Methods for evaluating investment projects. Methods for evaluating the effectiveness of investment projects

All enterprises in one way or another are connected with investment activity.

Making investment decisions is related to separate factors:

Plurality of projects;

Limited financial resources;

Decision risk.

The need for investment may be due to several reasons:

Updating the existing material and technical base;

Increasing the objects of production activity;

Mastering new activities.

When making an investment decision, the question of the amount of the proposed investment is important, because any enterprise has limited free financial resources available for investment. Therefore, the task of optimizing the investment portfolio arises.

The risk factor is also important. In order to take into account all these factors, various formalized and non-formalized methods are used when making investment decisions. There are many of these methods, they are considered in combination with each other when making an investment decision, because. there is no single universal method.

The process of making managerial decisions of an investment nature is based on the assessment and comparison of the volume of proposed investments and future cash receipts. Since these indicators refer to different points in time, the problem here is comparability.

The methods used in the analysis of investment activity can be divided into 2 groups:

a) based on discounted estimates;

b) based on accounting estimates.

1st method for calculating the net present effect.

This method is based on comparing the value of the original investment (ІС) with the total amount of discounted net cash receipts. Since the cash inflow is distributed over time, it is discounted using a coefficient (2), which is set by the investor independently based on the annual percentage return that he wants or can have on invested capital.

Suppose a forecast is made that investment ІС will generate annual incomes in the amount of P1, P2, ... Pn over several years. The total cumulative value of discounted income (PV) and net present effect (NPV) is calculated:

If NPV > 0, then the project is accepted

NPV< , то проект необходимо отвергнуть

NPV = 0, then the project is neither profitable nor unprofitable.

If the project involves not a one-time investment, but a consistent investment of financial resources over several years, then

i - projected average inflation rate.

For the convenience of applying these and other methods, special statistical tables have been developed, where the values of compound interest, discounted factors, the discounted value of the monetary unit depending on the time interval and the value of the discount factor are tabulated.

The NPV indicator reflects the predictive assessment of the change in the economic potential of the enterprise in the event that the project under consideration is accepted. The NPV of various projects can be summarized, so it can be used as the main criterion when analyzing the optimality of an investment portfolio.

2nd method for calculating the index of return on investment.

This method is a consequence of the previous one. The profitability index is calculated by the formula:

PI > 1, the project should be accepted.

Unlike NPV, PI is a relative measure. It is very convenient when choosing one project from a number of alternative ones with approximately the same NPV values, or when completing an investment portfolio with the maximum total NPV value.

3rd method for calculating the rate of return on investment.

With a normal return on investment, IRR is understood as the value of the discount factor at which the NPV of the project = 0.

IRR = r, where NPV = f(r) = 0.

Meaning: IRR indicates the maximum allowable relative level of R that can be associated with a given project.

For example, if the project is fully financed by bank loans, then the IRR shows the upper limit of the acceptable bank interest rate, the excess of which makes the project unprofitable.

In practice, any enterprise finances its activities (and investments) from various sources. As a payment for the use of financial resources, the company pays interest, dividends, remuneration, i.e. incurs some reasonable costs to maintain its economic potential.

The indicator characterizing the level of expenses is called valuable advanced capital (SS). This indicator reflects the minimum return on the capital invested in its activities, its profitability and is calculated using the arithmetic weighted average formula.

The economic meaning of this indicator: an enterprise can make any investment decisions, the level of profitability of which is below the MA (or the price of the source of funds). It is with him that the IRR is compared. If IRR > CC - accept if IRR< СС, то проект является не прибыльным, если IRR = 0, то он является убыточным.

4th method for determining the payback period of investments.

This method is one of the simplest and widely used in the world accounting and analytical practice; it does not imply a temporal ordering of cash receipts. The algorithm for calculating the payback period (RR) depends on the uniformity of the distribution of projected income from the investment. If the income is evenly distributed over the years, then the payback period is calculated by dividing the one-time costs by the amount of income due to them.

When a fractional number is received, it is rounded to the nearest integer. If profits are unevenly distributed, then the payback period is calculated by directly counting the number of years during which the investment will be repaid with cumulative income. The general formula for calculating PP:

РР = n, at which

The payback period indicator is very simple in calculations, however, it has a number of disadvantages that must be taken into account in the analysis.

There are a number of situations in which the application of the payback method may be appropriate. In particular, this is a situation where management is more concerned with solving the problem of liquidity than the profitability of the project - the main thing is that the investment pays off and as soon as possible. The method is also good when investments are associated with a high degree of risk, so the shorter the payback period, the less risky the project is.

5th method for calculating the investment efficiency ratio.

This method has 2 characteristic features.

First, it does not involve discounting returns; secondly, income is characterized by the net profit indicator PN (balance sheet profit minus deductions to the budget).

The investment efficiency ratio (ARR) is calculated by dividing the average annual return PN by the average investment value (in percent).

The average value of the investment is found by dividing the original amount of capital investments by 2, if it is assumed that after the expiration of the implementation period of the analyzed project, all capital investments will be written off: if residual or liquid value (RV) is allowed, then its assessment should be excluded:

This indicator is compared with the rate of return on advanced capital, calculated by dividing the total net profit of the enterprise by the total amount of funds advanced in its share (to average balance - net).

The method based on the investment efficiency ratio also has a number of existing disadvantages, first of all, it does not take into account the time component of cash flows.

The world is like this only because it was

created without an investment project.

The high level of inflation and the annual depreciation of money lead to the need for reasonable investments and investments in order to maintain savings. Investment projects look attractive at the stage of searching for investors, but in reality, many will not bring the promised profit, and even lose the money invested. How to evaluate the project in advance and make the right decision, let's try to figure it out today.

Investment project

The term "investment" comes from lat. Investice - “clothe”. In a general sense, this means investing money in order to ultimately receive a profit. You can invest in various assets, so investments are divided into real and financial. Real investments are more related to enterprises and organizations and involve investments in the material and technical base, equipment replacement, new product launches, research and development, construction and other sectors.

The basic principle of financial investment is investing money in other money, that is, investing in securities: stocks, bonds, shares, bank deposits. This also includes business loans, the growing popularity of crowdfunding and high-risk investments in the network.

Investments can be private, public and corporate. Also, investments are divided into short-term - 1-3 years, medium-term - 3-5 years, long-term - above 5 years. But speaking of classical investing, it is always a long process and takes over 10 years. On the other hand, the rules of the game change very often in Russia, which is why both business and private investors want projects with a short payback period.

What is an investment project

The term "project" means an idea embodied in the form of description and calculation with evidence prospects this idea. An investment project implies the justification of financial investments in order to obtain future income. From a federal point of view legislation RF, an investment project is a design and estimate documentation developed for the purpose of capital investments. In the economic literature, projects considered broader and subdivided according to the object of investment:

production;
financial;
commercial;
scientific and technical and others.

If you look even more broadly, today investments are any investments of money, primarily in real estate, stocks, bonds, precious metals, currencies, business purchases, start-ups and high-yield risky instruments. There is even an investment in oneself, which cannot be formally defined as an investment project.

Each project implies a time frame, necessary costs, planned results. Based on them, the reasonableness of investments as a whole is assessed.

Assessment of investment projects

Before making a decision, the need for investment should be analyzed and assessed. Evaluation of an investment project is a multifaceted undertaking. It is necessary to evaluate all the components in a comprehensive manner. The criteria and methods for evaluating investment projects vary, so after a brief analysis, you need to choose the right ones. Basically, you need to correctly calculate the future income and the costs of obtaining this income.

Principles for evaluating investment projects

The principles fall into three broad groups:

methodological;
methodical;
operational.

The application of the principles and methods for evaluating investment projects makes it possible to evaluate them uniformly and helps in comparing several options. There are 30 principles in total, 10 in each group. The most significant are: uniqueness, profitability, paid resources, capital structure, linkage with government policy.

Criteria for evaluating investment projects

No matter how trite it may seem, the basic criterion is whether the investor will be able to return his money, when and how much. Everything else is basically unimportant. Such a criterion can also be expressed as a percentage and show the rate of return on investments.

If we consider the criteria for evaluating an investment project more broadly, then each project should develop its own scale of criteria, based on the object of investment and the type of investment.

Types and methods of evaluation of investment projects

The economic literature offers multiple criteria and methods for evaluating investment projects. The selection of the right one should be based on the strategic goal, as well as the type of investment: real or financial. The source of funding does not affect the choice, but should be taken into account when analyzing and interpreting the results. It is better to be guided by several methods for a complete analysis. Economic science offers dynamic and statistical methods for evaluating investment projects. Static methods for evaluating investment projects are based on the laws of a perfect market. Dynamic methods for evaluating investment projects analyze the development of a project in dynamics. They include different calculations.

Basic assessment methods

Not all methods should be used when analyzing and evaluating investment projects. Some of them are suitable for determining the strategic activities of the enterprise. In organizations, especially large ones, such calculations are carried out by the planning and economic department, financial director or advisers, in their absence - by the chief accountant. A private investor is not interested in the capitalization rate at all. He should rely on other, simpler, but no less suitable evaluation methods.

Method for calculating the payback period

The most popular way to evaluate an investment project is to calculate the payback period. It is determined based on the amount of investment and the amount of profit for each year. The basic calculation looks like this:

Investment / annual net profit = payback period.

Important: The method does not take into account possible changes and risks of the project, the calculation is very simplified. Suitable for a preliminary assessment of investments in a project.

Net Present Value Calculation Method

Another important metric is Net Present Value (NPV). Calculated as the difference between the discounted amount of expected returns and investment costs.

Discounted amount of expected returns - costs = net present value

Likbez: Discounting is a way to compare the current and future value of money.

The discounting technique allows us to compare the costs that we incur now and the income that we should receive in the future. On the one hand, money is constantly depreciating due to inflation, on the other hand, money grows in value when capital is invested in growth. To compare the value of money today and, for example, in 5 years, you need to take the amount and reduce it by the amount of interest that could be accrued over 5 years. These percentages are the discount rate. Its choice is based on the experience and subjective knowledge of the expert who evaluates the investment project. The easiest way is to take the refinancing rate of the Central Bank of Russia as a basis.

Likbez: The refinancing rate is an instrument of the monetary policy of the Central Bank; the rate at which the Central Bank lends to other banks in Russia.

Calculation Method of Internal Rate of Return (IRR)

The IRR indicator reflects the discount rate at which the discounted future income of the investment project must be equal to the costs. IRR displays a suitable discount rate that allows you to invest without loss. It is always linked to the net present value. The combination of them shows the attractiveness of investments.

Depending on the comparison of IRR, NPV and r, where r is the real rate of return in percent, a decision is made to invest in the project. There are three options:

Important: The risk of investing depends on the internal rate of return and the real rate of return. It is necessary to strive for the IRR to exceed the real rate by a lot.

Project evaluation procedure

Analysis and evaluation of investment projects begin with the study of basic data: financial indicators, graphs and calculations. The evaluation should be carried out in two stages: at the first, consider the idea as a whole, how good it is for investing, and at the second, decide how suitable it is for the investment of a particular investor, whether he needs it or not.

The first stage begins with the selection of suitable investment projects;
Estimate the cost of investing in each and leave only those corresponding to the invested amount;
Study project materials, description, calculations, financial indicators, promises;
Select evaluation criteria;
Calculate the payback period;
Calculate profitability indicators;
If necessary, calculate the profitability of the project;
Compare assessment indicators with each other;
Assess the significance and prospects of the project;
Investment risks are assessed.

Important: When evaluating the documents, indicators and calculations indicated in them, do not consider a priori truthful and reliable. Question the given data and trust your experience and expert opinion.

After selecting worthy projects, you should ask yourself a serious question: is it necessary to participate in the project? Try to answer three basic questions:

Does the project provide an opportunity to make a profit for each investor?
Should the project be effective for each participant?
Is the organizational-economic mechanism suitable for all participants?

The answers to all questions must be “yes”. Only in this case you can invest money. For example, if the project stipulates that the majority shareholders receive the profit in the first place, then you can not wait for your investments. Or you see that the prescribed business processes are not effective and contradict each other, which means that the organization will face technical problems at every step and will not be able to work with full dedication, producing a profit. It is better to refuse such projects, especially if you are far from the only investor.

Important: when evaluating an investment project, separate the evaluation of the project itself and the evaluation of your participation in it.

Risk assessment

The investment project will be implemented under conditions of risk and uncertainty. It is necessary to correctly assess the degree of risk, on which it will depend.

Many factors influence risk.

investment policy of the state, the adoption of laws and regulations governing the scope of the investment project;
competition, raiding;
lack of demand, market unpredictability;
force majeure and others.

Internal risk factors include:

investor conflict;
incorrect economic calculation;
problems with personnel (insufficient qualifications, sabotage, mass layoffs) and much more.

It is impossible to foresee all risks. Some of them can be insured. Insurance is a way to reduce possible costs and losses. Unfortunately, the institution of business and investment risk insurance is poorly developed in Russia, but nevertheless, some individual aspects of a business can be insured, thereby reducing the risk of losses.

Investment Rules

For an approximate assessment of the need for investment, you can rely on the basic rules:

Investments are mostly real - these are long-term projects with a payback period of 10-30 years. When investing in securities, the investment period may be shorter, especially if the investor plays on the increase and decrease in prices, but if we discard the speculative strategy, then it is recommended to invest in the same shares for a period of 5 years or more. So remember: in long-term projects you need to invest in long-term funds. If the project is for 10 years, then you need to invest an amount that will not be needed for 10 years. Usually it will not be possible to return the money earlier or it will work, but with large losses;
Balance of risks. Projects can be high-risk and low-risk, but their profitability must also correspond to the level of risks. There is no point in risking your savings a lot with the profitability of a bank deposit. Analyze how much you can earn, and what is the probability of losing everything, take risks - only if the profitability is also high.

Important: invest only your own funds in high-risk investment projects. Here you can not risk borrowed money!

Return on investment. One of the basic concepts in calculating the return on investment. When choosing a project, calculate the profitability of each and choose the one with the maximum.

Likbez: Profitability is an economic indicator for determining efficiency. It is calculated as the ratio of revenue and costs.

Accounting for market needs - the project must be in the market, the products or services of such a project must be in demand, otherwise it may not pay off;
Solvency - when investing funds, the solvency of the organization should not suffer. If we talk about private investment, then, accordingly, you need to take into account your own dependence on the money invested: how much you can afford to live without these savings.

Likbez: Solvency - the ability of the subject to fulfill its financial obligations in a timely manner and in full.

Summary

Choosing an investment project is a serious decision. It needs to be assessed impartially and objectively. The choice of assessment method depends on:

type of investment: real or financial;
source of investment: public, corporate or private;
term of investment: short-term, medium-term or long-term.

For a preliminary assessment of an investment project, an elementary and effective method is the calculation of the payback period. This will allow you to determine how quickly the invested funds will return if events develop exactly according to the predicted scenario.

For a more detailed analysis of the investment project and making the right decision, you should determine the discount rate and calculate the net present value and internal rate of return.

Important: if it is difficult to properly analyze the project, it is better to contact an independent financial analyst. Even the high cost of a consultation cannot be compared with the hypothetical possibility of losing all your invested savings.

When calculations show the reliability and efficiency of investments, evaluate how the investment project suits you personally, whether you can personally get a good profit from investments. Sometimes the interests of investors come into conflict with each other or with other project participants. You must be sure that you can earn personally.

For a profitable investment, 3 components must be found:

you have free funds;
you have found a good investment project;
you have to earn from it.

What else is needed? Nothing. Take action! Good luck!

The investment policy is based on an accurate calculation of the expected results of investing money, since this directly affects the financial condition and activities of the enterprise. Evaluation of the effectiveness of investment projects includes a number of indicators, which together give a detailed picture of the prospects of the initiative. Consider the main criteria and methods for evaluating investment projects.

How projects are evaluated

Any investment in some kind of undertaking goes through several mandatory stages:

making a decision on financing, while determining the goals of the undertaking and the direction of financing;
the actual financing of the processes of a pre-approved plan;
the payback stage and reaching the expected level, achieving the set goals, making a profit.

Investing money in an investment endeavor involves not only making a profit, but also achieving the goals set by a businessman (or several partners) in their own interests. Evaluation of efficiency will help an entrepreneur or financier to understand whether he will lose his money as a result of investments, and whether the expected profit is able to compensate him for abandoning other possible investment options.

Conducting an assessment of the effectiveness of an investment project can take from several days to several years, depending on the scale and complexity of the undertaking.

It is advisable to carry out it not only when determining the potential of a proposal, but also for an informed choice between several competitive options, as well as for ranking and establishing a plan for the sequence of execution of several initiatives, depending on the expected economic effect.

The main principles for evaluating the effectiveness of investment projects in accordance with the Methodological recommendations of the Russian Academy of Sciences are as follows:

At the same time, one should not forget about the focus of each specific initiative on a specific goal. If the proposal deals with the development of infrastructure (construction of bridges, roads, bicycle parking) or any social issues (education, sports, health), then the methods of economic analysis are most often unacceptable. The level of effectiveness of such undertakings can be considered as improving the quality of life of citizens, while making a profit is secondary or not considered at all.

What methods are used to evaluate investment projects

Among the whole variety of indicators, the following main complementary criteria for evaluating the effectiveness of investment projects are distinguished:

economic, showing the ability of the undertaking to maintain the value of previously invested funds in the process of implementation;
financial, which puts solvency and liquidity indicators at the forefront.

International practice uses different methods for assessing the economic efficiency of investment projects. All of them can be conditionally divided into two groups:

Static. They are characterized by simplicity and minimal labor intensity. Their main feature is the possibility of assuming equal expenses and incomes in the calculations throughout the entire period of the initiative. In addition, it does not take into account the temporal dynamics of the value of money.
Dynamic. They are able to provide the investor with more accurate and detailed data, however, in unstable markets, they require regular modification. In dynamic methods, the most important factor is the discounting of the value of money, but in order to avoid errors, exactly .

In order to reduce the probability of error and adequately assess the feasibility of investing, a combination of these methods is usually used.

Static evaluation methods

Static (simplified) methods for evaluating the effectiveness of investment projects have been widely used since the time when discounting was not yet recognized as one of the most accurate methods of analysis. They are acceptable for small investments for a short period (less than a year), and are also necessary for obtaining additional information. Let's consider them in more detail.

The payback period is simple. This refers to the time from the beginning of the implementation of the idea to the moment of payback. The start is usually the start of operations, and the payback point is the earliest point at which net cash receipts become non-negative and remain so in the future.

The calculation is to determine the period of time for which the amount of cash receipts on an accrual basis will be equal to the volume of the initial investment.

PP - payback period in years;
To about - the initial invested amount of money;
CF cg is the average annual income from the implementation of the initiative.

This method of evaluation allows you to understand whether it will be possible to recover costs over the period of the life cycle of an undertaking.

Let's assume that initially 1 million rubles were invested in a project with a total duration of 10 years, and 150 thousand rubles will be returned on average annually. Applying the formula, we find the solution:

PP = 1000000 / 150000 = 6.66 years.

Therefore, the payback moment will come in 6 years and 7 months, after which profit can be expected.

The modified formula looks a bit more accurate:

where the initial investment is divided by the net average annual profit Pch s.g. (i.e. after taxes but without depreciation).

If in our example the net profit is 50 thousand rubles, then we get the following picture:

PP = 1000000 / 50000 = 20 years.

Thus, only after 20 years the net profit will be equal to the amount of the down payment.

The problem is that in addition to the return of money, the investor expects a profit. In our example, there are prerequisites for obtaining it, although discounting is not taken into account here. If the average income per year is 100 thousand rubles, then the payback moment will coincide with the end of the life cycle, therefore, the entrepreneur will incur losses, since he could earn by investing this money in an alternative idea. Also, with annual inflows increasing or decreasing during the project implementation, it is impossible to make a correct calculation in a simple way. In addition, the one-time investment of capital is required.

Calculated rate of return (ARR). This methodology for evaluating the effectiveness of investment projects characterizes the return on investment and has the form of a ratio of cash receipts relative to the initial contribution. Calculated as a percentage.

CF s.y. - average annual income from the main activity;
K about - starting investments.

In relation to our example, this indicator for evaluating an investment undertaking has the following value:

ARR = 150000 / 1000000 = 0.15 * 100% = 15%.

This indicator indicates that with a starting investment of 1 million rubles, the rate of return should be 15% to obtain the desired annual income.

There are variations of this formula, where the numerator uses the values of net average annual income (after taxes) or gross average annual income (before interest and taxes). In addition, the initial cost can be taken as a one-time cost or as an average between the start and end points.

The advantage of the method is ease and clarity, the disadvantages are ignoring the cheapening of money, the duration of the operation of assets, focusing more on an external user.

In addition to those mentioned above, other simple methods for evaluating investment projects are also used. They give a vision of the most general indicators, based on which, you can move on to more detailed calculations.

(NV, or NPV) is the positive balance of cash flow for the period under review

P m - the amount of money inflow at step m;
О m - the amount of money outflow at step m.

This is the ratio of the flow from the main activity to the amount of the flow from the investment activity. It can be represented as a formula:

wherein:

K - initial investment;
P m and O m - inflow and outflow of funds.

This indicator indicates the profitability of investing funds relative to net cash flow and the total amount of investments.

Maximum cash outflow(CO). Represents the maximum negative balance and shows what the least amount of external funding from any source is needed in order for the initiative to be implemented.

Dynamic (discount) methods of analysis

For a more detailed and professional study of the issue, indicators are used to evaluate the effectiveness of investment projects based on the concept of discounting. Let's dwell on the most important of them.

The most common and important criterion in evaluating and analyzing an undertaking is the indicator net present value or net present value(NPV, or NTS). This is the effect of cash flows, normalized to present value. Its formula looks like this:

where the discount factor is taken into account, expressed as part of the formula

NPV shows the ratio of investment costs and future cash flows, which are adjusted to current conditions. For its correct calculation, it is necessary to determine the norm (rate) of reduction, after which .

Using its value, you can easily find the discounted amounts of inflows and outflows of funds, and the current net worth is the difference between them, which can have a different value:

a positive value indicates that over the period under study, the volume of revenues will cover the amount of capital expenditures and increase the value of the company;
a negative value is a signal that the initiative will not generate the required rate of return and will cause losses.

Let's turn to our example. If we take a discount factor of 10% as a basis, we get the following result:

NPV = -1000000 + 150000 / (1 + 0.1) + 150000 / (1 + 0.1)2 + 150000 / (1 + 0.1)3 + 150000 / (1 + 0.1)4 + 150000 / (1 + 0.1)5 + 150000 / (1 + 0.1)6 + 150000 / (1 + 0.1)7 + 150000 / (1 + 0.1)8 + 150000 / (1 + 0.1 )9 + 150000 / (1 + 0.1)10 = -1000 + 136.3 + 123.9 + 112.8 + 102.4 + 93.1 + 84.7 + 77 + 70 + 63.6 + 57 ,8 = - 78.4 thousand rubles.

Thus, we see that at a discount rate of 10%, the undertaking does not cover the start-up costs and will become unprofitable. Therefore, it should be abandoned if there are no options for how to lower . At the same time, when considering options with a decrease in the discount rate, one must remember about the methods for assessing the risks of an investment project (shortage of profit, poor management, country risk).

The net present value is a good indication of the minimum required return. A positive NPV value indicates a profit, a negative NPV indicates a loss, close to zero indicates a minimum payback. If in our example we take 9% as the discount rate, then we still get a negative value (-37.4 thousand rubles), so a plus is possible here at a rate not higher than 8%.

Discounted Yield Index (DII), or, in other words, return on investment (PI). This is the ratio of the adjusted flow from domestic activities to the adjusted flow from investment activities.

Our example here is calculated like this:

PI = (136.3 + 123.9 + 112.8 + 102.4 + 93.1 + 84.7 + 77 + 70 + 63.6 + 57.8) / 1000 = 921.6 / 1000 = 0, 9216

Therefore, we can conclude that each ruble invested in this project will result in almost 8 kopecks of loss. This method is well suited for determining the more attractive initiative among several available options, especially if some of their other indicators have similar values.

Rate of return (profit, discount) internal (IRR). In projects where there are upfront costs and a positive cash flow, the internal rate of return is the number with a "+" sign equal to the discount rate at which NPV is zero. If the IRR is higher than the discount rate, then the project may be attractive; if it is lower, then it threatens to lose capital.

Typically, this criterion is calculated with the following assumptions:

first there are costs and only then the inflow of finances begins;
revenues are cumulative in nature, while the sign changes only once from minus to plus.

There is no specific IRR formula. Most often, it is found by plotting a graph with values plotted on it. Then, by the method of successive trials, the closest value of the rate of return is selected. You can also use formulas by which other key indicators for evaluating investment projects are recognized.

The problem that we consider throughout the article can be solved in this case using the calculation of NPV. In this case, by calculating the discount interest rate at which the net worth is close to zero, you can determine the IRR, it is in the range of 0.08, that is, 8%.

Sometimes the value of this indicator is taken from the value of other related criteria. So, if the initiative is financed in full by a commercial bank, then the maximum allowable interest rate will indicate the IRR value.

The IRR size criterion is suitable for screening out unpromising initiatives if the IRR is less than E, as well as for ranking multiple proposals with similar inputs, such as:

the amount of required investment;
possible risks;
duration of the calculation period.

Payback period discounted (DPP). This is a more accurate calculation of the time required to return the money spent. Unlike a simple payback period, this takes into account the dynamics of the value of money over time.

r is the discount rate;
CFt is the flux value in the t-year.

Let's return to our task. In contrast to the method of finding the value of PP by a simple method, here it is required to bring all annual receipts to the current state at the rate of 10% adopted by us earlier. By year (from the first to the tenth) it looks like this: 136.3 + 123.9 + 112.8 + 102.4 + 93.1 + 84.7 + 77 + 70 + 63.6 + 57.8 = 921.6 thousand rubles.

The result obtained indicates that during the life cycle of the initiative (10 years) this investment will not pay off. Here you can clearly see the difference between the objectivity of calculations by a simple method and using the reduction of cash flows. If the investor will rely on a simple method that is poorly applicable in long-term projects, then he will incur losses, since the PP was equal to 6 years and 7 months. If DPP is taken as the basis, then the entrepreneur is likely to refuse this proposal altogether or in favor of another possible option.

An investor who decides to invest his capital in a business project, in most cases, is guided by rational arguments, which are expressed in specific numbers, terms and concepts.

Business practice and economic science throughout the industrial era has accumulated a solid set of tools that allow you to assess the prospects of almost any investment project. A variety of methods and methods for evaluating investments in modern commercial activities can be divided into two large groups according to their structure:

Fundamental analysis, which includes the study and assessment of all environmental factors associated with the implementation of an investment project, for example, market conditions, legal and social conditions, environmental impact, etc.

Technical analysis, which is based on the study and calculation of indicators of the very activity of the project or company in relation to its production, financial and technological components.

In addition, the general approach to investment evaluation is based not only on the calculation of statistical data, which for the most part takes into account past events, but also on its dynamic development, as shown in the figure below.

With such dynamic forecasting and analysis, both constant factors and variables are taken into account, which makes it possible to determine all changes in the market situation, calculate risk limits, payback periods, etc. An important part of the analysis of the investment project is the sources of information and data.

Initial data for investment evaluation can be obtained:

Company financial statements(if the investment is in an existing business)
Statistical data obtained from open sources of government organizations or private analytical agencies, consulting companies
Comparative studies on similar projects (benchmarking)
Expert assessments at different stages of project implementation
Own research based on information obtained from any available sources.

In addition to this, the assessment of long-term investments may also include various models or the development of scenario conditions for development, for which specialists from various applied scientific fields are involved.

In general terms, according to their functional performance, all types and methods of investment assessment are divided into two large groups:

Qualitative assessment methods- include methods of analysis and development of recommendations for the investor based on the study (forecasting) of data that cannot be expressed in quantitative parameters, for example, social or environmental effect, the degree of perception of products by the consumer, assessment of the quality of investment management (competence of management, motivation personnel). To work with such implicit qualitative data, the following are used:

Index parameters compiled on the basis of historical data, expressed in some degree of assessment, for example, negative, neutral, positive.
Scoring system, when each of the conditions or factors is expressed in a relative scoring
Expert methods of analysis and evaluation, which use the knowledge and experience of specialists in a specific project implementation problem, for example, sociologists to study the attitude of the population towards the construction of chemical production facilities.

The second large group of methods used to evaluate investments are quantitative or analytical models.

The most well-known and widely used in practice are such dynamic models (methods of taking into account inflation when evaluating investments), such as:

Net present value NPV (Net Present Value).
Internal rate of return IRR (Internal Rate of Return).
Profitability Index PI (Profitability Index).
Dynamic payback period DPP (Discounted Payback Period).

A brief description of these methods is as follows:

Net present value method NPV (Net Present Value)

When using this method, it is assumed that the goal of the company is to maximize its value. The method is based on comparing the value of the initial investment with the income streams that these investments generate over the forecast period.

Since the cash flows are distributed over time, they are discounted using the coefficient r, which is set by the investor independently, based on the annual rate (percentage) of the return of capital that he wants or can have on the capital he invests. In addition, this coefficient evaluates the impact of inflation on investment activity, since the rate of return must always be higher than the percentage of depreciation of money.

The profitability index shows the relative profitability of the project or the discounted amount of cash receipts from the project per unit of investment:

Dynamic (discounted) payback period takes into account the time value of money.

This method consists in calculating the period of time that will be required to return the initially invested capital with a given (required) rate of return.

The second group of analytical methods is represented by non-discounted methods for evaluating investments, the most informative of which are:

is the expected recovery period for the initial investment from the net proceeds received by the project (where net proceeds are cash receipts less expenses). The method involves calculating the period during which the entrepreneur will be able to return the initially advanced capital. Thus, the time for which the receipts from the operating activities of the enterprise will cover the costs of investments is determined.

The general formula for calculating the PP indicator is:

where Pk is the annual income generated by the project, IC is the size of the initial investment.

Accounting rate of return ARR (Accounting Rate of Return)

This method is based on the use of accounting characteristics of an investment project. The accounting rate of return is the ratio of the average annual profit (PN) to the invested capital (average annual investment).

This value provides information about the impact of investments on the company's financial statements. The indicators of financial statements are the most important in the analysis by investors and shareholders of the investment attractiveness of the company.

Conclusion

Comparison of investment appraisal methods, based on the practice of their use, shows that there is no single and universal algorithm suitable for all investments. Therefore, in order to develop the most appropriate investment analysis format, an investor should, as a priority, choose those methods that consider the entire process in dynamics (ie, with a calculation of the future perspective).

In addition to the need to analyze the project in which funds are to be invested, it also makes sense to assess the investment management system itself, i.e., the readiness of the investor or its structures to perform the tasks of money management in time, under conditions of uncertainty and risk.

What is an investment appraisal for?
In what areas is the evaluation of the effectiveness of investments.
What are the criteria for evaluating investments.

Indicators that are analyzed when evaluating investments

When evaluating an investment project, experts focus on certain indicators, analyzing:

All stages of the project, from pre-investment to the final.
Validity of cash flow forecasts for the entire period of project implementation.
Comparability of conditions for comparing different projects in order to choose the most rational solution.
Achieving the maximum positive effect from the implementation of the investment project.
Time factor.
Expected cash investments and income.
The most significant consequences of the project implementation.
Interests of all investors involved in the project.
The impact of inflation.
Impact of implementation risks.

An investment appraisal is conducted to find out three key points.

How profitable is it to invest in the project.
How soon will it pay off.
What are the risks that the company may face in the implementation of the project.

If the investment appraisal is carried out professionally, the enterprise can:

understand whether it is worth investing in the project, and whether there are all the necessary conditions for its implementation;
make a choice in favor of optimal investment decisions;
identify factors that can affect the actual results of the project, and adjust their impact on this process;
assess acceptable risk parameters; the company can also evaluate the return on investment;
develop measures aimed at investment monitoring.

A company should assess how attractive a project is from an investment point of view if it:

looking for investors;
selects suitable investment and lending conditions;
selects the terms of risk insurance.

As a rule, an assessment of the investment attractiveness of a project is of interest, first of all, to the investor himself.

Sometimes the implementation of one specific project may not bring the expected financial results. That is why firms often consider several options in order to choose the most promising ones. The assessment is carried out in order to:

understand how effective independent investment projects are when the decision to further implement or abandon one option does not affect the decision to accept another;
to determine how effective are alternative or mutually exclusive projects, when the decision on the further implementation of one implies an automatic rejection of the other; in this case we are talking about comparative efficiency.
Thanks to certain methods, enterprises today can draw reasonable conclusions, make calculations, evaluate the effectiveness of a project implemented in several options, and also choose the best scenarios from a variety of existing ones.

In what areas is the evaluation of the effectiveness of investments

1. Estimation of financial efficiency.

The financial performance assessment involves the calculation of the net present value of the project, defined as the difference between the inflow and outflow of funds during each settlement period (month, year), reduced to the current value (inflation is taken into account). If the net present value is greater than 0, it is advisable to invest in the project. If the indicator is less than 0, it is better to refuse it. Thanks to the assessment of financial efficiency, a company can understand how profitable investments are, that is, learn about the ratio of funds already invested and the profit received.

When evaluating financial attractiveness, not only the net present value indicator is calculated, but also the payback period, index and internal rate of return. A comprehensive assessment of the values of all indicators allows you to understand how effective the project is. That is, an assessment of the return on investment will be carried out.

2. Assessment of socio-economic efficiency.

Socio-economic evaluation of investments helps to judge how the project can benefit the state, citizens and other enterprises. The indicators of socio-economic efficiency are the main results of the implementation of the investment project, namely:

profit from the sale of manufactured products or services rendered in the market of Russia and other countries;
profit from the sale of intellectual values created as part of an investment project (intellectual values include technologies, scientific developments, patents);
final monetary indicators (income of the enterprise, the amount of dividends issued to shareholders, the amount of dividends per share, etc.).

The social results of the investment project implementation are:

creating new jobs, improving working conditions through the implementation of social programs for employees;
providing citizens with the necessary services and goods;
renovation of the housing stock and contribution to the cultural development of the public sphere.

3. Assessment of budgetary efficiency.

When evaluating budgetary efficiency, the size of investments from a certain budget and the total income for the entire budgetary system are compared. At the same time, experts evaluate how the results achieved are reflected in the revenue and expenditure parts of the budgets of all levels.

The main indicator for assessing the budgetary efficiency of investments is the amount of net present value of a certain budget. It is calculated as the difference between the amount of revenues (taxes and fees, amounts used to repay loans, etc.) and total costs (for the implementation of state functions and the provision of interbudgetary transfers in the form of subsidies, grants, subventions).

They also use the indicator of the integral budget effect, calculated as the sum of the reduced (discounted) annual budget effects during the implementation of the investment project or as the excess of integral budget revenues over budget costs.

Investment evaluation criteria

There are various criteria for evaluating the effectiveness of investments, the main of which is profit.

It is also possible to evaluate the effectiveness of an investment project on the basis of the return on investment parameters measured over a certain period - several months or years.

When evaluating an investment project, risks are also taken into account. It should be emphasized here that if investments in a project are very risky, other indicators should not even be given attention.

1. Criteria in financial terms.

In this case, we are talking about the general indicators of return on investment in the currency of their full settlement, reduced to a previously determined settlement date. This indicator is indispensable if you need to choose a more profitable investment option from a number of available ones.

2. Relatively pronounced criteria.

There are much more such indicators than financial ones. Their main advantage lies in the visibility and the ability to reflect the variety of probable results.

Do not forget about one of the most important evaluation indicators - the life cycle of an investment project. It is needed in the conditions of urgent optimization of the main production apparatus of the organization, the need for which is dictated by modern scientific and technological progress. It is this criterion that directly affects the overall profitability (attractiveness) of the investment project.

Investment Appraisal Methods

1. Conditional selection.

The conditional allocation method is effective if the investment project exists separately from the company. It works like this. Imagine an investment project as a separate legal entity with its own assets and liabilities, which receives revenue and bears expenses, and assess how financially sound it is. Then ask yourself if you would cooperate with him or not.

Thanks to the conditional allocation method, it is possible to assess the financial viability of the investment project. However, it also has drawbacks, since a project and an independent legal entity are still not the same thing. However, the overall picture can be formed.

2. An association.

Build a financial plan for the enterprise that implements the project, make a forecast of profit, balance, cash flow and enter all the data in the report. To accomplish this task, you need to have a good understanding of how the organization works, to have the necessary information. If you do not have the information, and you cannot get reliable data, you should not use the aggregation method.

3. Comparison.

When using the method, they describe the budget plan of the company implementing the investment project. Next, the current production process is considered, but the project is not taken into account, after which the financial viability of the enterprise is assessed. Then they compare the profit of the company with and without the investment project.

4. Change analysis.

In this case, the revenue that the company will receive from the implementation of the project is calculated by comparing its size with the amount of investments. The method has a clear advantage - thanks to it, you can very easily get the information you need.

5. Overlay.

When applying the overlay method, the solvency of the investment project is determined, and it is carefully studied. Next, they develop a financial plan for the enterprise without taking into account the project, after which the results obtained are superimposed on each other. Based on the results of the calculation, a conclusion is made about the financial viability of the organization, taking into account the implementation of the investment project.

Alternative methods for evaluating the effectiveness of investments

There are also alternative methods for evaluating the effectiveness of investments. Companies use the value added method, the adjusted value method, the chain repetition method, and a special method based on real options.

In accordance with the adjusted cost method, the entire financial flow is divided into several components, each of which is considered separately. This is the most convenient method for evaluating projects financed from different sources.

The value added method is based on the fact that the total return on investment should be significantly higher than the cost of total capital. This method allows you to identify all inefficient options for the use of funds in projects.

The most flexible of all existing methods is based on real options. It is possible to buy or form assets within a certain period. Thanks to this method, you can correctly determine how valuable the project is in general.

If there are doubts about whether it is correct to compare investment projects with different implementation periods using the described criteria, you can use the chain repetition method. Here, the least common multiple of n of the implementation periods of n1 and n2 of the investment projects being evaluated is determined. They build new financial flows from the implementation of several investment projects, hoping that costs and profits will remain at the same level (the next project is started when the previous one ends). Net present profit indicators will change. And the internal rate of return will remain the same, regardless of the number of repetitions. At the same time, new financial flows may be non-standard if the initial investment exceeds the income in the last period of the investment project.

The application of this method may cause the need for complex calculations when considering several projects and the coincidence of all deadlines. Each of the calculations can be performed several times.

The chain repeat method has one major drawback. It consists in the assumption that the conditions under which projects will be implemented, and, accordingly, the necessary investments and profits, will remain at the same level. In today's market environment, this is almost impossible. In addition, it is not always possible to re-implement a project, especially if it is not long enough or belongs to an industry where manufactured products are quickly updated technologically.

Each of the investment appraisal methods has its pros and cons. To obtain the most accurate results, it is necessary to find out the degree of uncertainty of an investment project, which, accordingly, can have one outcome or several development options. All this is associated with risks, on which, as a rule, the overall assessment of investments in the project depends very much.

Static indicators of investment evaluation

Static indicators are an assessment of the effectiveness of an investment project in a certain period, usually at the moment. Static indicators are also called the arithmetic average of all financial investments during the life cycle of the project. At the same time, indicators become less valuable, since they do not take into account temporary changes. The most important of them are the following:

1. Return on invested capital (P).

Here we are talking about the degree of profitability of the project. The ROI is used when you need to:

Calculate the comparative profitability of different options.
Assess the current value of the business.
Calculate the profitability of the release of a particular product or service.

The degree of return on investment is calculated as the total profit divided by the amount of capital invested. The indicator is expressed as a percentage.

2. Payback period of investments (PP).

Estimating the payback period of an investment is very important for a company making a decision to implement a project. It should be noted that not all investments pay off directly, even if the enterprise has achieved the set results during the implementation of the project. As a rule, this situation arises with socio-economic projects.

The difficulty in evaluating the effectiveness lies in the fact that the funds invested for the implementation of social goals (in the development of an educational institution, a hospital or a highway) are paid off indirectly. Investments improve human capital and other factors of similar importance. At the same time, it is almost impossible to accurately calculate the payback period. But the criteria for the effectiveness of investments in human capital can be defined as a payback ratio showing the amount of invested financial units per unit of profit:

PP=I/YNB,

I is the total investment in the project up to the current moment;
YNB is net income for the year.

The payback period is the period after which the company begins to receive income from investments. The rest of the time she receives dividends from the business. Their amount and correlation with the reflected indicators in the business plan of the organization are not advertised.

It should be emphasized that the overall assessment of the return on investment also involves taking into account the period of the project's existence. Often, investment projects with a longer life cycle can bring greater benefits even with a long payback period.

3. Investment Effectiveness Ratio (ARR).

When calculating ARR, the average profit for the period under study is divided by the total amount of investments for it:

ARR = P(av)/ (1/2)I(av),

P(av) – average annual profit;
I(av) - the arithmetic average of all investments to date.

The indicator is especially significant when investing borrowed funds, since it allows you to calculate the probable period of debt repayment.

Dynamic indicators for assessing the effectiveness of investments

1. Net present value (NPV).

The indicator is calculated as the difference between the discounted financial income and expenses that the company incurs when implementing the project during the forecast period. This value is determined in order to compare the current value of the expected profit from the investment project with the costs necessary for its implementation.

Below are the conditions based on which the enterprise can decide on the implementation of the project:

if NPV > 0, the investment project should be accepted;
if NPV< 0, проект лучше не принимать;
if NPV = 0, then when accepting an investment project, the company will neither earn nor incur losses.

The basis of this way of evaluating investments is to follow the goal of the investor, whether it be maximizing the end state or increasing the value of the firm. Following the investor's target setting is one of the conditions for a comparative assessment of investments based on this indicator.

Despite the fact that this criterion has many advantages, it also has disadvantages. Since it is difficult to choose a discount rate, predict and form a financial flow from investments, and the result may be ambiguous, a company may underestimate the risks of an investment project.

2. Index of return on investment (Profitability index, PI).

The return on investment index is a relative indicator of the effectiveness of an investment project, which reflects the level of income per unit of expenditure. Thus, it demonstrates how expedient it is to invest in the project. The higher the value of the criterion, the more the company can earn. When forming an investment portfolio in order to maximize the total value of NPV, it is better for an enterprise to use this indicator.

Here are the conditions based on which a firm can make an investment decision:

if PI > 1, the project can be accepted;
if PI< 1, проект лучше не принимать;
if PI = 1, the project will bring neither profit nor loss.

Note that when evaluating projects with the same amount of initial investment, PI fully complies with the NPV criterion.

3. Internalnormprofitability(Internal rate of return, IRR).

Considering the dynamic methods of estimating investments, it is necessary to dwell on the internal rate of return. This indicator is calculated with the following goal. IRR shows the maximum allowable relative level of costs that a company can incur in the implementation of the project. For example, if an investment project is fully implemented with a loan from a commercial bank, IRR will show the upper limit of the bank interest rate, the excess of which means the project is unprofitable.

From an economic point of view, the internal rate of return means the following: the company can make any investment decisions, the profitability of which is not lower than the current value of the CC indicator (the cost of the source of funds for the investment project). It is with him that the IRR value calculated for this project is compared. These indicators are related as follows:

if IRR > CC, the project can be accepted;
if IRR< CC, проект не нужно принимать;
if IRR = CC, the investment project will bring neither profit nor loss.

The internal rate of return method, compared with the net present value method, has the advantage that it can be interpreted. It means the accrual of interest on the funds spent (the level of return on capital spent).

In the framework of investment analysis, the most commonly used criteria for evaluating the effectiveness of investments are NPV, IRR and PI. In fact, these are different versions of the same concept, and therefore their results are correlated. That is, for one investment project, the following mathematical relationships are possible:

if NPV > 0, then IRR > CC(r); PI > 1;
if NPV< 0, то IRR < CC(r); PI < 1;
if NPV = 0, then IRR = CC(r); PI = 1.

There are investment risk assessment methods that adjust the IRR for use in certain non-standard situations. In particular, we are talking about the modified internal rate of return (MIRR) method.

4. Modified internal rate of return (MIRR).

The modified rate of return (MIRR) makes it possible to eliminate a significant minus of the internal rate of return of an investment project that occurs with repeated outflows of funds. An example of such an outflow is the purchase on an installment plan or the process of building a property lasting several years. The method differs, first of all, in that reinvestment is carried out at a risk-free rate. The rate is calculated based on the results of the analysis of the financial market. With regard to Russian companies, this may be a fixed-term foreign currency deposit offered by Sberbank. In each specific situation, the expert determines the amount of the risk-free rate in a separate order. Usually it is small.

That is, by discounting expenses at a risk-free rate, it is possible to calculate their total present value, the size of which allows us to give an objective assessment of the profitability of investments. This method is most convenient if you need to make investment decisions with extraordinary (irrelevant) financial flows.

5. Discounted payback period (DPP).

The discounted payback period (DPP) eliminates the minus of the static payback period method and takes into account the time value of finance. It is clear that when discounting, the payback lasts longer, that is, DPP is always greater than PP.

Based on the results of simple calculations, we can conclude that such a technique at a low discounted rate, which characterizes a stable economy in the West, improves the result by an imperceptible amount. But in relation to a larger discount rate, typical for the economy in Russia, it significantly changes the calculated value of the payback period. That is, a project that is acceptable on the basis of the PP criterion may not be acceptable on the basis of the DPP.

Using the PP and DPP criteria when evaluating investment projects, a company can make decisions based on the following conditions:

the project is accepted if it can pay off;
the project is accepted only if the payback period is not higher than the time limit set for the given enterprise.

The criterion has a significant drawback, which is the absence of the additivity property, which distinguishes it from NPV. That is why, when considering combinations of projects, a company should be careful about this criterion, not forgetting this nuance.

Generally speaking, the evaluation of the payback period of an investment is done for ancillary purposes relative to the net present value of an investment project or internal rate of return. In addition, the minus of the payback period is that it does not take into account subsequent inflows of finance, which may become an incorrect indicator of the attractiveness of an investment project.

How is the analysis and evaluation of investments carried out: 5 stages

Stage 1.Forecasting the likely level of income of the investment project.

To understand whether the project is effective, the level of income is estimated relative to the costs incurred. Profit in this case is not an increase in income in itself. Profit is important, compensating for the constant depreciation of funds throughout the life of the project.

That is, in fact, you need to predict what new services or products the company will offer, what new technologies the project will allow to introduce, what it will bring financially, taking into account inflation.

It must be remembered that when investing there are always considerable risks. The investment is carried out in partly uncertain conditions - market conditions are constantly changing, and it is impossible to predict the success of a particular project. That is why investment decisions are often made by companies relying on intuition. But economic calculations are also important. The main thing here is to understand what income the company will receive from the project, taking into account inflation and all risks.

Stage 2.Analysis of current expenses.

When calculating income, the company must take into account expenses. Indeed, in case of excess of expenses over profit, the project will bring only losses.

Current costs are understood as the payment of salaries to employees, the maintenance of premises and the production process, the costs of materials, equipment, the purchase of products, and the provision of assets.

When calculating, you need to take into account operating costs. Taking into account the specifics of the company, analysts can calculate the costs for these purposes in advance. Operating costs are annual (recurring) expenses for the use of assets.

Stage 3.Accounting for investments that may be useful in the future.

Very often, companies go bankrupt due to optimistic forecasts, which underestimate the future costs of implementing an investment project. In order for the assessment of investments to be objective, all expenses must be taken into account - capital, at the initial stage, and further (one-time and systematic). It is necessary to remember about unforeseen expenses in the amount of 5-20%, depending on the area where the project is being implemented, the cost of paying taxes and ambiguous costs.

When implementing investment projects, enterprises often need additional investments needed for construction purposes, communications, and unforeseen investments in working capital. Think in advance where you will get the funds from. If you can't cover unexpected costs on time, the project will fail.

Stage 4.Careful study of funding sources.

Don't forget the golden rule of investors: long-term investments are funded by long-term financial resources. You need to know where you will get funds for the project, and not to doubt the stability of financial sources. If it is impossible to take funds from at least one source, the project will slow down and cause losses.

Stage 5.Accounting for basic taxes.

An assessment of the economic efficiency of investments must necessarily take into account the amount of taxes that will be levied on profits. Get advice from lawyers and find out how much the state will have to pay after the project is implemented. Situations are common when, as a result of calculations, profitable projects become unprofitable.

Investment risk assessment

The assessment of risks associated with the implementation of an investment project must be carried out in two directions. Firstly, to comprehensively analyze the market environment, and secondly, to analyze the internal business model from a technical point of view.

When assessing the risks of investment activity, the following is taken into account:

How attractive is the business environment in a particular country, in a particular territory. Here they determine whether the political system is stable, what kind of tax policy the state pursues, how the rights of a private owner are protected, whether a modern financial infrastructure has been built, etc.
What conditions exist in the market. In this case, they evaluate the level of competition in the market environment, the availability of resources, the overall rate of return, cyclicality, conjecture and the availability of new technologies on the market, the frequency of change of the material base, etc.
The ability of investment projects to maintain their positions or fight in situations where force majeure, man-made disasters, natural disasters or military operations, etc. arise.

It is necessary to assess the investment risks of the project, starting from the specific conditions of the business. However, there are general principles on which this analysis is based:

It is necessary to assess the project's capabilities - whether it is able to maintain efficiency in an unfavorable environment, for example, if demand for a manufactured product falls, inflation is observed in the country, or competitors take certain actions to get around you (dumping prices, which is very common).
Financial risks should be assessed taking into account economic conditions; however, an investor needs an economic evaluation of investments, first of all, in order to understand whether the project will be able to make a profit even under the influence of adverse factors. For example, how the depreciation of the national currency will affect the creditworthiness of the investment project, or whether the insured losses will be able to cover the increase in the insurance premium from the side of the general insurer in the future.

These principles can be fully applied in forecasting, determining and insuring the risks of investment projects.

Investment analysis and modeling are carried out using the following methods:

Statistical. Calculate the possibility of financial losses, based on strategic information about the results of the company. The methodology is based on statistical data and the ability to evaluate profits in the implementation of an investment project. Here we can mention such forms of analysis and risk assessment in business as the study of historical information on market assets, the probability of failure of fixed assets, communication systems, etc.
Cost feasibility analysis method, designed to identify potential risk areas. The methodology should differentiate and analyze costs, identify how justified they are, and also take into account measures to reduce them.
Criterion MINIMAX(Savage's criterion) is used not so much to find ways to increase profits, but to minimize financial losses or lost profits. The criterion allows justified risk for the sake of obtaining additional income, and it is reasonable to use it when choosing tactics of behavior in an uncertain situation only if the company is sure that accidental financial losses from the investment project will not lead it to complete bankruptcy. This indicator is used when making decisions on the project to assess the risks associated with the unfavorable development of the external environment.
Monte Carlo Simulation – the most complex, but at the same time, the most powerful method for assessing and accounting for risks. Since, during its implementation, different scenarios are studied, it can be attributed to the further development of the scenario method. Thanks to simulation modeling, it is possible to make more objective estimates compared to the previously indicated methods. But, despite the thoughtfulness and the ability to use it to get a competent justification of the conclusion, it is quite difficult to apply the method. This is due to the high price, difficulties in using computer models and the inability to standardize it for investment projects of various types and businesses of various types.
Assessment of investment risks with the help of experts. The method is applied in practice, but it is subjective and cannot be used operationally.