+7 925 966 4690, 9am6pm (GMT+3), Monday – Friday
ИД «Финансы и кредит»

JOURNALS

  

FOR AUTHORS

  

SUBSCRIBE

    
Financial Analytics: Science and Experience
 

Theory and model of investment (end of article)

Vol. 7, Iss. 44, NOVEMBER 2014

Available online: 30 November 2014

Subject Heading: Investment policy

JEL Classification: 

Pages: 12-25

Tsar''kov V.A. OOO CB BFG-Credit, Moscow, Russian Federation
VATsarkov@bfgbank.ru

Importance The research reviews investment models.
     Objectives The review is aimed to study the common models and new innovation models of evaluation of the efficiency of investment projects on the principle of borrowed capital.
     Methods In the first part of the paper, I am considering two economic-mathematical models of extended capital reproduction: with discrete and continuous capital reproduction. The article demonstrates that the process of discounting investment essentially reflects a capital growth trajectory as a result of the regulatory capital impact of positive feedback in the economic system of extended capital reproduction. I investigate the interrelation dynamics of capital growth with discounting formula. On the basis of generally accepted methods for evaluating investment performance, I have carried out an analysis of a simple project with investment (asset purchase) at the beginning of the project and the availability of income (sale of the asset) at the end of the project. As per common practice, the project efficiency is assessed on the basis of net present value - NPV and internal rates of return - IRR: the general rule is NPV: if NPV > 0, in that case the project will be adopted. The general rule is IRR: if IRR > , in that case project will be adopted. These rules are simple and versatile. These features comprise their advantages and their shortcomings. But they do not provide any answer to the question: what is the value of an investor's income in money-wise terms? I research a new innovation model of evaluation on the principle of debt capital. The new model is based on the separation of gross income of the project on income of the investor and the interest expense on the loan.
     Results The theoretical result of the research is a new mathematical proof of the following predicating: IRR is a loan rate, at which the gross income of the investment project is spent on paying interest on attracting borrowed capital. The practical result is to create a financial model in Excel software as a financial picture of the project.

Keywords: model, capital, investment, theory, cash flow, value, discount, profit

References:

  1. Vaag L.A. O normativnom koeffitsiente ekonomicheskoi effektivnosti [On the normative economic efficiency ratio]. Ekonomika i matematicheskie metody – Economics and mathematical methods, 1976, vol. XII, iss. 5, pp. 975–978.
  2. Vilenskii P.L., Lifshits V.N., Smolyak S.A. Otsenka effektivnosti investitsionnykh proektov. Teoriya i praktika [An evaluation of investment projects performance. Theory and practice]. Moscow, Delo Publ., 2004, 888 p.
  3. Gazeev M.Kh., Smirnov A.P., Khrychev A.N. Sushchnost' novykh pokazatelei effektivnosti investitsii [The essence of new indicators of investment effectiveness]. Moscow, All-Russian VNIIOENG Publ., 1993, 20 p.
  4. Damodaran A. Investitsionnaya otsenka. Instrumenty i metody otsenki lyubykh aktivov [Investment Valuation. Tools and Techniques for Determining the Value of Any Asset]. Moscow, Al'pina Pablisherz Publ., 2010, 1338 p.
  5. Zalesskii A.V. O normakh effektivnosti kapital'nykh vlozhenii i privedeniya raznovremennykh zatrat i rezul'tatov [On the efficiency standards of capital investment and performing of different time expenditures and results]. Ekonomika i matematicheskie metody – Economics and mathematics methods, 1976, vol. XII, iss. 1, pp. 155–156.
  6. Korn G., Korn T. Spravochnik po matematike dlya nauchnykh rabotnikov i inzhenerov [A handbook of mathematics for scientists and engineers]. Moscow, Nauka Publ., 1968, 720 p.
  7. Kochovich E. Finansovaya matematika. Teoriya i praktika finansovo-bankovskikh raschetov [Financial mathematics. Theory and practice of financial and banking transactions]. Moscow, Finansy i statistika Publ., 1994, 268 p.
  8. Livshits V.N., L'vov D.S., Ovsienko Yu.V. Metodologicheskie voprosy otsenki ekonomicheskoi effektivnosti novoi tekhniki [Methodological issues of economic estimation of new technology efficiency]. Izvestiya AN SSSR. Seriya ekonomicheskaya – Proceedings of Academy of Sciences of USSR. Economics series, 1979, no. 3, p. 39–58.
  9. Lukasevich I.Ya. Investitsii [Investment]. Moscow, INFRA-M Publ., 2011, 413 p.
  10. Lur'e A.L. Ekonomicheskii analiz modelei planirovaniya sotsialisticheskogo khozyaistva [An economic analysis of the planning models of the socialist economy]. Moscow, Nauka Publ., 1973, 435 p.
  11. Metodika (osnovnye polozheniya) opredeleniya ekonomicheskoi effektivnosti ispol'zovaniya v narodnom khozyaistve novoi tekhniki, izobretenii i ratsionalizatorskikh predlozhenii [A technique (general provisions) of determination of economic efficiency of application of new technologies, inventions and innovation in the national economy]. Moscow, Ekonomika Publ., 1977, 45 p.
  12. Paitgen H.O., Richter P.H. Krasota fraktalov. Obrazy kompleksnykh dinamicheskikh system [The Beauty of Fractals. Images of Complex Dynamical Systems]. Moscow, Mir Publ., 1993, 206 p.
  13. Fedorov B.G. Anglo-russkii tolkovyi slovar' valyutno-kreditnykh terminov [English-Russian dictionary of monetary terms]. Moscow, Finansy i statistika Publ., 1992, 240 p.
  14. Tsar'kov V.A. Analiticheskie metody i modeli analiza investitsionnykh proektov [Analytical methods and models of the investment projects analysis]. Audit i finansovyi analiz – Audit and financial analysis, 2014, no. 2, pp. 241–247.
  15. Tsar'kov V.A. Dinamicheskie modeli ekonomiki (teoriya i praktika ekonomicheskoi dinamiki) [Dynamic models of the economy (theory and practice of economic dynamics)]. Moscow, Ekonomika Publ., 2007, 213 p.
  16. Tsar'kov V.A. Ispol'zovanie metodov teorii avtomaticheskogo upravleniya pri postroenii i analize dinamicheskikh modelei ekonomiki proizvodstva [Using the methods of theory of automatic control at construction and analysis of dynamic model of production]. Izmereniya, kontrol', avtomatizatsiya – Measurement, control, automation, 1984, no. 4, pp. 66–78.
  17. Tsar'kov V.A. Novye metody i modeli analiza investitsionnykh proektov [New methods and models of investment projects analysis]. Finansovaya analitika: problemy i resheniya – Financial analytics: science and experience, 2013, no. 47, pp. 33–44.
  18. Tsar'kov V.A. O probleme edinogo kriteriya otsenki ekonomicheskoi effektivnosti nauchno-tekhnicheskoi i proizvodstvennoi deyatel'nosti [On the problem of single criterion of the estimation of economic efficiency of scientific-technical and production activities]. Moscow, Institute of Economics of Academy of Sciences of USSR Publ., 1982, 25 p.
  19. Tsar'kov V.A. Ekonomiko-matematicheskie modeli investitsii [The economic-mathematical models for investment]. Audit i finansovyi analiz – Audit and financial analysis, 2011, no. 4, pp. 316–333.
  20. Chetyrkin E.M. Metody finansovykh i kommercheskikh raschetov [Methods of financial and commercial payments]. Moscow, Delo, Rech' Publ., 1992, 319 p.

View all articles of issue

 

ISSN 2311-8768 (Online)
ISSN 2073-4484 (Print)

Journal current issue

Vol. 17, Iss. 1
March 2024

Archive