Financial Analytics: Science and Experience
 

Comparison of replacement chain and equivalent annual annuity approaches to evaluate technological innovation of the company

Vol. 11, Iss. 1, FEBRUARY 2018

Received: 18 May 2017

Received in revised form: 13 October 2017

Accepted: 20 October 2017

Available online: 1 March 2018

Subject Heading: INNOVATION AND INVESTMENT

JEL Classification: 

Pages: 32–42

https://doi.org/10.24891/fa.11.1.32

Yashin S.N. National Research Lobachevsky State University of Nizhny Novgorod (UNN), Nizhny Novgorod, Russian Federation
jashinsn@yandex.ru

ORCID id: not available

Trifonov Yu.V. National Research Lobachevsky State University of Nizhny Novgorod (UNN), Nizhny Novgorod, Russian Federation
decanat@ef.unn.ru

ORCID id: not available

Koshelev E.V. National Research Lobachevsky State University of Nizhny Novgorod (UNN), Nizhny Novgorod, Russian Federation
ekoshelev@yandex.ru

ORCID id: not available

Importance This article explores the problem of choosing the most accurate method for assessing the effect of technological innovation of a company that arises when an analyst faces the challenge of evaluating multiple investments.
Objectives The article aims to compare the replacement chain approach and equivalent annual annuity approach (EAA) to evaluate technological innovation.
Methods To evaluate the equipment technological modernization project for different planning horizons, we used the replacement chain and equivalent annual annuity approaches.
Results The article shows that taking into account the objectives of the investor and the planning horizon, each considered technique carries additional information about the effectiveness of the investment chains.
Conclusions and Relevance The assessment of technological innovation cannot be based on a single method of analysis. To make the best decision on replicating technological innovation projects, it is necessary to take into account the specific features of the new equipment operation, especially concerning the planned operating time. The results of the research can help financial analysts and project managers to choose the most advantageous variant of technological innovation of the company.

Keywords: technological innovation, investment chain, equivalent annual annuity, EAA

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ISSN 2311-8768 (Online)
ISSN 2073-4484 (Print)

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Vol. 11, Iss. 1
February 2018

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