Search

Purpose – Due to the disruptive nature of digital transformation, firms can hardly ignore the further digitalisation of processes and business models. Implementing such initiatives triggers enormous investments in infrastructure and software, making the evaluation of digital investments crucial for a firm’s competitive situation. Design/methodology/approach – Given the dynamics and uncertainties inherent in digital transformation, a qualitative, inductive research approach based on semi-structured interviews with high-level finance executives has been employed. Findings – Our findings indicate widespread dissatisfaction with traditional investment appraisal methods for evaluating digital investments. Data also suggest that non-financial considerations are frequently taken into account, albeit implicitly, as participants struggled to clearly conceptualize these criteria. Originality/value – The literature indicates important research gaps regarding the applicability and usage of traditional, predominantly financial, investment appraisal methods in digital contexts. This research enhances our understanding of digital investment evaluation, by (i) developing an exploratory conceptual framework of potential qualitative evaluation criteria and (ii) providing an in-depth and detailed understanding of the barriers to implementing investment appraisal methods.

Generally negative prevailing views of infrastructure delivery performance is sclerotic and in need of an evidence-based reappraisal. This study evaluated the project delivery performance of National Highways, the government company responsible for delivering England's road investment strategy which completed 138 road/highway major schemes over 16 years between 2001 and 2016.93% of major schemes had a benefit-cost ratio, BCR, of 1 or more which means most projects delivered more benefit than their cost. 69% have a high BCR of 2 or more, delivering benefits at least twice the cost of the project. Typical cost performance was a 2.4% overrun with 42% of projects delivered on or under budgeted cost. The overall value of cost overruns was compensated for by the value of underruns so the net cumulative balance was below zero. Cost performance improved over time, with a typical cost underrun of −6% observed in projects completed in the latter half of the studied time period. The improvement to delivery cost performance is most likely to be explained by changes in policy and practice, including: improved estimation of costs; Strengthened appraisal and approval; Developing procurement strategy; Improving programme management; Implementing lessons learned.

Aiming at the deficiencies presented by the traditional methods of highway project investment evaluation, the proposed highway investment evaluation method was based on system dynamics. First, we constructed an evaluation index system from profitability, solvency, and risk resistance and clarified the positive and negative causality within the investment evaluation system of highway projects; second, we determined the boundaries of the system dynamics model and divided it into six sub-systems, namely, income, cash flow, investment evaluation, profit, cost, investment and financing, and liabilities; and then, we established the system dynamics model of highway investment evaluation based on the sub-systems. The model made up for the limitations of the traditional discounted cash flow method; finally, taking the China's Yunnan Province an Expressway project as an example, using VENSIM software simulation, we get the evaluation results of the system dynamics model and make a comparative analysis with the discounted cash flow method, which showed that the calculation inaccuracies of the NPV and other financial indicators were in a reasonable range, and the evaluation method had strong operability and practicability. The system dynamics investment evaluation model provided a systematic, intuitive, whole-process investment evaluation method, which provided a theoretical basis for the analysis and decision-making of the investment effect of highway projects.

The article studies problems and prospects of managerial decisions dealing with the process of import-substitution of certain products and puts forward the method of raising its efficiency. This research is based on costs – output tables, as a result of which a special algorithm is designed to estimate the efficiency and accompanying effects for different lines of import-substitution. The authors analyze in what way the process of import-substitution can affect the output of certain industries (both inside the country and for other countries) and how it can change import and export by each industry of each country. By using this algorithm two tests were carried out based on computer modeling, where a proportion of import in a chosen industry of the country was replaced by home production, at first for one type of products and then for another. Results of these tests show a number of predicted values of macro-economic indices as a result of import-substitution of one or another product, whose analysis helps identify the best variant of importing such product, which should be substituted by home produce in order to reach the set criterion of efficiency. The designed algorithm can be used as a support system for decision-making in importsubstitution policy.

Quantifying uncertainty over technologies, costs, and prices that stem from site-specific conditions, technological particularities and future projections is an important element in the investment appraisal of desalination facilities. Yet, the majority of economic assessments in the field of desalination plants, so far, use deterministic estimation methods based on ‘best guess’ estimates and ceteris paribus sensitivity analyses. Aiming to fill this gap, this paper introduces a new approach towards comparing alternative technological options for desalination facilities under uncertainty based on the Levelized Cost of Water (LCOW). The proposed framework combines Monte Carlo simulations with scenario analysis and random-walk-based models to account for the cone of uncertainty of the LCOW. For purely illustrative purposes, five alternative combinations of desalination technologies and energy sources are examined in the State of Kuwait. The findings show that the proposed framework, although it cannot eliminate uncertainty, can assist decision-makers in managing it by framing the range of possible outcomes of the LCOW. In this way, it offers an insight into the accuracy of the estimates and allows the validation of the impact of risks and uncertainties against the acceptable tolerance level. Yet, several issues need to be addressed in future research.

Research background: An investment appraisal applies a single discount rate across all effects. However, this may be insufficient for heterogenous environmental impacts, mixing private and public goods as well as use and non-use values, where individuals may have multiple intertemporal preferences due to their duality to act as consumer or citizen.

Typically, the economic analysis of Renewable Energy Projects (REP) has been assessed considering Classical Methodologies of Investment Analysis (CMIA) in which only a few set of indicators are included, highlighting the Payback, Net Present Value and Internal Rate of Return. This excessive reliance on CMIA has been criticized because it neglects managerial flexibility, and it may end up leading to the project's undervaluation. This paper attempts firstly, to identify and describe the complementarity among economic evaluation methodologies for REP. Secondly, a novel framework is proposed for conducting the economic analysis to help decision-makers in identifying the most suitable methodology before proceeding with the investment. The findings of the study suggest that CMIA may be suitable for the cases of projects presenting low volatility. However, the analysis should be supplemented by a new set of indicators for projects with medium or high volatility. The Multi-Index Methodology (MIM), the Extended Multi-Index Methodology (EMIM) and the Real Options Analysis (ROA) are proposed to increase the investors’ perception towards both the project’s profitability and risk and to account for flexibility. The application of the proposed framework is demonstrated for the case of a Small Hydropower Plant (SHP) investment project. The outcomes of this paper also include the opportunities for decision-makers to flexibly respond to changes in the business and economic market using the proposed conceptual framework.

Developing countries have many cities which contain a historic district that include older buildings and streets as well as traditional activities and/or events. Such historic districts have survived and not changed to match the new developments. However, the continuing pressure of the population growth and the geographic expansion often represents a serious threat to these heritage assets which thought of as a block in the way of advance. This paper discusses the implementation of the heritage economics principles and its methodologies in the investment appraisal for the preservation of heritage assets in developing cities and countries, taking into consideration the characteristics of cultural heritage in such environment and discusses the options and anticipations that might face the planners of urban areas. The paper also summarizes the methodology used for the investment appraisal in the projects that aim at reusing the assets of material heritage. It also explains and gives information about the traditional status of developing countries; that's to clarify the implementation of post-investment assessment techniques on the projects concerned with the preservation of heritage assets in developing countries.

To reduce the Sulphur emission from shipping and ensure clean shipping, a number of Sulphur Emission Control Areas (SECA) were enforced in special areas around the globe. From 2015, in SECA, ship owners are not allowed to use fuel with more than 0.1% Sulphur content. One of the major concerns for the SECA regulation is that maritime stakeholders have had to take into consideration the costs as well as the tolerable risks of their compliance investment options. Besides that, low freight rates have increased the competition and had caused financial pressure on ship owners so that lower capital reserves and low credibility levels limit the manoeuvring space for investment activities.

The use of renewable energy sources, especially wind energy, has been widely developed, mostly during the last decade. The main objective of the present study is to conduct a literature review focused on the evaluation under uncertainty of wind energy investment using the real options approach to find out whether public opposition (NIMBY projects) has been contemplated, and if so, what have been the flexible strategies applied for its intervention. Overall, 97 publications were analyzed, identifying 20 different models or approaches, which were grouped into eight categories: 1. Real options, 2. Optimization, 3. Stochastics, 4. Financial evaluation, 5. Probabilistic, 6. Estimation, 7. Numerical prediction, and 8. Others. The real options approach, present in 32% of the studies, was the most popular. Twenty-eight types of uncertainties were identified, which were grouped, for better analysis, into nine categories. In total, 62.5% of the studies included the price of electricity as a source of uncertainty; 18.8%, the velocity of wind; and 15.6%, the feed-in rates-subsidy. Both random and non-random techniques were applied to assess the real options and to model the uncertainties. When evaluating real options, the Monte Carlo simulation technique was the most preferred, with 16 (51.6%) applications, followed by non-randomized techniques, decision tree, and dynamic programming, with eight (25.8%) applications each. There is a marked tendency to use stochastic processes to model uncertainty, particularly geometric Brownian motion, which was used in 61.3% (19) of the studies in the sample. When searching for “real options AND (nimby OR public opposition)”, no study was found, which shows the possibility of developing research on this aspect to determine its impact on investments in wind energy projects.

In the article the analysis of international data collection systems for analysis of investment projects. Examples of the international statistical, financial and audit organizations publish articles and data which are necessary in the analysis of investment at the level of a single project, and at the level of the country. Analyzes the volume of investments in EU countries and Russian Federation, as well as comparative analysis. In Russia the analysis of dynamics of investments in fixed capital by kinds of economic activities are considered sources of financing. According to the results of the analysis of the findings and practical recommendations for improving the efficiency of the organization's funds.

This study empirically conducts the sensitivity analysis for the determinants of investment appraisal of Pakistani non-financial firms listed at Pakistan Stock Exchange (PSX) across sectors. We employed OLS regression along with common effect and fixed effect model on panel data pertaining to 60 non-listed firms at Pakistan Stock Exchange (PSX) over the period from 2003 to 2015. Empirical results document that leverage, growth, dynamism and inflation have strong positive associations with investment appraisal, however, munificence and GDP influence the process conversely. The study provides useful framework for potential investors to evaluate all these vital factors besides conventional mechanism, prior to making investment decision. Policy makers for non-financial sectors may get benefit by apply this diagnostic model to evaluate prospective investment projects for the most optimistic outcome. Corporate finance literature reveals that there is no formal evidence of determinants of capital expenditure at different levels of economic recessions; therefore, the study is pioneer effort to identify the significant determinants of investment appraisal of Pakistani listed non-financial firms across sectors, eventually, a useful contribution in existing literature.

This paper assesses the economic benefits of 57 World Bank Group-sponsored hydropower dam plant investments. Hydropower dams are among the main sources for producing electricity and the largest renewable source for power generation throughout the world. Hydropower dams are often a lower-cost option for power generation in Clean Energy Transition for addressing global climate change. Despite its conspicuous aspects, constructing hydropower dams has been controversial. Considering the World Bank’s long history as the largest hydropower development financier, this study investigates its performance in supporting hydropower dams. The outcomes of this study apply to the wider hydropower development community. Of the projects in this study, 70% experienced a cost overrun, and more than 80% of projects experienced time overruns, incurring potential additional costs as a result. Despite the high cost and time overruns, this hydropower portfolio of dams produced a present value of net economic benefits by 2016 of over half a trillion USD. Based on our findings, the evaluated hydropower portfolio helped avoid over a billion tonnes of CO2 for an estimated global environmental benefit valued at nearly USD 350 billion. The projects’ additional environmental benefits raise the real rate of return from 15.4% to 17.3%. The implication for hydropower developers is that the projects’ assessment should consider cost and time overrun and factor them into the project-planning contingency scenarios. There is a considerable benefit for developing countries to exploit their hydropower resources if they can be developed according to industry practices and international standards. The case for developing hydropower may be stronger when considering its climate benefits. The net economic benefits of hydropower can be even higher if there is a greater effort to manage cost and time overruns.

Purpose—The purpose of this study is to investigate various aspects of capital budgeting techniques adopted by Kuwaiti non-financial companies listed on the Kuwait Stock Exchange (KSE). Design/methodology/approach—A questionnaire is used to collect data from Chief Executive Officers (CEOs), Chief Financial Officers (CFOs) and other managers of manufacturing, service and real estate companies listed on the KSE. Findings—The result of the analysis unveiled that top management and people who used the assets are the main sources of capital budgeting ideas. The analysis also unveiled that net present value and profitability index are the most frequently used capital budgeting techniques and the choice of the technique is determined by the nature of the project under assessment, and the academic and professional capabilities of corporate staff. The analysis further demonstrated that factors such as uncertainty about the outcome of the capital budgeting techniques and lack of required data and information to use capital budgeting techniques could prevent Kuwaiti non-financial companies from adopting capital budgeting techniques. Finally, the analysis disclosed that non-financial factors such as strategic planning, corporate image, employees’ capabilities and environment protection are taken into consideration when making capital budgeting decisions. Practical implications—Kuwaiti companies either possess technology or have the required resources to install advanced technology to assist them in employing sophisticated capital budgeting techniques that take into account inflation and risk. This would ensure more accurate results and minimize uncertainty about the outcome of the capital budgeting decisions. Originality/value—This study is based on primary data collected directly from non-financial companies listed on the KSE.

Background: South Africa is planning to introduce a carbon tax as a Pigouvian measure for the reduction of greenhouse gas emissions, one of the tax bases designed as a fuel input tax. In this form, it is supposed to incentivise users to reduce and/or substitute fossil fuels, leading to a reduction of CO2 emissions. Aim: This article examines how such a carbon tax regime may affect the individual willingness to invest in greenhouse gas mitigation technologies. Setting: Mathematical derivation, using methods of linear programming, duality theory and sensitivity analysis. Methods: By employing a two-step evaluation approach, it allows to identify the factors determining the maximum price an individual investor would pay for such an investment, given the conditions of imperfect markets. Results: This price ceiling depends on the (corrected) net present values of the payments and on the interdependencies arising from changes in the optimal investment and production programmes. Although the well-established results of environmental economics usually can be confirmed for a single investment, increasing carbon taxes may entail sometimes contradictory and unexpected consequences for individual investments in greenhouse gas mitigation technologies and the resulting emissions. Under certain circumstances, they may discourage such investments and, when still undertaken, even lead to higher emissions. However, these results can be interpreted in an economically comprehensible manner. Conclusion: Under the usually given conditions of imperfect markets, the impact of a carbon tax regime on individual investment decisions to mitigate greenhouse gas emissions is not as straight forward as under the usually assumed, but unrealistically simplifying perfect market conditions. To avoid undesired and discouraging effects, policy makers cannot make solitary decisions, but have to take interdependencies on the addressee´s side into account. The individual investor´s price ceiling for such an investment in imperfect markets can be interpreted as a sum of (partially corrected) net present values, which themselves are a generalisation of the net present values known from perfect markets

This paper is concerned with forecasting traffic accidents at a relatively aggregate level and over a long time period; the sort of information that is required as part of a comprehensive cost-benefit analysis of a major transportation investment or policy change. It is not so focused on appraising the social value of specific safety measures, although some of the points made seem germane. Whereas there has been much ex ante analysis at the meso- and macro-levels looking at the causes of accidents and ways of reducing both their number and severity, much less ex post has been done considering the accuracy of predictions of accident rates after an investment or policy initiative. Given the evidence that exists on the accuracy of traffic forecasts, especially involving oft over-optimistic predictions of public transit and rail use, there is at least a prima facie case for arguing that many investment and policy decisions are being based, in part, on over favorable assumptions with regard to their aggregate safety impacts.

Commercial profitability of poplar cultivation was analyzed in an artificial poplar plantation in Serbia. The aim of this study was to validate the invested financial means in the artificial poplar plantation, on the basis of the analysis of costs and receipts during a 42-year rotation, on alluvial semigley, at a discount rate of 12%. Methods of dynamic investment calculation (net present value - NPV, internal rate of return - IRR, benefit-cost method - B/C and payback period - PBP) were used. The investigated plantations were established from Populus x euramericana cl. I-214, with a planting spacing of 6 x 3 m. At the calculation discount rate of 12%, the project for the production cycle of 42 years was not cost-effective from the economic aspect. The discount rate of 6% can be accepted in the studied plot because of the better site (alluvial semigley), but the oldness of the stand is unfavourable. For the studied sample plot, IRR was 5.51 %. B/C at r=12% in the study compartment was 0.24. The analysis shows that PBP is practically unacceptable for the investor at the discount rate of 6%. In practice, it is necessary to improve the position of producers in getting financial means for investment in poplar cultivation, so as to stimulate the establishment of artificial poplar plantations, especially in the private sector (on private land). [Projekat Ministarstva nauke Republike Srbije, br. TR 37008, TR 31041 and Value chain of non-wood forest products and its role in development of forestry sector in Serbia]

Background and Purpose: Due to the fact that poplar rotation is one of the shortest in forestry, and as production of poplar wood requires rational and well-planned management, the potentials of sites and species must be maximally utilised. The main characteristics of the procedure of investment in poplar cultivation, is the fact that the conditions for the beginning of production and their exploitation are not created simultaneously. The main goal of the work reported in this paper was to examine the financial effects of different discount rates on the cost-efficiency values of studied poplar plantation, based on an analysis of the present value of costs and revenues over a stated time period using different methods of investment appraisal. Material and Methods: Investment Appraisal also known as Capital Budgeting is used to asses whether capital expenditure on particular poplar plantations will be beneficial for the entity or not. The investigated plantation was established from Populus x euramericana cl. I-214 on alluvial semigley, with planting spacing 6 x 3 m, aged 26 years, for technical wood production. The data used in this study were collected from the archives of the, according to the age at plantation established and from the management and materials books of the forest enterprise “Vojvodinašume”. During two-year study, the material was collected from study plot in order to assess the density, distribution and significance of individual fungal organisms present in the plantation. Identification was based on the morphological characteristics of species. Results and Conclusion: Under the calculation discount rate of 12%, the project for the production cycle of 26 years was not cost-effective from the economic aspect. The discount rate of 6% can be accepted in this studied plot because of the better sites (alluvial semigley) and youngness of the stand. For the studied sample plot IRR is 6.94. R for the r=12% in the study compartment is 0.407. The analysis shows that PBP is practically unacceptable for the investor under the discount rate of 6%. In the studied plot altogether 11 species of fungi causing significant damages in hybrid poplar plantations were identified. Two were found on cortical tissue, 6 on leaves and 3 species are causing decay. Number of trees attacked with decaying fungi, like Fomes fomentarius, Trametes suaveolens, was bellow 2%/ two percentage.

The article presents the research based on economic feasibility evaluation of model KAMIS developed for paving* of gravel roads. The model is built for Lithuanian climatic, economic and technological conditions, but it could be adopted in other regions, especially regions with “freezing and thawing climates”. After 8 years of model application for appraisal of Lithuanian Gravel Roads Paving Programme it was estimated that consequences after the presented Lithuanian Gravel Roads Conditions Research and KAMIS model application have accumulated 1,09 billion LTL (316 million €) gain for Lithuanian society. Conclusions and findings of the Analysis of Lithuanian Gravel Roads Paving Programme implementation from 1998 to 2005 are presented at the end of the article.

For fruits, establishing intensive apple-orchards requires the highest amount of investment cost, while the returns depend on many factors. Based on farm and bibliography data we appraised an investment in a model in some variations that are the most used in practice (100% owner's capital and 55% owner's capital +45%o subsidies). The profitability of the investment has been analysed using the methods of NPV (Net Present Value) and DPP (Dynamic Payback Period). The essence of our analysis is a sensitivity analysis with the optimistic, pessimistic and realistic combinations of the yield and the market price. Plantation establishment financed by only own (corporate's) sources turns into profitable over 7-10 years in average and favourable cases, but the opposite is the case in unfavourable circumstances. By subsidy of 45% for investments, it is highly possible to return by the fifth or sixth year after the year of establishment, but it can return by the twelfth year even in unfavourable case.