Fundamentals of Investment Appraisal Martina Röhrich ISBN: 978-3-11-034718-0 © 2014 Oldenbourg...

Fundamentals of Investment AppraisalMartina RöhrichISBN: 978-3-11-034718-0

© 2014 Oldenbourg Wissenschaftsverlag GmbH, Munchen

Abbildungsübersicht / List of Figures

Tabellenübersicht / List of Tables

Fundamentals of Investment Appraisal, Martina Röhrich ISBN 978-3-11-034718-0© 2014 Oldenbourg Wissenschaftsverlag GmbH, Munchen

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Table 1-1 Characteristics of the methods of investment appraisal


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Figure 2-1 Average capital employed


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Table 2-1 Comparison of alternatives by the cost comparison method


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Table 2-2 Comparison of alternatives by the cost comparison method with salvage values


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Table 2-3 Basic data for the calculation of critical values


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Figure 2-2 Critical activity quantity by the cost comparison method


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Table 2-4 Basic data for the new vehicle


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Table 2-5 Relevant costs with regard to the replacement decision


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Table 2-6 Replacement decision by the cost comparison method


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Table 2-7 Check for the replacement decision by the cost comparison method


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Table 2-8 Replacement decision by the cost comparison method with salvage values


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Table 2-9 Comparison of alternatives by the profit comparison method


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Table 2-10 Comparison of alternatives by the profit comparison method with salvage values


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Table 2-11 Decision about the replacement of the HL Securitas by the profit comparison method


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Table 2-12 Decision about the replacement of the BMC Minerva by the profit comparison method


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Table 2-13 Comparison of alternatives by the accounting rate of return method


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Table 2-14 Comparison of alternatives by the accounting rate of return method with salvage values


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Table 2-15 Replacement decision by the accounting rate of return method


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Table 2-16 Calculation of non-discounting payback through average annual cash flow


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Table 2-17 Calculation of non-discounting payback through average annual profit


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Table 2-18 Calculation of non-discounting payback through average annual cash flow with salvage values


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Table 2-19 Calculation of non-discounting payback through average annual profit with salvage values


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Table 2-20 Replacement decision by the non-discounting payback


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Table 2-21 Results from the non-discounting methods of investment appraisal


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Table 3-1 Basic example of the time value of money


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Table 3-2 Cost comparison for the basic example


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Table 3-3 Symbols for the discounting methods of investment appraisal (Continued)


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Table 3-3 Symbols for the discounting methods of investment appraisal


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Table 3-4 Investment’s payments within the example


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Table 3-5 Calculation of present values within the example


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Figure 3-1 Time line illustration of a net present value


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Table 3-6 Complete financial plan, investment of € 70,000 on the capital market


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Table 3-7 Complete financial plan, transaction of the investment, financing with equity


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Table 3-8 Complete financial plan, Transaction of the investment, financing with debt at 100 % and repayment at the end of

the time period in a single sum


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Table 3-9 Complete financial plan, Transaction of the investment, financing with debt at 100 % and repayment at the best

possible rate


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Table 3-10 Calculation of the net present value for Investment 1


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Table 3-11 Calculation of the net present value for Investment 2


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Table 3-12 Net present value method and differential investments


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Figure 3-2 Net present value profile


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Table 3-13 Basic data for the comparison of alternatives by the net present value method


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Table 3-14 Calculation of current cash outflow for the comparison of alternatives by the net present value method


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Table 3-15 Calculation of net present values for the comparison of alternatives without cash inflow


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Table 3-16 Calculation of net present values for the comparison of alternatives with cash inflows


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Table 3-17 Basic data for the CSA Toutatis


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Table 3-18 Marginal cash flows of new car purchase


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Table 3-19 Equivalent annuity as annualised net present value


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Table 3-20 Comparison of Alternatives by the annuity method


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Table 3-21 Calculation of equivalent annuities for the replacement decision


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Table 3-22 Basic data for graphical and arithmetic approximation of the internal rate of return


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Figure 3-3 Graphical estimate of the internal rate of return


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Table 3-23 Calculation of internal rates of return by Excel


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Table 3-24 Illustration of investment desirability ranking conflicts


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Figure 3-4 Net present value profiles for the HL Securitas and the BMC Minerva


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Table 3-25 Calculation of the discounted cumulative cash flow of the HL Securitas


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Table 3-26 Calculation of the discounted cumulative cash flow of the BMC Minerva


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Table 3-27 Results from non-discounting and discounting payback method


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Table 4-1: Correction of the input variables


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Table 4-2 Initial data for the comparison of alternatives


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Table 4-3 Net present values for the comparison of alternatives using the correction method


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Table 4-4 Data basis for the comparison of alternatives


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Table 4-5: Rise of cash flow by 10 % within the sensitivity analysis


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Table 4-6: Reduction of cash flow by 10 % within the sensitivity analysis


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Table 4-7: Synopsis of the results of the band width analysis


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Table 4-8 Identifying the BMC Minerva’s sensitive input variables


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Table 4-9 Definition of the uncertain input variables


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Table 4-10 Probability distributions of the uncertain input variables


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Table 4-11 Allocation of random numbers to the uncertain input data


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Figure 4-1 Monte Carlo Simulation to incorporate probability distributions of cash flows and economic life


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Table 4-12 Generated random numbers for the uncertain input data


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Table 4-13 Net present values for the iterations


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Table 4-14: Results of the risk analysis


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Figure 4-2 Risk profile


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Table 4-15 Initial data for the comparison of alternatives using the fixed planning


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Figure 4-3 Probability tree


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Table 4-16 Current value of cash flows from the investment depending on the state of the economy


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Table 4-17 Discounted cash flows from the investment project depending on the state of the economy


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Figure 4-4 Decision tree – fixed planning


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Table 4-18 Net present values and weighted net present values in the outcome nodes of period 2 using the fixed planning

approach


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Table 4-19 Discounted cash flows from the investment project depending on the state of the economy


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Figure 4-5 Decision tree – flexible planning


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Table 4-20 Explanation of the way to the results in period 2


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Table 4-21 Net present values in the final nodes in period 2 within the flexible planning approach


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Table 4-22 Overview of the decision nodes in period 1


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Table 4-23 Calculation of the expected net present value for the action ‘no reaction’


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Table 4-24 Calculation of the expected net present value for the action ‘advertising’


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Table 4-25 Summary of the expected net present values for the decision nodes in period 1


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Table 4-26 Summary of useful decisions in the decision nodes of period 1


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Table 4-27 Probability distributions of the uncertain input variable


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Table 4-28 Allocation of random numbers to the uncertain input variable


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Table 4-29 Generated random numbers for the uncertain input variable ‘sales revenues’


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Table 5-1: Calculation of the net present value without and with taxes


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Table 5-2 Derivation of the project’s after tax cash flow


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Table 5-3 Basic data for the calculation of the net present values without taxes


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Table 5-4 Calculation of net present values after tax


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Table 5-5 Comparison of alternatives based on net present values after tax


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Table 5-6 Basic data for the calculation of the net present values without inflation


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Table 5-7 Basic data to set up a complete financial plan


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Table 5-8 Complete financial plan for the BMC Minerva at a discount rate of 5 %


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Table 5-9 Complete financial plan for the BMC Minerva with a debit interest rate of 6 % and a credit interest rate of 5 %


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Table 5-10 Contributions of the assessment criterion ‘Eco Friendliness’


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Table 5-11 Partial values of benefit for the alternatives under consideration


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Table 5-12 Total values for the alternatives considered


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Table 5-13 Basic data for the macroeconomic net present value method


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Table 5-14 Calculation of the macroeconomic net present value


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Future Value Factor


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Annuity Future Value Factor


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Sinking Fund Factor


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Annual Equivalent Factor


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Present Value Factor


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Annuity Present Value Factor

Fundamentals of Investment Appraisal Martina Röhrich ISBN: 978-3-11-034718-0 © 2014 Oldenbourg...

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Transcript of Fundamentals of Investment Appraisal Martina Röhrich ISBN: 978-3-11-034718-0 © 2014 Oldenbourg...