We have been assuming that if your income stream is Y1,Y2, your consumption stream must be the same. And if you invest, your consumption stream must be C1,C2.
However, by lending or borrowing at the market rate of interest, you can choose any point on the net present value line through A (if you don’t invest), or through B (if you do invest).
return on investment
I Covers the key areas of return on investment, from cost benefit
analysis and risk analysis to accounting techniques and the balanced scorecard
I Examples and lessons from some of the world’s most
successful businesses, including oil and telecommunications giants, and ideas from the smartest thinkers, including Mack Hanan and Warren Buffet
I Includes a glossary of key concepts and a comprehensive
This paper was prepared for the purpose of presenting the methodology and uses of the Monte Carlo simulation technique as applied in the evaluation of investment projects to analyse and assess risk. The first part of the paper highlights the importance of risk analysis in investment appraisal. The second part presents the various stages in the application of the risk analysis process. The third part examines the interpretation of the re
Ebook Management Accounting - June 2012 presented the main contents: introduction to cost accounting; cost classification and behaviour; materials, labour, stock control; overheads and absorption costing; cost bookkeeping; marginal costing and contribution theory; costing for jobs, batches, and services; process costing, joint and by products; budgets; statistical techniques; investment appraisal techniques; standard costing and variance analysis; performance measurement.
The third approach, modern capital budgeting, recognises that today’s (present) value
of an investment asset is the cash flow it can generate in the future, not the returns it has
provided in the past. Accordingly, investment appraisal must adopt an ‘ex ante’ - forward-
looking analysis - as distinct from the backward-looking focus of the traditional financial
approaches typified by the ROI calculation.
Essentials of Investments: Chapter 18 - Active Management and Performance Measurement to introduce the most widespread approaches to risk adjustment for performance evaluation. It includes Introduction, The Conventional Theory of Performance Evaluation, Market Timing.
In the financial appraisal of a project, the cashflow statements are constructed
from two points of view: the Total Investment (TI) Point of View and the Equity
Point of View. One of the most important issues is the estimation of the correct
financial discount rates for the two points of view. In the presence of taxes, the benefit
of the tax shield from the interest deduction may be excluded or included in the free
cashflow (FCF) of the project. Depending on whether the tax shield is included or
excluded, the formulas for the weighted average cost of capital (WACC) will be
The intent of these standards is not to instruct in the details of appraising, but rather the emphasis is on those particular aspects of valuation that pertain to assessing in Utah. Detailed instruction in appraisal theory and practice is provided through appropriate registration and certification course work.
Much of the language in these standards is common to other assessment publications as well as other disciplines; however, its use here is restricted to the definitions provided in the “General Information Section”.
Chapter 1 introduces the concept of capital budgeting, and sets out the structure of the book.
The important points are:
Capital budgeting is the most significant financial activity of the firm.
Capital budgeting determines the core activities of the firm over a long term future.
Capital budgeting decisions must be made carefully and rationally.
C H A P T E R
Counting the cost – summarizing money variables over time
This chapter will help you to:
■ ■ ■ ■
employ simple and aggregate index numbers to measure price changes over time work out weighted aggregate price indices: Laspeyre and Paasche indices adjust figures for the effects of inflation using price indices apply methods of investment appraisal: accounting rate of return, payback period,
It would not be exaggerating to argue that financial risk analysis is one of the most important and most difficult components of project appraisal. Such analysis is especially important because the financial viability of a project may be critical for its long-term sustainability and survivability. Its particular difficulty is due to the inherent challenge of pricing risk with market
Money has a time value: a $ or £ or € today, is worth more than a $ or £ or € next year.
A risk free interest rate may represent the time value of money.
Inflation too can create a difference in money value over time. It is NOT the time value of money. It is a decline in monetary purchasing power.
Internal Rate of Return (IRR) is the discount rate at which the Present
Value of future cash flows equals the initial capital invested (i.e. the discount rate at which the
Net Present Value of a series of cash flows equals 0) expressed as a percentage.
An IRR less than your targeted rate of return suggests you are paying too much for the property
to get your targeted rate of return
An IRR greater than your target rate of return suggests you could pay more for the property and
still get your targeted rate of return
These guidelines specify standard appraisal procedures for Japanese real
estate appraisers (the only profession that is licensed and registered by the
government by law. Hereinafter “Japanese Appraisers”) to appraise overseas
real estate for investment purposes.
As the globalization of the real estate market progresses, cross-border real
estate investment is gaining momentum. In addition, real estate investment
trust (REIT) markets have been set up in the past few years, and
international competition in real estate markets is heightening rapidly....
There are many underutilized and vacant urban lots throughout the world,
which are held by private investors who are interested in maximizing their
wealth by land development. Three approaches are commonly used for
property and land valuation (Appraisal Institute, 2001; Baum and Crosby,
1988; Isaac, 2002). The first is the cost approach, which estimates the
property by summing the land value and the depreciated value of any
The inherent uncertainty in property prices are
traditionally characterized by probability distributions (Ratcliff, 1972 and
Squirell, 1985). However, the lack of precise information on properties often
poses a problem. As mentioned by Bagnoli and Smith (1998), appraisers use a
great deal of judgment to identify the characteristics (attributes) of properties
that relate to property prices. Additionally, they usually have to consider
qualitative characteristics, such as structural quality, architectural
attractiveness and location convenience.
“A systematic framework for economic appraisal of proposed public and private projects from a public interest point of view”
– based on Benefit-Cost Analysis: Financial and Economic Appraisal using Spreadsheets by H. Campbell & R. Brown (Cambridge University Press, 2003)
To study and clarify the basic theoretical issues and practices on appraisal of investment projects at Laos Bank for Foreign Trade. To assess current situation of appraisal of investment project with loans in Laos
Bank for Foreign Trade in the past ew years and work out outstanding issues need being completed. Suggest system of major solutions to complete appraisal of loan investment project of Laos Bank for Foreign Trade by 2020.