Reinvestment

From an overall economic viewpoint, any investment proposal may be considered as an activity which initially absorbs funds and later generates money. The funds may be raised from loan capital or from shareholders capital, and the net (after tax and costs) money generated may be used to repay interest on loans and loan capital, with the balance being due to the shareholders. The shareholders profit can either be paid out as dividends, or reinvested in the company to fund the existing venture or new ventures. The following diagram indicates the overall flow of funds for a proposed project. The detailed cash movements are contained within the box labelled the project . 

From this overview it is apparent that the project must generate sufficient return on the funds absorbed to at least pay the interest on loans and pay the dividend expected by the shareholders. Any remaining cash generated can be reinvested in the same or alternative projects. The minimum return expected from the investment in a project will be further discussed in Section 13.4. 

The oil company s after-tax share of the profit is then available for repayment of interest on loans, distribution to the shareholders as dividends, or reinvestment on behalf of the shareholders in this or other projects. 

The process starting from lignin has faced serious problems, such as reduced availabiUty and environmental impact. The availabiUty is reduced because the new process for making paper paste yields less Hquor. As a result, it is likely that the larger companies will not reinvest in new factories to process Hquors to meet demand. The process s environmental impact is also problematic because over 160 t of caustic waste are produced for every ton of vanillin manufactured. 

Book-Bas s Depreciation. The book-basis depreciation is arbitrarily determined by management on a year-to-year basis, subject to acceptable accounting practice. This is not an out-of-pocket expense. It is simply a charge for the recovery of capital ia earnings calculations and is available as capital for reinvestment or distribution. Some consistent treatment for recovery of capital must be assumed ia profitabiUty analysis. 

Most companies can maintain a given level of business only by continuous reinvestment in plant and equipment. If company growth is... 

The money earned in any year can be put to work (reinvested) as soon as it is available and start to earn a return. So money earned in the early years of the project is more valuable than that earned in later years. This time value of money can be allowed for by using a variation of the familiar compound interest formula. The net cash flow in each year of the project is brought to its present worth at the start of the project by discounting it at some chosen compound interest rate. 

Both methods assume that the money earned can be reinvested at the nominal interest rate. Suppose the rates of return calculated are after tax returns and the company is generally earning a 5% or 6% return on investment. Is it reasonable to expect that all profits can be reinvested at 23% or even 20% No, it isn t Yet this is what is assumed in the Rate of Return method. Sometimes the rate of return may be as high as 50%, while a reasonable interest rate is less than 15%. Therefore if a reasonable value for the interest rate has been chosen (this is discussed later in this chapter) and the two methods differ, the results indicated by the Net Present Value method should be accepted. 

Fair trade a basis for adequate producers incomes, farm reinvestment and quality and safety focused production... 

For an exploration of Sitwell s efforts to use alchemical tropes to reinvest atomic science with an ethical sensibility after Hiroshima, see Morrisson 2002. 

Is not always possible to specify a reinvestment rate for capital recovered... 

Implicitly assumes that capital recovered can be reinvested at the same rate... 

In 1996, a project was initiated to investigate options for reinvestment in the business. This was driven by a number of issues ... 

Reinvest significant sustenance capital to bring the mercury cell plants up to the world s best practice. 

Orica has been presented with a unique opportunity to reinvest in an existing chlor-alkali business, to rejuvenate the business and enable it to contribute profitable returns for the next 20-plus years. This has enabled Orica to benchmark available chlor-alkali technologies currently on the market and select the one that best meets its... 

Stockholders equity is the interest that all stockholders have in a company and is a liability with respect to the company. This category includes preferred and common. stock as well as additional paid-in capital (the amount that stockholders paid above the par value of the stock) and retained earnings. These are earnings from accumulated profit that a company earns and are used for reinvestment in the company. The sum of these items is the. stockholders equity. 

Genenteeh was founded in 1976 by scientist Herbert Boyer and the venture capitalist, Robert Swanson. Headquartered in San Francisco, it employs almost 5000 staff worldwide and has 10 protein-based products on the market. These include human growth hormones ( Nutropin , Chapter 8), the antibody-based products Herceptin and Rituxan (Chapter 10) and the thrombolytic agents Activase and TNKase (Chapter 9). The company also has 20 or so products in clinical trials. In 2001, it generated some US 2.2 billion in revenues, 24% of which it reinvested in R D. 

The second tier consists of several dozens of midsized companies. They include both independents and subsidiaries of major companies. A number of these companies are privately owned and have grown entirely by reinvesting the profits. European examples are F.I.S. and Poll Indu-stria Chimica, Italy Hovione, Portugal and Orgamol (now part of... 

For the second year, further cost savings and a moderate price increase accepted by Automobiltechnik Blau, will ensure the company a modest profit which will be reinvested into further marketing of this new and sustainable concept. 

Legislation introduced in 2008 proposes to use this new standard. The Comparative Effectiveness Research Act of 2008 would create an institute to review and publicize evidence on how to best treat diseases, disorders, and other health conditions. In evaluating the effectiveness of drugs and medical procedures, the institute would provide unbiased information to health care practitioners. Information on the most effective treatment rather than the most heavily advertised and expensive treatment would ideally reduce costs. The pharmaceutical industry also favors the legislation. A version of this legislation passed as part of the American Recovery and Reinvestment Act of 2009. The act provided funds to several agencies and created a Federal Coordinating Council for Comparative Effectiveness Research to advance comparative effectiveness research. 

---