Profitability projections

Keywords economic model, shareholder s profit, project cashflow, gross revenue, discounted cashflow, opex, capex, technical cost, tax, royalty, oil price, marker crude, capital allowance, discount rate, profitability indicators, net present value, rate of return, screening, ranking, expected monetary value, exploration decision making. 

It is important when appraising by (NPV) and (DCFRR) not to consider the past in profitabihty estimations. Good money should never follow bad. It is unwise to continue to put money into a project if a more profitable project exists, even though this course may involve scrapping an expensive plant. Other considerations may, however, outweigh purely financiaf criteria in a particular case. 

Develop a well-defined and acceptably profitable project. 

In addition, project data indicate that a well-integrated EEL team can produce significantly better project performance in terms of lower capital investment, as compared to projects where EEL teams were not properly integrated. This illustrates the benefits for each engineering team member working closely together with each other team member, to produce the most profitable project results. 

The distance between Black and Watt is also reduced when we recognize that Black had an entrepreneurial side, or at least an interest in funding practical, potentially profitable projects. The first partnership between Black and Watt was in late 1759 when Watt, Alexander Wilson and Black associated in a venture to produce improved clocks. Other partnerships involving the two men (sometimes with other parties) included a hardware shop and a scheme for producing alkali from salt.15... 

After compiling the estimated operational costs, update the income statement (Exhibit 11.5) to see if your initial profit projections are still on target. For our coffee shop example, total costs will likely be less than predicted on the reverse income statement, which increases the amount of projected profit. Of course, had the pro forma operation specs predicted higher costs than the initial estimate. Pikes Peak Coffee would need to either reduce costs or increase revenue projections. 

The project schedule is also a big driver. In a typical two-year project, most of the investment occurs in the first year. That means another year goes by without any return for the investment. If a project can be speeded up it usually means that the rate of return of a project increases. Typically a three-month schedule improvement could mean 3 to 4% better return on the project. This can mean the difference between a profitable and non-profitable project. In many industries being the first to market a new product could have a huge impact on the long-range profitability of the project. 

The value of i is found by trial-and-error calculations or by using the appropriate function in a spreadsheet. A more profitable project will be able to pay a higher DCFROR. 

Andiesen, A., Steen, 0. and Hartz, E. 1994. Fault populations and fault distributions in rotated fault blocks, Traill 0, East Greenland. In Olsen et al. (Editors), Profit Project Summary Reports, Reservoir Characterization, Near Well Flow, pp. 43-59. 

Walderhaug, O, Prestholm, E. 0xnevad, I.E.I. (1995) Geometry of calcite cemented zones in shallow marine sandstones. In PROFIT Project Summary Reports (Eds Olsen, J., Olaussen, S., Jensen, T.B., Landa, G.H. Hinderaker, L.), pp. 75-90. Norwegian Petroleum Directorate, Stavanger. 

However, nothing would induce one to make a new plant investment of a similar nature again unless there were a sufficiently large positive profit. Projected return on investment (ROI) is one of the most important determinants of new plant investment. A firm must make sufficient ROI to justify plant expansion, and a firm with a risky investment would require even higher projected ROI to proceed with a new plant. 

A profitable project should realise a positive NPV for a sufficient high interest rate, say 10%. When several projects are compared, the best is the one bringing the highest NPV. If NPV is negative, the economic analysis should review the elements of the cash flow and identify saving measures. NPV evolution can also indicate when the project does not bring sufficient value, and therefore the plant should be retrofitted or stopped. 

In equation (15.43) r denotes DCFFR. This may be found by trial-and-error, easy to do with a spreadsheet. Higher DCFRR means more profitable project. 

There was little real commitment from senior management to make the project succeed. Lip service was paid to the SCM concept, but management s prime concerns were increasing market share, speeding up new-product introduction, and meeting the profit projections made to the parent company for the next few fiscal quarters. 

Profitability. Projects are profit or loss generators in the private sector. Similarly, in the government, academic, and volunteer sectors, the manner in which projects are managed is a major determinant of staying within budgets. 

It is well known that capitalism is always searching for new, innovative, and more effective forms of exploitation (Ritzer, 2009 Roemer, 1982). However, some such as Tapscott and Williams (2007) now argue that cloud collaboration is simply exploitation that has gone too far. Exploitation is not a simple coercive production practice in the Web 2.0 ecosystem, but is rather something far less obvious. Often repeated claims about shared, open, transparent, and democratic cyberspaces are in many cases failing to match the realities of privately owned and for-profit projects created by an unpaid labor force of millions. 

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