Investment return

It is necessary to determine the minimum selling price for nitric acid that must be obtained in order to substantiate this project as being economically feasible. If this figure is below the market value for nitric acid, then due to the relatively stable consumption pattern envisaged, the project might be considered viable. If the project is found to be viable then the rate of return can be calculated based upon sales of nitric acid at market value. 

Viability is assessed according to a required maximum 5 year return on investment. All annual costs must be considered. These costs include the required return on the capital outlay, as well as daily production costs, annual sundry charges such as insurance, tax, maintenance charges, and interest on borrowed capital. 

Production costs are calculated to be A 97.07 per tonne of 100% nitric acid produced. This corresponds to As59.30 per tonne of 60% nitric acid. This figure compares with a cost of As36 per tonne of 60% nitric acid (Ref. CE1 1 US 22.70, 1985). This lower value might be 

Other annual operating costs to be calculated are shown in Table E.5 of Appendix E. These figures sum to AS3.7 million. 

Assume that the capital for the project is borrowed at 25% interest with a required return on investment of 5 years. Five annual payments are made to the creditors. The calculations made to determine the size of these payments and their repayment schedule are given in Appendix E (Table E.6). The five payments needed are each of AS5.02 million. These will cover both the 25% interest rate and the AS13.5 million principal. Operating and production costs are tax deductible as is the interest on borrowed capital, only gross profit is taxed. In the calculations, the AS5.02 million capital cost term is therefore broken into two components. The first is the tax-free interest component and the second must come from operating profit. This profit is assumed to attract 49% company tax. 

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Before a decision is made, all three items, ie, investment, return, and rate of return, would be examined, as would the current cash position, perceived risk, other venture opportunities, and a variety of subjective criteria. Eor this elementary situation, economists would also employ an incremental approach analogous to the above, based on the tenet that each increment of investment should itself make an adequate return. Rarely is there a unique correct decision. Only future events determine the wisdom of the selection even then, the results that another decision would have produced are rarely known. This is the essence of profitabiHty analysis. 

In multiyear process ventures, the money flows are more compHcated and must be discounted to a common point in time before they can be combined. However, the three basic parameters, investment, return, and rate of return, should be retained in some logical and consistent manner. 

If an option proves to be technically ineffective or inappropriate, it is deleted from the list of potential alternatives. Either follo ving or concurrent with the technical evaluation, an economic study is performed, weighing standard measures of profitability such as payback period, investment returns, and net present value. Many of these costs (or, more appropriately, cost saving may be substantial yet are difficult to quantify. (Refer to Economic Considerations Associated with Pollution Prevention.)... 

Smith, Michael L. 1989. Investment Returns and Yields to Holders of Insurance. 

The amount of personal savings you will need to fund your retirement depends on several variables including inflation, return on investments, and how long you will live. You already have an assumption about inflation. You should continue to use this number. You can expect investment returns to exceed inflation by 3-4 percent. You can be conservative and add 3 percent to your assumed inflation rate or be optimistic and add 4 percent. You can estimate your life expectancy from Table 3, which is based on the IRS life expectancy tables. A brief look at the table shows that for planning purposes, it is reasonable to plan to age 90 unless you have reason to adjust this number either up or down. 

To obtain reliable estimates of investment returns, it is necessary to make accurate predictions of profits and the required investment. To determine the profit, estimates must be made of direct production costs, fixed charges including depreciation, plant overhead costs, and general expenses. Profits may be expressed on a before-tax or after-tax basis, but the conditions should be indicated. Both working capital and fixed capital should be considered in determining the total investment ... 

Disclaimer. The materials and opinions herein are based upon publicly available information believed to be reliable, and may change without notice. The author or Publisher shall not in any way be liable for claims relatingto them, and makes no express or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in, or omissions from, them. The information and analyses contained herein are not intended as tax, legal or investment advice and may not be suitable for your specific circumstances accordingly, you should consult your own tax, legal, investment or other advisors to determine such suitability. Any investment returns, past, hypothetical or otherwise, are not indicative of future performance. 

Fig. 8.6 LBO investment returns relative to risk-adjusted benchmarks, 1980-1999 Composite of US publicly traded chemical companies TRS (capital appreciation plus dividends) Includes leveraged buyout fund investments in later stages (e.g., MBO, LBO,...

In 1983, Jari reported a 2.1 million operating profit (International Society for Tropical Forests 1985). This represents a rate of return of 0.2% on the original investment of 1 billion. Even for the Brazilian consortium who paid 280 million for Jari, the rate of return is only about 0.8% on their investment. Because annual sales at Jari are greater than annual expenses such as salaries and maintenance, the project should continue to operate in the near future. However, eventually the major capital item, the pulp mill, will become obsolete. Willingness of investors to recapitalize will depend on Jari s history of Investment return. 

Discounted cash flow is a measure of profitability and is based on the amount of investment that is unretumed every year, taking into consideration the time-value of money (interest, I). Consider a plant manager s 10,000 investment in a control device that has a 3-yr lifetime. Carry out the discounted cash flow calculation for this new unit assuming that the investment returns 5000/yr for Syr, and that the investment has 0 salvage value at the end of the S-ju period. 

USDA, Forest Service, Pacific Northwest Research Station, PNW RB-168 Wadsworth J (2005) New investment returns to the western MDF industry. Wood Based Panels International, 3 13-8... 

At the same time, obstacles of Inertia, skepticism and concern over investment return confront the private sector. 

Despite the fact that formal investment analysis is infrequently used in R D decisions, the present value of dollar returns to R D across the entire industry should approximate the present value of R D costs. Although R D managers may not follow strict rales, companies whose investments do not return enough to cover the cost of capital will ultimately fail, while those whose investments return more than enough to cover the cost of capital will gradually expand their investments. 

An employer s yearly investment returns may exceed the interest credited to each employee s account. If so, the excess over the credited interest goes to reduce the employer s costs in funding the pension plan, not to increase the employees gains. In this respect, cash-balance plans resemble traditional pensions. 

Table V. Investment/Return Data for All-Chemical Refineries ...

Income from Salable Products. This covers the sale of the by-products as well as the principal productfs), which is primarily monitored by the market and sales group. The interrelationships among selling price, market demand and supply, production capacity, and investment return require careful economic analysis. In many cases, particularly new ventures, this can only be detei mined by a profitability analysis, e.g.,... 

Selling prices as these affect investment return (c) Plant capacity... 

Its physical dimension is a reciprocal time, which is that of a frequency or — if the distillation is regarded from the aspect of labour economy — that of an investment return. 1 is independent of the scale and can be formulated for a volume element of arbitrary size in a column, having an arbitrary height and diameter. 

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