Financial investment is an active form effective use temporarily free funds enterprises. This is an investment in:

profitable stock instruments (shares, bonds and other securities freely traded on money market);
profitable types of monetary instruments, such as certificates of deposit;
authorized funds joint ventures with the aim of not only making a profit, but also expanding the sphere of financial influence on other business entities, etc.

In the process of analysis, the volume and structure of investment in financial assets are studied, its growth rates are determined, as well as profitability financial investments in general and individual financial instruments.

A retrospective assessment of the effectiveness of financial investments is made by comparing the amount of income received from financial investments with the average annual amount of this type of assets. The average rate of return (ARR) may change due to: structure valuable papers(Удi) having different levels of profitability; the level of return of each type of securities acquired by the enterprise (DVKi). The total change in the average level of return can be calculated using the formula (5):

DVKtotal = ∑(Удi ·ДВКi) (5) Example 26. There is data on long-term financial investments (Table 64), on which we will perform a retrospective assessment of their effectiveness.

Table 64 - Analysis of the effectiveness of the use of long-term financial investments

The data in Table 64 show that the profitability of financial investments for the reporting year increased by 2.16%, including due to changes in:

structures of financial investments:
∆DVK = ∑(∆Udi DVKi 0) = [(-3.33) 35 + (+3.33) 30] / 100 = -0.17%
the level of profitability of certain types of investments:
∆DVK= ∑(Udi 1 ∆DVKi) = (46.67 5 + 53.33 0) / 100 = +2.33%

The return on securities must also be compared with the so-called alternative (guaranteed) income, which is taken as the refinancing rate or interest received on government bonds or treasury bills.

Forecasting economic efficiency individual financial instruments can be made using both absolute and relative indicators. In the first case, the current market price financial instrument, at which it can be purchased, and its intrinsic value based on the subjective assessment of each investor. In the second case, its relative profitability is calculated.

The difference between price and value financial asset is that the price is an objective declared indicator, and the intrinsic value is a calculated indicator, the result of the investor's own subjective approach.

in general view can be calculated by formula (6):

Substituting in this formula expected cash receipts, yield and duration of the forecasting period, you can calculate the current value of any financial instrument.

If the actual amount of invested costs ( market price) for a financial instrument will exceed its current value, then it makes no sense for an investor to purchase it on the market, since he will receive a profit less than expected. On the contrary, it is profitable for the holder of the security to sell it under the given conditions.

As can be seen from the above formula, present value financial instrument depends on three main factors: expected cash flows, the length of the forecast period of receipt of income and the required rate of return. The forecasting horizon depends on the type of securities. For bonds and preferred shares it is usually limited, and for ordinary shares is equal to infinity.

The required rate of return, which the investor puts into the calculation algorithm as a discount, usually reflects the profitability of investment options alternative to this investor. It could be the size interest rate on bank deposits, interest rate on government bonds, etc.

Features of the formation of a returnable cash flow for certain types securities cause a variety of models for determining their current value.

The basic model for assessing the current value of bonds with periodic interest payments can be represented by formula (7):

Example 27. It is required to determine the current value of a three-year bond, the face value of which is 1000 rubles, with a coupon rate of 8% per annum, paid once a year, if the discount rate (market rate) is 12% per annum.

Therefore, a rate of return of 12% will be provided when buying a bond at a price approximately equal to 900 rubles.

If the required rate of return is 6%, then the present value of the bond would be:

This shows that the current value of a bond depends on the value of the market interest rate and the time to maturity. If d > k, then the current value of the bond will be less than the face value, i.e. The bond will be sold at a discount. If d< k, то текущая стоимость облигации будет больше номинала, т.е. облигация продается с премией. Если d = k, то текущая стоимость облигации равна ее номиналу.

If a bond's yield does not change during its maturity, then as the maturity period decreases, the discount or premium will fall. Moreover, these changes are more significant as the maturity date approaches.

Income on coupon bonds consists of periodic payments of interest (coupons) and exchange rate difference between the market price and the nominal price of the bond. Therefore, several indicators are used to characterize the yield of coupon bonds:

coupon yield, the rate of which is announced when issuing bonds;
current yield, which is the ratio of interest income to the purchase price of a bond, and can be calculated using formula (8):

The model for assessing the current value of bonds with the payment of the entire amount of interest upon its redemption can be represented by the formula
(10):

The model for estimating the current value of bonds sold at a discount without paying interest can be represented by formula (11):

Discount bond yield model:

a) by effective rate percent is calculated by the formula (12):

b) at the rate of simple interest is calculated by the formula PV reg (13):

where Pk is the bond rate (the ratio of the purchase price to the face value of the bond);
T - quantity calendar days per year;
t is the number of days until the bond matures.

Example 28. It is required to determine the level of yield of bonds to maturity if the purchase price is 850 rubles, the redemption price (face value) is 1000 rubles, the maturity of the bond is 90 days.

Income from shares consists of the amount of dividends received and income from the increase in their value. The current yield is determined by the ratio of the amount of dividends per share for Last year to the share price according to the formula (14):

Using the above models, one can compare the profitability of investments in various financial instruments and choose the most optimal option for investment projects.

The level of return on investment in specific securities depends on:

changes in the level of interest rates in the money market of loan capital and exchange rates;
the liquidity of securities, determined by the time it takes to convert financial investments into cash;
the level of taxation of profits and capital gains for different types valuable papers;
the amount of transaction costs associated with the procedure for the purchase and sale of securities;
frequency and time of admission interest income;
inflation rate, supply and demand and other factors.

Criteria for evaluating the effectiveness of investments are divided into three groups: the payback period of investments; return on investment; profitability (yield) of investments.
The payback period of investments (Current) is defined as the ratio of the total investment (Inv) to the amount of profit (P) or the amount of profit growth (AP):

T ok \u003d Inv / R,
or
T ok \u003d Inv / D ^
With a significant unevenness in obtaining profits over time, the payback period of investments can be determined by comparing the total amount of investments with the amount of profit growth. The payback period corresponds to the period in which the amount of the profit increase calculated in this way is equal to the amount of investment.
The return on investment can be assessed using indicators of the additional volume of sales of services per 1 rub. investments, discounted income, future value of investments.
Additional volume of sales of services for 1 rub. investment is calculated as the ratio of the increase in the volume of sales of products received as a result of additional investments (AN) to the total amount of investments:
EI = D^Inv,
where EI is the efficiency of investments.
Evaluation of the effectiveness of investments based on the methods of accrual or discounting of cash receipts, taking into account the change in the value of money over time, is scientifically substantiated.
The assessment of profitability (yield) is made by comparing the income received from this type of investment with the amount of investment. As evaluation parameters, one can use an indicator of the overall economic efficiency of investments and a more specific indicator - return on invested capital.
The overall economic efficiency of investments for a separately operating enterprise is defined as the ratio of the increase in profit to the total amount of investments that caused this increase; for a newly created enterprise - as the ratio of planned profit to the total amount of investment:
EIbsht ^N/Inv,
or
EIbsht = P/Inv.

Return on invested capital (ROC) is determined by the ratio of the total profit to the total investment:
DVK = R/Inv.
Accordingly, the profitability of each type of investment can be calculated as an inverse indicator:
P = DVK Inv.
This method allows, in the presence of alternative options for long-term financial investments, to choose the option that is more profitable for the enterprise.
A comprehensive assessment of indicators characterizing the effectiveness of financial investments can be carried out according to the data in Table. 10.4.
Kg = pPRk;
Kg \u003d $, 07-1.78 \u003d ^ 2D5 \u003d 1.69 100 \u003d 169.
Thus, as a result integrated assessment indicators of the effectiveness of financial investments, it was revealed that in the reporting year, the effectiveness of investments increased by 69% compared to the previous year, which characterizes investment attractiveness enterprises from positive side.
Table 10.4
Analysis of financial investment efficiency indicators

Financial investment is an active form of effective use of temporarily free funds of an enterprise. It can take various forms:

1) investing in profitable equity instruments(shares, bonds and other securities freely traded on the money market);
2) investment in profitable types of monetary instruments, such as certificates of deposit;
3) investment in statutory funds of joint ventures in order not only to make a profit, but also to expand the sphere of financial influence on other business entities, as well as to obtain more profitable sources of raw materials or markets.

In the process of analysis, the volume and structure of investment in financial assets are studied, its growth rates are determined, as well as the profitability of financial investments in general and individual financial instruments.

Retrospective evaluation of the effectiveness of financial investments

is made by comparing the amount of income received from financial investments with the average annual amount of this type of assets. Average return (DVK) may change due to:

structures of securities with different levels of profitability (W);
the level of profitability of each type of securities acquired by the enterprise ( DVK".).

DVK o6sch \u003d ЪSchuDVK g

Forecasting the economic efficiency of individual financial instruments can be done using both absolute and relative indicators. In the first case, the current market price of a financial instrument is determined, at which it can be purchased, and its intrinsic value based on the subjective assessment of each investor. In the second case, its relative profitability is calculated.

The difference between the price and value of a financial asset is that price is an objective declared indicator, and intrinsic value- calculated indicator, the result of the investor's own subjective approach.

The current intrinsic value of any security in general can be calculated by the formula

rufi = I

where Ruf and - the real present value of the financial instrument;

SR p- expected returnable cash flow in p-m period;

G- expected or required rate of return on a financial instrument;

P- the number of periods of receipt of income.

By substituting the values of expected cash receipts, profitability and the duration of the forecasting period into this formula, it is possible to calculate the current value of any financial instrument.

If the actual amount of invested costs (market value) on a financial instrument exceeds its current value, then it makes no sense for an investor to purchase it in the market, as he will receive a profit that will be less than expected. On the contrary, it is profitable for the holder of this security to sell it under the given conditions.

As can be seen from the above formula, The fair value of a financial instrument depends on three main factors: expected cash receipts, the duration of the forecasted period of receipt of income and the required rate of return. The forecasting horizon depends on the type of securities. For bonds and preferred shares, it is usually limited, and for ordinary shares it is equal to infinity.

The required rate of return, which the investor puts into the calculation algorithm as a discount, usually reflects the profitability of alternative options for investing capital. This may be the interest rate on bank deposits, the level of interest on government bonds, the weighted average price investment resources, the desired rate of return, etc.

Bond yield analysis. Bonds belong to the class of securities confirming the obligation of the issuer to reimburse the nominal value of their holder within the stipulated period with the payment of a fixed interest income. According to the forms of payment of income, they are divided into interest and discount.

By percentage The terms of the issue of bonds provide for periodic payment of interest in accordance with the coupon rate established on them. There are bonds with a fixed and floating interest rate, which varies depending on the level of inflation or the interest rate for a loan. Interest on them can be paid evenly or at the end when they are repaid.

By discount the terms of the issue do not provide for the payment of interest income. The income of the bondholder is formed as the difference between the face value of the bond and the purchase price, which is set on a discount basis. Such a bond generates cash flow only once - at the time of its redemption.

Features of the formation of a returnable cash flow for certain types of securities determine the variety of models for determining their current value and profitability.

Basic Model for Estimating the Present Value of Bonds with Periodic Interest Payments looks in the following way:

(1 + d)"

where RU region- the current value of bonds with periodic interest payments;

CE p- the amount of interest received in each period (the product of the face value of the bond by the declared interest rate (L, X to c))

N^- face value of the bond redeemed at the end of its circulation period (/);

to, is the annual coupon rate.

Example. It is required to determine the current value of a three-year bond, the face value of which is 1000 rubles, with a coupon rate of 8% per annum, paid once a year, if the discount rate (market rate) is 12% per annum.

RKb, =

(1 + 0,12) (1 + 0,12) 2 (1 + 0,12) 3 (1 + 0,12)

Therefore, a rate of return of 12% will be provided when buying a bond at a price approximately equal to 900 rubles.

If the term of the bond is two years, then its present value, all other things being equal, will be

g region

(1 + 0,12) (1 + 0,12) 2 (1 + 0,12)

With a maturity of one year, its present value will be equal to

80 1000 (1 + 0,12) + (1 + 0,12)

Thus, as the term to maturity of the bond decreases, its current value, other things being equal, will grow, gradually approaching the face value.

If the required rate of return is 6%, then the present value of the three-year bond is

G U region

(1 + 0.06) (1 + 0.rev) 2 (1 + 0.rev) 3 (1 + 0.06)

As the term to maturity shortens, its present value will fall:

g region

(1 + 0.06) (1 + 0,v) 2 (1 + 0.06)

80 1000 (1 + 0,06) + (1 + 0,06)

This shows that the current value of the bond depends on the value of the market interest rate and maturity. If a g>k, then the current value of the bond will be less than the face value, i.e. The bond will be sold at a discount. If a r then the current value of the bond will be more than the face value, i.e. the bond will sell at a premium. If a r = k, the current value of the bond is equal to its face value.

It follows from this that if the yield of a bond does not change during the period of its circulation, then as the term to maturity decreases, the value of the discount or premium will fall. Moreover, these changes are more significant as the maturity date approaches (Fig. 4.4).

Bond rate

Income on coupon bonds consists, firstly, of periodic interest payments (coupons), and secondly, of the exchange rate difference between the market and nominal price of the bond. Therefore, several indicators are used to characterize the yield of coupon bonds.

a) coupon yield, the rate of which is announced when the bonds are issued;
b) current profit, which is the ratio of interest income to the purchase price of a bond:

Y \u003d Mo & 1 x K \u003d 1000 x8% \u003d 8.51%,

to s- coupon interest rate;

P is the purchase price of the bond (in this example- 940 rubles). In this example, the current bond yield is higher than the announced coupon rate (8%) due to

with the fact that it was purchased at a price lower than its face value. Conversely, if the purchase price of a bond were above par, then its current yield would be below the coupon rate;

in) yield to maturity".

UTM =

SR + (M obl -R) / n + 2

80+ (1000-940)/3 (1000+ 940)/2

where ST- the amount of the annual coupon income on a bond; P- number of years to maturity.

The yield to maturity is higher than the current yield also due to the fact that this bond was purchased at a price lower than its face value.

Model for estimating the current value of coupon bonds with the payment of the entire amount of interest upon its redemption:

(1 + 0,12) 3

UU + (UUh? xp) ru -___? __

O + D)”

1000+ (1000x0.08x3)
(1 + 0D2) 3

Since this bond does not generate current income, its current yield is not determined, and the yield to maturity is calculated as follows:

UTM =^~R^n = (1240-940)/3 =

(14 + P) / 2 (1000+ 940)/2

where 5 = N + (YYx /: x / 7) - the total amount of income from the bond, paid at the end of its circulation period.

Model for estimating the current value of bonds sold at a discount without paying interest:

(1 + 0,12) 3
RUB 711.7

Discount bond yield model

1) at the effective interest rate:

2) at the rate of simple interest:

UTM =

R where УУ is the face value of the bond;

R - purchase price of the bond;

/ - the number of days until the maturity of the bond.

Suppose you want to determine the yield level of bonds to maturity, if the purchase price is 850 rubles, the redemption price (face value) is 1000 rubles, the maturity of the bond is 90 days: at the effective interest rate

1 = 0,915 = 91,5%;

at the rate of simple interest

UTM =

100-85 365 85 X 90
71,56%.

Analysis of stock returns. A share is a security certifying the participation of its owner in the formation authorized capital joint-stock company and giving the right to receive an appropriate share of its profits in the form of a dividend and accumulated capital. To assess its current value and profitability, it is necessary to take into account the type of shares (preferred or common), a definite or indefinite term of its circulation, type dividend payments(with a stable, constantly increasing or fluctuating level of dividends).

Model for assessing the current value of preferred and common shares with a stable (fixed) level of dividends is determined by the ratio of the amount of the annual dividend to the market rate of return:

RU = = 200 = 1333 rubles

where /). - the amount of the annual dividend;

G- market rate of return in the form of a decimal fraction.

The current value of shares with a uniformly and constantly increasing level of dividends is defined as follows (Gurdon model):

LO + i)

where /), is the amount of the last dividend paid;

g- the growth rate of dividends in the form of a decimal fraction. Example. The last amount of dividend paid per share was 150 rubles. The annual dividend growth is 5%. The expected annual rate of return is 15%. Under these conditions, the market value of the share will be

150(1 + 0,05) 0,15-0,05

To determine the current value of a common share used during certain period , the following model is used:

RU= Y

share "

n= 1 (1 + d) p(1 + g ) 1

where KS- the market value of the share at the end of the period of its implementation;

P- the number of periods of use of the action.

Example. nominal cost shares - 1000 rubles, dividend level - 20%, expected market value of the share at the end of the period of its implementation - 1100 rubles, market rate of return - 15%, share use period - 3 years, dividend payment frequency - once a year.

1000x0.2 1000x0.2 1000x0.2 1100_
-- +--t +-4- + -g \u003d 1178 rubles.
(1 + 0,15) (1 + 0,15) 2 (1 + 0,15) 3 (1 + 0,15) 3

Income from shares consists of the amount of dividends received and income from the increase in their value. The current yield is determined by the ratio of the amount of dividends per share for the last year to the market value of the share:

1 a

The market value of the share is calculated in comparison with the bank deposit rate (G

R "= - x100%.

The final return on a share (K) is the ratio of the amount of total income to its initial cost:

y= R| +(/> P 0) \u003d C SHCH. = y y

r r ras 9

g 0 g 0 g 0

where /), - income in the form of received dividends;

R ]- the current market price of the share at which it can be sold;

P 0- share purchase price;

Y (1 - dividend yield stock;

At is the capitalized return on the stock.

Suppose an enterprise purchased a block of shares two years ago at a price of 10 thousand rubles. for each. The current market price of a share is 15 thousand rubles, and the amount of dividends received per share for this period is 3 thousand rubles. Let's calculate its profitability:

3 + 05 10) x100 \u003d A x ioo + 15_iv x ioo \u003d zo + 50 \u003d 80%. 10 10 10

Using the above models, one can compare the profitability of investments in various financial instruments and choose the most optimal option for investment projects.

In doing so, it should be taken into account that return on investment, expressed in different currencies, is not comparable. For example, if the interest rate in rubles is higher than the interest rate in foreign currency, then it is impossible to draw a conclusion about the profitability of investing money in a ruble deposit. Suppose a share was bought for 1,500 rubles, and a year later it was sold for 1,750 rubles. Its annual return will be

1750-1500

x 100 = 16.67%.

If a share was bought at a dollar rate of 60 rubles and sold at a rate of 64.8 rubles, then the purchase price in dollars is $25, and the selling price is $27. The yield in currency is

Y \u003d -x 100 \u003d 8.0%.

Profitability in rubles and profitability in foreign currency correlate as follows:

U g\u003d ^.x (1 + Y 5) -1 \u003d - x (1 + 0.08) -1 \u003d 0.166 (16.6%);

T = ~~ x (1 +) -1 \u003d -ttt x (1 + 0.166) -1 \u003d 0.08 (8.0%),

where Y is the yield in rubles;

Y - profitability in currency;

K 2 , K ]- the exchange rate when selling and buying, respectively.

Therefore, knowing the exchange rates and the profitability of a financial asset in one of the currencies, it is possible to determine its profitability in another currency.

The level of return on investment in specific securities depends on the following factors:

change in the level of interest rates in the money market of loan capital and exchange rates;
liquidity of securities, determined by the time it takes to convert financial investments into cash;
the level of taxation of profits and capital gains for different types of securities;
the amount of transaction costs associated with the procedure for the purchase and sale of securities;
frequency and timing of receipt of interest income;
the level of inflation, supply and demand, etc.

annotation

Within the framework of this work, the main principles for evaluating the effectiveness of financial investments are given. The methodology for assessing investments is presented. The main indicators of the effectiveness of investment projects and methods for their evaluation are listed.

Introduction.. 3

1. Basic principles for evaluating the effectiveness and financial feasibility of investment projects.. 4

1.1. Definition, types and principles of efficiency of investment projects. four

1.2. cash flows investment project. Financial feasibility of the project 7

2. Methodology for assessing investments.. 11

2.1. General provisions on economic evaluation of investment projects. eleven

2.2. The future value of the annuity. 13

2.3. Discount coefficient. Discount rate. fourteen

3. Key performance indicators of investment projects and methods for their evaluation.. 22

3.1. Classification of investment project efficiency indicators. 22

3.2. Indicators that do not involve the use of the concept of discounting. 22

3.3. Indicators of the effectiveness of investment projects, determined on the basis of the use of the concept of discounting. 27

Conclusion.. 33

References... 34

Introduction

The term "investment" comes from the Latin word "invest", which means to invest. In a broader interpretation, it expresses the investment of capital with the aim of its further increase. The capital gain resulting from the investment must be sufficient to compensate the investor for not consuming the available funds in current period, reward him for the risk and compensate for the losses from inflation in the future period.

Investments express all types of property and intellectual values that are directed to objects entrepreneurial activity, as a result of which profit (income) is formed or another useful effect is achieved.

Capital investments are inextricably linked with the implementation of real investment projects.

Investment project - justification of economic feasibility, scope and timing capital investments, including the necessary documentation developed in accordance with the standards adopted in Russia (norms and rules), as well as a description of practical steps for the implementation of investments (business plan).

The purpose of this work is to evaluate the effectiveness of financial investments, i.e. investment projects.

Realization of the goal involves the solution of the following tasks:

To reveal the basic principles for evaluating the effectiveness and financial feasibility of investment projects;

Describe the methodology for assessing investments;

List the main performance indicators of investment projects and describe methods for their evaluation.

1. Basic principles for assessing the effectiveness and financial feasibility of investment projects

1.1. Definition, types and principles of efficiency of investment projects

Implementation effective projects increases the gross domestic product (GDP) at the disposal of the company, which is then divided among the entities participating in the project (firms, shareholders and employees, banks, budgets of different levels, etc.). The revenues and expenses of these entities are determined different kinds efficiency of the investment project.

The effectiveness of the project as a whole;

The effectiveness of participation in the project.

The effectiveness of the project as a whole is evaluated in order to determine the potential attractiveness of the project for possible participants and search for sources of funding. It includes:

Public (social - economic) efficiency of the project;

The commercial viability of the project.

Indicators public efficiency take into account the socio-economic consequences of the investment project for society as a whole.

Indicators commercial efficiency The project takes into account the financial consequences of its implementation for the sole participant implementing the investment project, on the assumption that he incurs all the costs necessary for the implementation of the project and uses all its results.

The following basic principles are used as the basis for assessing the effectiveness of investment projects (IP):

Consideration of the project throughout its life cycle(billing period);

Simulation of cash flows, including all inflows and outflows related to the implementation of the project Money for the billing period;

Comparability of comparison conditions various projects(project options);

The principle of positivity and maximum effect. In order for the IP to be recognized as effective from the point of view of the investor, it is necessary that the effect of the project implementation be positive; when comparing alternative IPs, preference should be given to the project with the highest effect value;

Accounting for the time factor. When evaluating the effectiveness of the project, various aspects of the time factor should be taken into account, including the dynamism of the parameters of the project and its economic environment; gaps in time (lags) between the production of products or the receipt of resources and their payment; disparity in costs and/or results at different times;

Accounting for future expenses and receipts only. When calculating performance indicators, only future costs and revenues during the implementation of the project should be taken into account, including costs associated with attracting previously created production assets, as well as future losses directly caused by the implementation of the project (for example, from the termination of existing production in connection with the organization in its place new). Previously created resources used in a project are valued not by the cost of their creation, but by an opportunity cost that reflects maximum value lost profits associated with their best possible alternative use. Past, already incurred costs that do not provide the possibility of obtaining alternative (i.e., received outside this project) income in the long term (sunk costs, sunk cost) are not taken into account in cash flows and do not affect the value of performance indicators;

Accounting for the most significant consequences of the project. When determining the effectiveness of an IP, all the consequences of its implementation, both directly economic and non-economic, should be taken into account;

Accounting for the presence of different project participants, the discrepancy between their interests and various estimates of the cost of capital, expressed in individual values of the discount rate;

Multi-stage assessment. At various stages of development and implementation of the project, its effectiveness is determined anew, with different depths of study;

Accounting for the impact of inflation (taking into account changes in prices for various types of products and resources during the project implementation period);

Accounting for the influence of uncertainty and risks accompanying the implementation of the project.

Evaluation of the effectiveness of investment projects is carried out in two stages.

At the first stage, the performance indicators of the project as a whole are calculated. The purpose of this step is to aggregate economic evaluation design decisions and creating the necessary conditions for the search for investors. For local projects, only their commercial effectiveness is evaluated, and if it turns out to be acceptable, then you can proceed to the second stage of evaluation.

If the source and terms of financing are already known, the evaluation of the commercial effectiveness of the project can be omitted.

The second stage is carried out after the development of the financing scheme. At this stage, the composition of the participants is specified and the financial feasibility and effectiveness of participation in the project of each of them is determined.

For local projects, at this stage, the effectiveness of participation in the project of individual enterprises-participants, the effectiveness of investing in shares of such joint-stock enterprises is determined.

1.2. Cash flows of the investment project. Financial feasibility of the project

The effectiveness of the investment project is evaluated during the calculation period covering the time interval from the beginning of the project to its termination.

The calculation period is divided into steps - segments within which the data used to evaluate financial and economic indicators are aggregated. The calculation steps are defined by their numbers (0, 1,…). Time in billing period is measured in years or fractions of a year and is counted from a fixed moment t0 = 0, taken as the base one (usually, the start or end of the zero step is taken as the base moment; when comparing several projects, it is recommended to choose the same base moment for them). In those cases when the start of the zero step is the base one, the moment of the start of the step with the number m is denoted by tm; if the base moment is the end of the zero step, then tm denotes the end of the step with the number m. The duration of different steps can be different.

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

The cash flow value is denoted by Æ(t),(CFt) if it refers to time t, or by Æ(m) (CFm) if it refers to step m.

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

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

An inflow equal to the amount of cash receipts (or results in value terms) at this step (Pm);

Outflow equal to payments at this step (Оm);

Balance (active balance, effect) equal to the difference between inflow and outflow (Pm - Om).

Types of financial investments. Retrospective evaluation of financial investments. Assessment of the present value, current yield and yield to maturity of various financial instruments.

Financial investment is an active form of effective use of temporarily free funds of an enterprise. It can be carried out in various forms.

1. Capital investment in profitable stock instruments (shares, bonds and other securities freely traded on the money market).

2. Capital investment in profitable types of monetary instruments, such as certificates of deposit.

3. Investment of capital in the authorized capital of joint ventures in order not only to make a profit, but also to expand the sphere of financial influence on other business entities.

The analysis examines the volume and structure of investment in financial assets, determines the rate of its growth, as well as the profitability of financial investments in general and individual financial instruments.

Retrospective assessment of the effectiveness of financialinvestments is made by comparing the amount of income received from financial investments with the average annual amount of this type of assets. Average return ( DVK) can change due to:

structures of securities with different yield levels ( Beat i);

the level of profitability of each type of securities acquired by the enterprise ( DVK i):

DVK about 6sch =∑ (UD i × DVK i).

Table data. 23.6 show that the profitability of financial investments for the reporting year increased by 1.4%, including due to changes in:

structures of financial investments

∆DVK =∑(∆sp i × DVK i 0) = [(+10) × 15 + (-10) × 10] ∕ 100 = +0,5%

the level of profitability of certain types of investments

∆DVK =∑(Beat i 1× ∆DVK i)= (90 × 1 + 10 × 0) ∕ 100 = +0,9%.

Table 23.6

Analysis of the effectiveness of the use of long-term financial investments

Index	Last year	Reporting year	Change
The amount of long-term financial investments, thousand rubles.			+500
Including:
in shares			+700
in bonds			-200
Specific weight, %:
shares	80,0		+ 10
bonds	20,0		-10
Income, thousand rubles:
from shares			+132
from bonds			-20
Profitability of long-term financial investments, %		15,4	+ 1,4
Including:
shares			+ 1
bonds			-

The return on securities must also be compared with the so-called alternative (guaranteed) income, which is taken as the refinancing rate, or the interest received on government bonds or treasury bills.

Evaluation and forecasting of the economic efficiency of individual financial instruments can be carried out using both absolute and relative indicators. In the first case, the current market price of a financial instrument, at which it can be purchased, and its intrinsic value are determined based on the subjective assessment of each investor. In the second case, its relative profitability is calculated.

The difference between the price and value of a financial asset is that price - is an objective declared Indicator, and intrinsic value - calculated indicator, the result of the investor's own subjective approach.

The current intrinsic value of any security in general can be calculated by the formula

PV f.i= ,

where РV f.u - the real present value of the financial instrument;

CF n- expected returnable cash flow in P-th period;

d- the expected or required rate of return on the financial instrument;

P- the number of periods of receipt of income.

If the actual amount investment costs(market value) for a financial instrument will exceed its current value, then it makes no sense for an investor to purchase it on the market, since he will receive a profit less than expected. On the contrary, it is profitable for the holder of this security to sell it under the given conditions.

As you can see from the above formula, The fair value of a financial instrument depends on three main factors: expected cash receipts, the length of the projected period of receipt of income and the required rate of return. The forecasting horizon depends on the type of securities. For bonds and preferred shares, it is usually limited, and for ordinary shares it is equal to infinity.

The required rate of return, which the investor puts into the calculation algorithm as a discount, usually reflects the profitability of investment options alternative to this investor. This may be the interest rate on bank deposits, the level of interest on government bonds, etc.

Features of the formation of a returnable cash flow for certain types of securities determine the variety of models for determining their current value.

Basic Model for Estimating the Present Value of Bonds with Periodic Interest Payments as follows:

where РV region - the current value of bonds with periodic interest payments;

CF n - the amount of interest received in each period (the product of the bond's face value times the advertised interest rate ( N oδl × k);

N region - the face value of the bond redeemed at the end of its maturity ( t);

k- annual coupon rate.

Example. It is required to determine the current value of a three-year bond, the face value of which is 1000 rubles. and with a coupon rate of 8% per annum, paid once a year if the discount rate (market rate) is 12% per annum.

Therefore, a rate of return of 12% will be provided when buying a bond at a price approximately equal to 900 rubles.

If the market rate of return is 6%, then the present value of the bond will be:

This shows that the current value of the bond depends on the value of the market interest rate and maturity. If a d > k, then the current value of the bond will be less than the face value, i.e. The bond will be sold at a discount. If a d< k, then the current value of the bond will be greater than the face value, i.e. the bond is sold at a premium. If a d=k the current value of the bond is equal to its face value.

Income on coupon bonds consists, firstly, of periodic interest payments (coupons), and secondly, of the exchange rate difference between the market and nominal price of the bond.

Therefore, several indicators are used to characterize the yield of coupon bonds:

a) coupon yield, the rate of which is announced when issuing bonds;