average interest rate on interbank loans provided in Euros;

At the MIBOR rate (Moscow Interbank Offered Rate) - the indicative rate (benchmark) for providing ruble loans on the Moscow interbank market.

b) risk adjustment. Typically included if the project is evaluated under a single scenario for its implementation. An adjustment or risk premium provides additional compensation for the risk associated with investments (failure to receive predicted income, unreliability of project participants, etc.). The smallest amount of risk is applied when investing in the development of production based on mastered technology, the highest when investing in innovative research.

c) inflation (unless calculations are already made at forecast prices) to ensure that the real purchasing power of money does not change over time. When planning the results and costs of a project in comparable prices, inflation is not taken into account. Base period prices apply. The inflation percentage is set at the level predicted for the corresponding period of time in the calculations of the RF budget.

To simplify the process of calculating the required rate of return on equity capital, it can be determined depending on the deposit rates of banks of the first reliability category, since interest rates in commercial banks already reflect expected inflation, the risk of investing funds in storage and the “price” that the bank pays for refusing immediate use of the money.

If all capital is borrowed, the discount rate is the appropriate lending rate. If the capital is mixed, the discount rate is found as a weighted average taking into account the capital structure:

WhereE (i ) - discount rate for the i-th type of capital;Ai – share in the total capital;i … n – n types of capital.

To confirm economic efficiency investments, the following integral indicators are calculated:

Net present value (NPV, also known as the integral effect, Net Present Value - net present value).

NPV is the accumulated discounted effect from the implementation of the project. It is determined sequentially for each year as the difference between the discounted stream of future income from operating activities (inflow Pt, taking into account net profit, depreciation charges and the results of reinvestment of free cash at interest) and the discounted stream of future payments in the investment sector of activity (outflow Ot).

When calculating the NPV, the influence of the time factor is excluded, so we can assume that this is the result obtained immediately after the decision to implement the project is made.

A positive NPV value is considered to confirm the feasibility of investing, while a negative value indicates the ineffectiveness of the investment. When comparing alternative projects, the project with the highest NPV is considered economically profitable.

Continuation of the example

The discount rate is set at 14%. The rate is justified by the following calculations: risk-free income rate - 3%; risk premium - 5%, since the production will use proven technology and technical means; inflation expectations - 6%.

Table 10.4

Determination of NPV, thousand rubles.

Calculation steps	Inflow	Outflow	Discounting at α= 1/ (1+ 0.14)t	Current	accumulated












Total	5547114	1224000	-	2713850	1173816	1540034	-

ID = 2713850: 1173816= 2.31 or 231%.

Payback period investment project

The payback period (Current) is determined in aggregate using the method of full reimbursement of investments (the so-called “pay-off” method). This is the length of the period during which the sum of discounted net inflows fully compensates the sum of discounted net outflows or that earliest point in time over the calculation horizon after which the current net present value becomes and subsequently remains a non-negative value. More accurately, the payback period can be calculated using the formula:

Wheren − Last year, when NPV £ 0; NPVn − the amount of accumulated NPV in the year “n "(without minus sign); NPV techn+1 − the value of the current NPV in the “n + 1” year.

Continuation of the example

The payback period for investments, as can be seen from Table 10.4, occurs in the fifth year of the project’s operation (year t4). More accurate determination of payback period

Current =4+188831/322382=4.6 years.

The payback period is usually compared with the standard service life of the capital equipment. The shorter it is relative to the standard service life, the more effective the project.

Internal rate of return EVN(internal discount rate, internal rate of return, Internal Rate of Return-IRR)

The internal rate of return represents the discount rate at which the value of the given effects is equal to the given capital investments, i.e. NPV=0.

Evn shows the maximum allowable relative level of costs that can be associated with the project. For example, if a project is fully financed by a loan from a commercial bank, then the EUR value shows the upper limit of the acceptable level of the bank interest rate, the excess of which makes the project unprofitable.

To assess the effectiveness of the project, Evn is compared with the previously accepted rate of return on capital or the discount rate E. When Evn is greater than E, the implementation of the project is economically feasible. Projects for which Evn >E have a positive NPV and are therefore effective.

At an existing enterprise during its reconstruction, the internal rate of return is also compared with the weighted average cost of capital (WACC). If Evn > WACC, then the project should be accepted.

The most common approach is when Evn is determined using the method of successive iterations of the discount rate E to obtain a new NPV value. A more accurate result is achieved in the case of a slight change in the discount rate.

Continuation of the example

To determine the internal rate of return in the example, when calculating NPV, a new discount rate of E = 15% is used

Table 10.5

Determination of NPV at E=15%, thousand rubles.

Calculation steps	Inflow	Outflow	Discounting at α= 1/ (1+ 0.15)t	Current	Accumulated

continuation of table 10.5






Total

Evn can also be determined graphically as a dependence of the NPV (ordinate axis) on the discount rate (abscissa axis). The value of Evn is located at the intersection of the direct change in NPV with the abscissa axis, i.e., under the condition that NPV = 0.

Rice. 10.1. Graphic definition of the IRR of an investment project

In the investment process of a business environment, there are necessarily several role settings: initiator, investor, customer, executor. These roles are assumed by the participants in the investment project. It is rare when all the roles are embodied in one subject, although this is possible. In conditions of multi-subjectivity of project procedures, a difference in role interests arises. The income and costs of entities determine various types of efficiency, among which the commercial efficiency of an investment project occupies a special place.

Let us recall the concept of an investment subject. By it we mean a commercial organization (enterprise) that uses investments to solve its business problems. The investor is a significant role in investment activities(ID), which, having at its disposal available funds, interested in them effective investment. Among investors besides legal entities(enterprises and their associations) may also be other persons (individuals, state and municipal bodies, foreign states, etc.).

The next important role is the project organizer. By this we will understand an individual entrepreneur who acts as the initiator, organizer and general executor of a project-type investment task. For the purposes of the article, we will also assume that the role of the project organizer is an enterprise acting in its own commercial interests. It develops and implements the project using its own and, if necessary, borrowed funds.

Several more roles can be noted: user of ID objects, customer, intermediaries. The user role gives the subject the authority to determine the requirements and scope of the investment. Often the roles of the user and the executor of the investment project (IP) coincide. In this case, he is involved in securing financing, contracting with contractors, creating project team and organizes project interaction and is responsible for the results of the project.

Since the determining figure in investment activity is the investor, in understanding the phenomenon of efficiency and its types in relation to individual entrepreneurs we will be guided by a dual feature. It is determined, on the one hand, by the requirements of the investor, and on the other, by economic efficiency indicators. The criterion for the economic efficiency of ID can be not so much a synthetic indicator - profit, but rather its different kinds. Thus, for an investor, net profit is more suitable for assessing efficiency, and gross profit is more suitable for social efficiency.

reproductive;
stimulating;
function of the financial result of the activity.

The profitability criterion is not enough to understand the economic efficiency of individual entrepreneurs. To this should also be added the economic interests of the participants of the ID. They must be diagnosed before starting the project. So, for example, the interest of the owner of the project organizer is in profit, cleared of taxes and other payments. Investor interests are broader and include:

compensation of income for demand deferred due to investments;
compensation of funds due to inflationary depreciation;
compensation for probable losses due to investment risk.

Whatever type of efficiency we consider in connection with an investment project, we need to remember one thing: they are all determined by the principles of economic efficiency. Economic efficiency in any model and in any component of the management system is based on an assessment of profitability: absolute or relative. The most common indicator for these purposes is the rate of return. IN economic theory There are two approaches for solving the calculation problem.

Simple, large-scale methods, also called static.
Methods that take into account indicators of a technical and economic nature in their dynamics at each time step, the cost of money, which tends to change due to inflation and investment alternatives. These methods make it possible to take into account project risks and interests of IP participants. They have the alternative name of dynamic methods.

In my practical work, I have repeatedly encountered a situation where I literally had to make quick express calculations of expected benefits on the fly based on “small statistics” expert assessments and your own digital sensation. I call such calculations “blotter” and, oddly enough, they can be very useful.

Real activity, as a rule, is richer than theory. Decisions are not always made on the basis of prescribed political and strategic procedures. Events can happen quickly and opportunities are easily missed if not assessed early. Simple methods help with this. Let's look at several examples of static calculations.

Formulas for simple methods for assessing the economic efficiency of individual entrepreneurs

When using simple methods, dynamic issues are ignored. It seems that the project will be implemented, say, in a year, i.e. with some static parameters. The duration of operation of the investment object is not taken into account, the structure of income and expenses during the operational phase is also not taken into account. Without pretending to have a high quality result, such calculations allow us to focus on promising ideas and proposals and weed out those that are obviously failures.

Static methods have significant drawbacks, the main one being low reliability. For this reason, it is not possible to use them to develop a feasibility study for an investment project. However, the disadvantages of simple methods can be eliminated by using dynamic indicators. These indicators together constitute a system of interconnected calculations that make it possible to evaluate profitability in a comprehensive manner. Let's name the main indicators of the system:

net income;
net present value;
internal rate of return (return);
profitability index (profitability);
payback period;
financial reliability (sustainability);
general solvency ratio;
total liquidity ratio;
immediate liquidity ratio.

Composition of dynamic indicators of economic efficiency of individual entrepreneurs

We always need to remember that the calculation and presentation of the project's effectiveness is carried out in the interests of the investor as a role setting. Based on the principles of economic efficiency, it is customary to evaluate several of its types, among which the largest is social efficiency. It reflects the socio-economic importance of individual entrepreneurs for society. In this case, the calculation takes into account values not only financial results investment event, but also results and costs “external” to the project. The effects taken into account include:

responses in industries related to the project;
social events;
environmental results;
other non-economic effects.

Social effectiveness assessment is only appropriate for global, national and large-scale projects where socio-economic effects are actually present in national economy and cause a real public response. Expertise government agencies local projects, if they are not socially significant, are not provided. In this case, calculation of the public benefit of the project is not required.

The commercial effectiveness of an individual entrepreneur makes it possible to establish economic consequences for the designer. The condition for such calculations is the independent implementation of the project by the organization initiating it at the expense of its own sources. In this case, the project organizer himself bears all the costs of the IP and fully receives all its results. Such efficiency in the literature is considered as the efficiency of total (total) investment costs.

Main features of assessing the social and commercial effectiveness of individual entrepreneurs

Above is a table comparing the features of assessing the social and commercial effectiveness of individual entrepreneurs. In both the first and second cases, efficiency assessment is performed using the same set of dynamic indicators (NPV, IRR, PI, PP). However, the approaches to comparing the effects and costs of IP differ. This assessment group includes another type of environmental efficiency. All three types of efficiency identified above relate to the project as a whole. In addition, significant types include the effectiveness of participation in the project.

The effectiveness of participation in the project is assessed to check the feasibility of the IP. At the same time, the interest of project participants in its implementation is revealed. First of all, the assessment is given to the profitability of the participation of the project organizing organization. This efficiency is also called efficiency of use equity project organizer. In addition to it, the determination of the profitability of participation in an investment project of organizations more high level, state participation ( budget efficiency) and other types. A complete diagram of possible types of IP efficiency is posted below.

Types of investment project efficiency

Commercial efficiency assumes that the point of view of the initiator-project organizer on the relationship between results and costs during the implementation of the project is assessed. The assessment is made for conditions when the enterprise uses only own sources financing and becomes the owner of all the results of the investments made. In support of this position, I will provide an extract from the Methodological Recommendations for Assessing the Efficiency of Investment Projects (second edition, developed by V.V. Kossov, V.N. Livshits, A.G. Shakhnazarov).

The calculation is intended to characterize exclusively the economic side of investment effects that are provided by the enterprise’s own decisions in matters of organization, equipment and technology. This somewhat refined assessment involves the inclusion of two types of cash flows in its calculation: from operating and investing activities. The third type of cash flow (financial) is excluded from consideration, therefore it is important that external sources of financing, such as credits, loans, subsidies and subsidies, are not provided. This would defeat the very purpose of commercial efficiency.

To calculate commercial profitability, a standard Cash Flow from operating activities, the inflows of funds for which are formed from revenues from the sale of products and services, as well as non-operating income. Outflows are reflected as a result of the outflow of cash to pay the costs of production and sales of products. Cash flow from investing activities has little specificity. Inflows from the sale of assets are included in the calculation net of taxes (VAT). Cash Flow outflows from investing activities include:

investments in fixed assets and others fixed assets, related to individual entrepreneurs;
liquidation expenses;
investment investments in securities and bank deposit;
increasing working capital for project purposes;
compensation of current liabilities (at the end of the project).

Consideration of IP throughout its life cycle.
Cash flow modeling.
The principle of ensuring comparability of conditions for comparing IP options.
Assumption of a positive and maximum possible level of effect of the selected project option.
The principle of taking into account time factors: dynamics, unevenness of events, the time gap between shipment and payment.
The principle of alternative comparison of efficiency options (“with a project” and “without a project”).
The principle of taking into account all essential conditions of an individual entrepreneur.
The principle of taking into account the interests of different project participants.

An assessment of commercial efficiency is required by the project initiator for two purposes: to clarify the profitability of the project’s own economics without the influence of external sources of resources and to search for investors on its basis. If the composition of funding sources is fully determined and formed, there is no need to calculate this type of efficiency.

As already noted, the assessment methodology is standard and includes both static and dynamic methods from the economic side. Additionally, the coefficient method is used financial assessment, allowing us to finalize the picture of project viability. The structure of evaluation indicators is presented in the diagram below.

Types of investment project efficiency

I propose to consider an example of calculating the commercial efficiency of a small project lasting 8 billing periods. Below is a table with calculated data for the project. This is a basic cash flow plan with financial flows excluded from it. Since borrowed funds are not considered as project resources, expenses for servicing bank loans are excluded from the operating part. This has a positive effect on the balance of cash flows from operating activities.

Calculation table of cash flows for the project for commercial efficiency purposes

As a result, we get several dynamic indicators so that we can draw conclusions. The net present value (NPV) resulting from the project is positive, therefore the project is effective. The internal rate of return (IRR) is higher than the discount rate (r) taken into account in the calculations, which also indicates the profitability of the project. The payback period occurs within the seventh calculation step, this is evident from the change in the NPV sign and is confirmed by calculations using the formula (7.22 years). As a result of calculating the PI index, a value of 1.22 was obtained, corresponding to NPV > 0.

We have examined various types of economic efficiency of individual entrepreneurs, highlighting among them a special type of assessment, which is of greater interest to the key participant - the project organizer. Although a significant role in ID certainly belongs to the investor, my inner sympathies lie with the enterprise, which arranges a project undertaking not so much for the sake of income as such, but in the interests of developing the core activities of the business. The presented somewhat exaggerated approach to efficiency makes it possible to obtain a snapshot of the true economics of the project. Business leaders and potential investors are convinced that the project idea is promising and worth investing in and attracting resources.

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

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

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

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

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

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

Solution.

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

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

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

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

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

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

Table 5.1. Calculation of cash flows to assess the commercial effectiveness of the project

Indicators	1 year	2 year	3 year	4 year	5 year	6 year	7 year	8 year
Investments, thousand rubles	18000	0	0	0	0	0	0	0
Income from the sale of assets, thousand rubles.	0	0	0	0	0	0	0	50
Production volume, pcs./year	0	12000	12000	12000	12000	12000	12000	12000
Sales volume, pcs./year	0	12000	12000	12000	12000	12000	12000	12000
Cost per unit of production, thousand rubles.	0	5	5	5	5	5	5	5
Product unit price, thousand rubles.	0	7	7	7	7	7	7	7
Cost of production volume, thousand rubles. (= item 3 x item 5)	0	60000	60000	60000	60000	60000	60000	60000
Annual revenue, thousand rubles. (= item 4 x item 6)	0	84000	84000	84000	84000	84000	84000	84000
Depreciation, thousand rubles/year	0	80	80	80	80	80	80	80
Tax and other obligatory payments, thousand rubles/year	0	30	30	30	30	30	30	30
Cash flow from investment activities, thousand roubles. (=p.2-p.1)	-18000	0	0	0	0	0	0	50
Cash flow from operating activities, thousand rubles. (=p.8-p.7-p.9-p.10)	0	23890	23890	23890	23890	23890	23890	23890

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

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

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

Solution.

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

Table 5.2. Calculation of BH and NPV

Indicators	1 year	2 year	3 year	4 year	5 year	6 year	7 year	8 year
Cash flow from investment activities, thousand roubles.	-18000	0	0	0	0	0	0	50
Cash flow from operating activities, thousand rubles.	0	23890	23890	23890	23890	23890	23890	23890
Net income, thousand rubles. (item 1+item 2)	-18000	23890	23890	23890	23890	23890	23890	23940
Discount factor at E=15% (formula 3)	0,870	0,756	0,658	0,572	0,497	0,432	0,376	0,327
NPV, thousand rubles. (item 3 x item 4)	-15652	18064	15708	13659	11878	10328	8981	7826
NPV on an accrual basis, thousand rubles.	-15652	2412	18120	31779	43657	53985	62966	70792

The integral NPV amounted to 70,792 thousand rubles.

Indicators of the commercial effectiveness of an investment project include indicators formed on the basis of the absolute effectiveness of investments. The absolute efficiency of an investment (investment project) can be calculated using the formula

An investment project is effective if the absolute efficiency of investment is greater than zero. The calculation of performance indicators is based on authoritative international methods for assessing the effectiveness of investments.

To determine the commercial effectiveness of an investment project, the following indicators are calculated:

integral economic effect (other names - net present value, NPV, integral effect, Net Present Value, NPV);

internal rate of return (other names - IRR, internal discount rate, internal rate of return, Internal Rate of Return, IRR);

payback period;

profitability indices;

other indicators that indirectly (condition of sufficiency) characterize the effectiveness of the project.

The integral economic effect is defined as the sum of economic effects for billing period, discounted to the beginning of the first step. In other words, net present value characterizes the excess of the discounted inflow of funds over the discounted outflow of funds for the billing period:

If the IEE is positive, then the project is effective (at a given discount rate) and can be accepted for implementation. The more IEE, the more effective the project, which means it should be more preferable for the investor.

Properties of the integral economic effect:

the larger the capital investment, the lower the IEE;

the later the start of return on investment, the lower the IEE;

The longer the billing period, the larger the IEE, as a rule. It should be borne in mind that an excessive increase in the duration of the return period for capital investments is not always advisable. With an increase in the return period (calculation period), the increase in the value of IEE decreases and tends, as a rule, to zero, and the absolute value of IEE -

4) as the discount rate increases, the IEE value decreases. The dependence of IEE on the discount rate is shown in Fig. 7.2 (/ - discount rate).

5) it is necessary to compare projects by IEE value taking into account barrier points. The barrier point (BP) is the discount rate at which the intersection of the graphs of the IEE(i) functions of different investment projects occurs and which is determined from the equality of the equations of the IEE of investment projects (Figure 7.3):

IEE1 = IEE2.

The methods for calculating barrier points are the same as for calculating GNI.

The internal rate of return (IRR) is the discount rate at which the integral economic effect is equal to zero.

The value of the IRR at which the project can be considered effective must exceed the design value of the reduction rate or, according to at least, be equal to this value. Proof of this fact can be obtained using a graphical representation of the function of the integral economic effect of the reduction rate.

Graphically, the IRR can be determined at the point of intersection of the IEE(/) function with the abscissa axis (Fig. 7.4).

The value of IRR is determined from the equation

Finding an exact solution to the equation IEE = 0 using regular methods is not always possible, therefore, finding the IRR is carried out using numerical methods that make it possible to find the actual solution of this equation with a given accuracy after several iterations. Numerical methods can be used:

1) method of half division. This method is implemented using the formula

The payback period of a project is the period of time (from the start of the project), after which the integral economic effect becomes and subsequently remains non-negative. This indicator allows you to determine how long it will take the investor to recoup the investment costs incurred. The shorter the payback period, the faster the costs will be reimbursed. The project is effective if the payback period is less than the estimated period.

The payback period is calculated from the equation

Graphically, the payback period can be determined at the point of intersection of the IEE(t) function with the abscissa axis (Fig. 7.5). The graph of the IEE(t) function is called the financial profile of the investment project.

Finding an exact solution to the equation IEE(t) = 0 using regular methods is also not always possible. Therefore, the determination of the payback period is carried out approximately graphically or using the property of similarity of triangles. In the latter case, to clarify the position of the payback moment, it is assumed that within the step at which the project payback is achieved, the balance of the accumulated flow changes linearly.

Profitability indices characterize the relative “project return” on invested funds. They can be calculated for both discounted and undiscounted cash flows. When assessing efficiency, they often use: cost return index (CII) - the ratio of the amount of inflows of funds (accumulated income) to the amount of outflows of funds (accumulated payments). The cost profitability index is calculated using the formula

discounted cost profitability index (DCPI) - the ratio of the sum of discounted inflows of funds (accumulated receipts) to the sum of discounted outflows of funds (accumulated payments). The profitability index of discounted costs is calculated using the formula

Investment return index (IRI) is the ratio of economic effect (EE) to the accumulated volume of investments increased by one:

If there are several projects, the criterion for selecting the most attractive project for this indicator is the condition

An investment project is effective if the profitability index discounted investments more than one. The proof of this fact is obvious, since if the IEE is greater than zero (the project is effective), then the fraction in the formula is greater than zero, and therefore the investment return index is greater than one. If there are several projects, the criterion for selecting the most attractive of them for this indicator, as well as for the cost profitability index, is the condition

The cost and investment return indices exceed one, only for this flow the black hole is positive.

Often, in addition to the investment return index, the overall return on investment (ROI) is calculated, which is defined as the ratio of the project’s IEE to the discounted cost of investment costs:

If the overall return on investment is greater than zero, then the project is effective. This fact is obvious, since inequality (7.5) is satisfied if the numerator is greater than zero.

Other indicators cannot actually be classified as performance indicators, since they do not serve as a criterion for the effectiveness of the project. This group of indicators is characterized by the fact that they cannot always reflect the effectiveness of the project (they characterize effectiveness in an indirect way, i.e. they are considered a sufficient condition for effectiveness). Their role is to evaluate the project in more detail from different angles. In other words, if these indicators exceed the criterion value, then the effectiveness of the project does not clearly follow.

These indicators include the following.

Simple return on investment (RP), which is determined by the formula

Thus, we can formulate Theorem 1: if the project is effective, i.e. absolute investment efficiency (E) is greater than zero, then simple profitability, as well as average return on investment, is always greater than zero; the opposite is not always true. Symbolically, this can be written as

The proof of this fact is quite obvious, since the amount of net profit received may not be sufficient to cover capital costs.

The break-even point (TB) shows the volume of production in physical terms at which the net profit is zero. The project break-even point is calculated for a specific period of time using the formula

Thus, we can formulate Theorem 2: if the project is effective, i.e. the absolute efficiency of investment (E) is greater than zero, then the break-even point always does not exceed the projected production volume for the period (OP); the opposite is not always true. Symbolically, this can be written as

The proof of this, as with ROI, comes from the fact that the amount of net profit generated may not be sufficient to cover the capital costs.

It should be noted here that project profitability and efficiency are not synonymous. Profitability means the presence of net profit from the implementation of the project, and efficiency means the presence of a positive economic effect. Not effective project can provide profit, at the same time, an effective project is always profitable.

Average rate of capital growth (growth rate of return, GR). This indicator is based on the principle of interest accrual and shows capital growth (value own funds investors) received as a result of the project. The total capital (K) for the calculation period T is the initial amount of equity invested in the form of capital investments (KVss), and the amount of the economic effect, considered as capital gain. The economic effect can be understood as an integral economic effect. Thus, we can write the relation

It should be borne in mind that the calculation of performance indicators depends on the investment object. If capital investments are made in existing production, i.e. before and after their implementation the same type of product is produced, then according to Methodological recommendations it is necessary to use the incremental method. According to this method, when calculating efficiency indicators, incremental values of the economic parameters of the project are used, i.e. the difference between their design values and their values before capital investments are made.

Let's look at several examples of calculating commercial efficiency indicators. As a rule, there are three typical situations for making capital investments:

capital investments in the existing production of final products intended for external sales. Such capital investments may involve, for example, modernization, renovation, expansion of existing production;

capital investments in new production, which involves the production of new types of products (works, services) for the enterprise, intended for external sales;

capital investments in the production of semi-finished products, i.e. products that will be used on this enterprise in the following areas.

Let's consider the first case. In table Table 7.1 presents the initial data of the investment project. The estimated period of the project is 3 years. In the first half of the year, it is planned to make capital investments, in the subsequent period - industrial operation with reaching the designed production volume.

As can be seen from table. 7.1, the investment project provides for a change in the cost of production as a result of the influence of the following factors:

increasing the volume of production by 25%, which will lead to a reduction in the value of specific fixed costs;

an increase in depreciation charges as a result of the commissioning of new fixed assets (depreciation charges are considered semi-fixed costs).

The amount of depreciation charges per ton of the project (ATP) at linear method its accrual will be determined from the expression

Thus, despite the reduction in depreciation charges per ton as a result of an increase in production volume for the project, there was an increase in specific depreciation charges due to the commissioning of additional fixed assets.

Sum fixed costs at the full cost per ton of the project (PZtp)

Presented in table. 7.2. In this example, we will assume that the amount of expenses taken into account for profit tax purposes coincides with the amount of the full cost.

Table 7.2

Basic basic and design economic indicators

From the table 7.2 shows that sales revenue, profit before tax and net profit increased due to an increase in production volume and a decrease in total cost.

Since capital investments are planned for the first half of the year, it is advisable to determine the duration of the step to be equal to half a year. Thus, the billing period is divided into six steps.

In table 7.3 presents the flows of the main economic parameters of the project, as well as basic (pre-project) economic indicators. Production volume values are given for half a year, i.e. two times less than the annual value. At the first step, the flow elements are equal to zero, since the incremental method is used in the calculations.

The increase in net profit at a certain step is determined as the difference between the projected value of net profit at this step and the basic value of net profit. For example, the increase in net profit at the second step is 58.2 million rubles. (100 million rubles - 31.8 million rubles).

The discounted increase in net profit at a certain step is calculated as the product of the increase in net profit at this step and the corresponding discount factor.

In table 7.4 shows the calculation of the integral economic effect (last column and last row).

Capital investments are mastered as follows: in the first half of the year - the acquisition and installation of fixed assets, in the second half of the year in working capital an additional amount of funds is advanced as production volume increases.

Operating costs are defined as the difference between the total gross cost and the amount of depreciation. IN in this case subtracting depreciation charges from expenses is due to the fact that depreciation charges are considered as an influx of funds. At the first step, the incremental values are zero.

From the table 7.4 shows that the integral economic effect of the investment project is 197.7 million rubles. Since this indicator is greater than zero, the project is effective. In this case, the increase in net income is considered in the project as an economic effect. After discounting and calculating the sum of the elements of the discounted increase in net income flow, the integral (total) economic effect is determined.

The payback period occurs in the fourth step. In this case, it is possible to more accurately determine the payback period from the expression

Since the payback period is less than the estimated period, this shows the effectiveness of the project. In Fig. 7.6 presents the financial profile of the investment project

The project's internal rate of return is 50%. At this discount rate, the integral economic effect becomes equal to zero. Since the internal rate of return is greater than the project discount rate (9%), this shows the effectiveness of the project.

To calculate the cost profitability index and discounted cost profitability index using formulas (7.1) and (7.2), it is necessary to carry out intermediate calculations presented in table. 7.5.

Let's substitute the values found in the table. 7.5, into formulas (7.1) and (7.2). We get

Since the profitability index of discounted costs is greater than one, it characterizes the project as effective.

We will calculate the index of return on investment and return on discounted investment using formulas (7.3) and (7.4) according to the data in Table. 7.5. We get

Let's continue with the example. Let's consider the second typical situation, when capital investments are made in new production, which involves the production of new types of products (works, services) for the enterprise, intended for external sales. In this case, unlike the previous option, there will be no basic (pre-project) values of economic indicators, therefore the incremental method is not used when calculating commercial efficiency indicators.

In table Table 7.6 presents the initial data of the investment project. Similar to the previous option, the estimated period of the project is 3 years. In the first half of the year, capital investments are envisaged; in the subsequent period, industrial operation is envisaged to reach the designed production volume.

The main design economic indicators are presented in table. 7.7. In this example, we will also assume that the amount of expenses taken into account for profit tax purposes coincides with the amount of the full cost.

Since capital investments are envisaged in the first half of the year, it is advisable to determine the duration of the step, just as in the first option, equal to half a year. Thus, the billing period is divided into six steps.

In table 7.8 presents the flows of the main economic indicators of the project. Production volume values are given for half a year, i.e. two times less than the annual value. At the first step, the flow elements are equal to zero, since construction is carried out at this step.

In table 7.9 presents the calculation of the integral economic effect. The discount factor is calculated based on the discount rate, which is 9% (4% is the risk premium and 5% is the rate of return). In this case, the discount rate is reduced by half, since the step is equal to half a year. Capital investments are mastered as follows: in the first half of the year - the acquisition and installation of fixed assets; in the second half of the year, an additional amount of funds is advanced into working capital, as the volume of production increases.

From the table 7.9 shows that the integral economic effect of the investment project is 662.3 million rubles. Since this indicator is greater than zero, the project is effective.

The payback period occurs in the third step. In this case, it is possible to more accurately determine the payback period from the expression

Since the payback period is less than the estimated period, this shows the effectiveness of the project. In Fig. 7.7 presents the financial profile of the investment project.

The project's internal rate of return is 132%, and since it is greater than the project's discount rate (9%), this shows the effectiveness of the project.

To calculate the cost profitability index using formula (7.1), it is necessary to perform intermediate calculations presented in table. 7.10.

Let's substitute the values found in the table. 7.10 into formula (7.2) and we get

The average simple return on investment is determined by formula (7.7):

Based on the calculated indicators, a general conclusion can be made about the commercial effectiveness of the investment project.

Let's continue with the example. Let's consider the third typical situation, when capital investments are made in the production of semi-finished products, i.e. products that will be used at this enterprise in the following stages. There is no selling price in this option. In addition, not the full cost will be known, but only the production or workshop cost. In this case, when calculating commercial efficiency indicators, the incremental method will be used.

In table 7.11 presents the initial data of the investment project. Similar to the previous option, the estimated period of the project is 3 years. In the first half of the year, it is planned to make capital investments, in the subsequent period - industrial operation with reaching the designed production volume.

The main basic and project economic indicators are presented in table. 7.12. In this example, we will assume that the costs included in the production cost will be expenses taken into account for profit tax purposes.

Since a decrease in production costs must be considered as an increase in pre-tax profit for the enterprise, the influx of funds will be pre-tax profit as the difference between the gross production costs before and after the project, as well as the additional amount of depreciation charges.

Table 7.12

Main basic and project economic indicators

Since capital investments are planned for the first half of the year, it is also advisable to determine the duration of the step to be equal to half a year. Thus, the billing period is divided into six steps.

In table 7.13 presents the flows of the main economic parameters of the project, as well as basic (pre-project) economic indicators. Production volume values are given for half a year, i.e. two times less than the annual value.

The discount factor is calculated based on the discount rate, which is 9% (4% is the risk premium and 5% is the rate of return). In this case, the discount rate is reduced by half, since the step is equal to half a year. The amount of discounted increase in net profit is calculated in order to further calculate the return on investment.

In table Figure 7.14 presents the calculation of the integral economic effect. Capital investments are mastered as follows: in the first half of the year - the acquisition and installation of fixed assets; in the second half of the year, an additional amount of funds is advanced into working capital, as the volume of production increases.

From the table 7.14 shows that the integral economic effect of the investment project is 148.5 million rubles. Since this indicator is greater than zero, the project is effective.

The payback period occurs at the fifth step. In this case, it is possible to more accurately determine the payback period from the expression

Since the payback period is less than the estimated period, this shows the effectiveness of the project. In Fig. 7.8 presents the financial profile of the investment project.

The project's internal rate of return is 40.4%. Since this is more than the project discount rate (9%), the project is considered effective.

To calculate the cost profitability index using formula (7.1), it is necessary to perform intermediate calculations based on the data presented in table. 7.15.

For this example, we will calculate only the discounted cost return index and the discounted investment return index.

Let's substitute the values found in the table. 7.15 into formula (7.2) and we get

The investment project is effective since the cost-return index is greater than one.

The overall ROI will be 0.458.

Simple return on investment is determined by formula (7.6):

Based on the calculated indicators, a general conclusion can be made about the commercial effectiveness of the investment project.

billing period	CF current *b t , thousand rubles.	cumulative total, thousand rubles.

Indicators

Starting moment

Years of the billing period

CFinv* b t , thousand rubles

CFtek * b t , thousand rubles.

NPV on an accrual basis, thousand rubles.