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Economic Analysis: Theory and Practice
 

Assessing the effectiveness of investment projects: Rules, indicators and their calculation procedure

Vol. 15, Iss. 6, JUNE 2016

PDF  Article PDF Version

Received: 23 March 2016

Accepted: 8 April 2016

Available online: 28 June 2016

Subject Heading: INVESTMENT ANALYSIS

JEL Classification: C02, G11, O22

Pages: 26-41

Balynin I.V. Financial University under Government of Russian Federation, Moscow, Russian Federation
igorbalynin@mail.ru

Subject In the context of the existing economic problems and the Government's decision to build an innovative economy and implement the import substitution program, it is crucial to focus on investment project realization.
Objectives The study aims at developing clear and transparent criteria for selecting the most attractive investment projects, thereby minimizing the risks of potential losses.
Methods The methodological framework rests on the integrated approach, analysis and synthesis, principles of consistency and objectivity. To assess investment project effectiveness, I used Microsoft Excel software.
Results The article presents rules for assessing the effectiveness of investment projects, key features, advantages and disadvantages of certain performance indicators applied to evaluate investment projects, as well as a mechanism of selecting the best project on their basis. I consider the case study on evaluation of the most attractive investment project out of five.
Conclusions It is crucial to use all these indicators as a single set based on the developed procedure for assessing investment project's effectiveness. The assessment is required not only at the project selection stage, but also after its implementation. The findings of the research may be used in taking specific management decisions by corporations, investment funds, credit institutions, as well as in the educational process of higher schools and secondary specialized educational institutions.

Keywords: net present value, internal rate of return, profitability index, payback period

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