Value Assessment: Investment evaluation for shareholder value

Author: (English) Huo Sheng / Song Yunling / Ji Xinwei
Publisher:
Publish Date: 2005-06-01
Features: The purpose of this book is to show readers how to utilize current project evaluation techniques in investment decisions that enhance value. Its target audience is financial analysts and other individuals directly involved in investment decisions. The book introduces the basics of Net Present Value (NPV) and Capital Cost. It examines the practical challenges of applying fundamental principles such as cash flow and risk-adjusted returns. The book explains NPV techniques and explores two methods for calculating NPV. First, the Weighted Average Cost of Capital (WACC) method is a simple but less precise approach widely used, especially for medium-sized or representative company activity projects. It is particularly suitable for decentralized evaluation processes. The other method is the Adjusted Present Value (APV) method, which is more complex but more precise. It allows the inclusion of specific financing arrangements related to the project in the analysis.
The main issues in project evaluation are related to risk. Risk analysis examines several methods used to modify the evaluation to account for the range of possible outcomes. These methods include:
- Sensitivity Analysis
- Monte Carlo Simulation Analysis
- Real Options Analysis, as well as a unique evaluation method that examines three scenarios where special evaluation methods can be applied: cross-border investments, asset replacement and timing selection, and lease analysis.
Furthermore, the authors provide an example of appropriate standard information to be included in investment appropriation applications, offering management insights into the evaluation process.