Fedorova E.A.Financial University under Government of Russian Federation, Moscow, Russian Federation ecolena@mail.ru
Importance Investment attraction is one of the principle goals the entities pursue. Unusual solutions will enable the Russian entities to evolve notwithstanding that the cost of securing loans rises. Investment project planning always requires a feasibility study of any project. Basically, for these purposes, the Net Present Value (NPV) method and Internal Rate of Return (IRR) are applicable, since they relate to the discounted cash flows. Objectives The research is to compare the application of standard evaluation methods based on the discounted cash flows principle with non-standard methods using information technologies. The article illustrates the project: The Construction of the New Hydro Power Plant Combined Cycle Power Unit. Methods The modern information technologies allow using the quantitative methods to assess the risks associated with the investment approach. The methods eliminate weaknesses of the standard approach. The article discusses three methods of the quantitative approach to risk assessment, i.e. decision tree, Monte Carlo method (simulation modeling), and the theory of options. Results As set forth in the conventional evaluation methods, the project should be declined, if it has negative NPV, low rate of return, without paying back. As for alternative evaluation methods and the Monte Carlo method, in particular, the probability of NPV>0 is close to 0.85. According to the decision tree method, NPV may reach RUB 3,624 million provided the top management makes correct key decisions. According to the Black-Scholes model, RO will equal RUB 890.88 million. Conclusions and Relevance When the conventional pattern has the analysis of strategic opportunities and conditional value integrated and embedded, it will unite the potential of the strategic and financial analysis, thus creating an analytical tool that is consistent with the New World Economy associated with risks and uncertainties. The article reviews information technologies, which may be applicable to evaluate investment projects.
Keywords: real options, investment project, alternative evaluation methods, standard methods
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