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Economic Analysis: Theory and Practice
 

Problems of valuation in project analysis and project financing

Vol. 13, Iss. 42, NOVEMBER 2014

Available online: 4 November 2014

Subject Heading: METHODS OF ANALYSIS

JEL Classification: 

Pages: 2-10

Nikonova I.A. Financial University under Government of Russian Federation, Moscow, Russian Federation
nikonova_ia@veb.ru

Fedotova M.A. Financial University under Government of Russian Federation, Moscow, Russian Federation
mfedotova2007@mail.ru

Importance The President and Government of the Russian Federation set an objective to develop project financing in Russia. Our article studies the problems of valuation in project analysis and project financing.
     Objectives The purpose of the paper is to present our own position on the challenges of assessing project cost parameters at different stages of its life cycle, project risk and valuation of collateral in project financing.
     Methods We have considered the application of the business assessment methodology for estimating the cost and economic effects of the project at different stages of its life-cycle. We propose certain approaches to valuation of project risk and collateral in project financing. We state the need to establish a national information database on project financing transactions and cost parameters. We have analyzed the shortcomings of the existing evaluation practices of banks and companies to assess the cost and economic impact of the project. We substantiate the necessity of the application of the theory of business valuation for valuation of investment projects for investment and operation stages of the project.
     Results We propose certain guidelines for addressing the various problems of valuation in project analysis and project financing: different valuation methods used in the assessment of project cost; the cost of project risks and take them into account in the cash flows of the project; collateral assessment in project financing. We give our own interpretation of the notion of economic effect on the operational stage of the project life cycle.
     Relevance The study develops valuation methodology in the project analysis to improve the effectiveness of the project companies in project financing.

Keywords: project analysis, project financing, cost parameters, business valuation

References:

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  2. Gryaznova A.G., Fedotova M.A. Otsenka biznesa [Business valuation]. Moscow, Finansy i statistika Publ., 2009, 736 p.
  3. Livshits V.N. O metodologii otsenki effektivnosti rossiiskikh investitsionnykh proektov [About the methodology of efficiency valuation of Russian investment projects]. Moscow, Institute of Economics of RAS Publ., 2009, 70 p.
  4. Nikonova I.A. Proektnyi analiz i proektnoe finansirovanie [Project analysis and project financing]. Moscow, Al'pina Pablisher Publ., 2012, 153 p.
  5. Nikonova I.A. Razvitie zakonodatel'noi bazy proektnogo finansirovaniya [Development of project financing legislation in Russia]. Bankovskoe delo – Banking, 2014, no. 3, pp. 74–78.
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  7. Rukovodstvo k svodu znanii po upravleniyu proektami (PMBOK-4). [A Guide to the Project Management Body of Knowledge (PMBOK-4)]. Project Management Institute, Inc., Newtown Square, Pennsylvania 19073-3299, USA, 2008, 496 p.
  8. Boardman A.E., Greenberg D.H., Vining A.R., Weimer D.L. Cost-benefit Analysis. Concepts and Practice. Pearson, 2013, ed. 4, 541 p.
  9. Hollmann J.K. Total Cost Management Framework. An Integrated Approach to Portfolio, Program, and Project Management. First Edition, Revised. PE CCE CEP 2012, CreateSpace, 303 p.
  10. Public-Private Partnerships: In Pursuit of Risk Sharing and Value for Money. ISBN 9789264042797. 2008, June, 142 p.

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ISSN 2311-8725 (Online)
ISSN 2073-039X (Print)

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