RESERVES OF INVESTMENT ACCEPTABILITY OF THE PROJECT BASED ON VALUES OF ITS PARAMETERS AND EFFICIENCY CRITERIA

Abstract

The article focuses on quantitative methods of investigation of financial stability of the investment project. It refers to investment projects of real (production) thrust, but not to the projects connected with investments into securities. The authors propose to investigate the financial stability of the investment project assessing values of the reserves of investment acceptability of the project for its parameters (in case of rent flow of project payments) or considering values of the basic criteria of financial efficiency of the project (in case of random flow of project payments). The concepts of investment acceptability of the project and dynamic point of investment acceptability were defined first in one of the previous articles of the authors, but only for rent flow of project payments and only for one parameter – production volume for one period of the project. In this article the authors have spread these concepts for rent payment flow of the project to all the basic project parameters (deriving precise analytical formulas for calculation of the values), and in case of random flow of project payments – to almost all the basic criteria of project financial efficiency. Discount payback period (DPP) is not included into the list of basic financial efficiency criteria, but this criterion in aggregated form will soon appear in the next article of the authors. The main idea of the approach proposed in the article is the following: the less the relative reserve of investment acceptability of the project for some of its parameter (in case of rent flow of project payments) or by values of one of the basic financial criteria (in case of random flow of project payments) is, the less is financial stability of the investment project and the higher is the risk of unacceptable project profitability. In fact, it’s a reverse variant of analysis of sensitivity of project efficiency criteria. The idea is quite obvious, but as numerous experiments of the authors have shown, it is easily, seamlessly and efficiently implemented in the framework of scenario method and Monte Carlo method! The corresponding calculating formulas will be provided in the following article of the authors.