Model for Evaluating the Economic Efficiency of Investment Projects: Architecture and Main Aspects of Application

Mackevičius, Jonas; Tomaševič, Vladislav

doi:10.15388/ekon.2011.0.920

Cited by 6 publications

(1 citation statement)

References 4 publications

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“…Recent studies have focused on a detailed analysis of the assumptions underpinning the calculation of expected cash flows and an in-depth assessment of risks. The proposed evaluation should be a three-stage process of the selection and application of the method; changes in the investments of the project; analysis, interpretation results, and conclusion (Mackevičius et al 2011). The main evaluation indicators of investment projects are net present value (NPV), profitability index (PI), and payback period (PP) (Chubarkina 2020;Azzheurova and Bessonova 2015;Bartošová et al 2015).…”

Section: Introductionmentioning

confidence: 99%

A study on loan repayment options for power plant construction: a case study of the Son La hydropower plant, Vietnam

Tu¹,

Phap²,

Hương³

2023

Polityka Energetyczna – Energy Policy Journal

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Using loans is an effective solution for the investment and construction of energy works in general and power plants in particular, especially for developing countries. In economic and financial studies of the project investment preparation stage, the options of using capital and paying interest will be taken into account to minimize risks and increase the project's ability to pay due debts. However, it is difficult to know which loan repayment option is the most beneficial for the project and when the risk is for the project in the context of debt repayment. The current economic and financial analysis of the project mainly focuses on determining the feasibility of the project through basic parameters, such as net present value (NPV), benefit -cost -ratio (B/C), internal rate of return (IRR), profitability index (PI) and payback period (PP). These parameters do not indicate the most difficult time to pay off the project's loans. This paper analyzes two options for repayment of long-term loans in Vietnam using the case study of Son La hydropower plant to clarify the above difficult times and recommend a suitable repayment plan for the power project. The analytical me-122 thod is used to actualize the cash flow of capital and interest during the construction and operation of the works. In Option 1, the debt is paid annually for interest and capital with a constant amount of money during the repayment period. In Option 2, the original dept without interest is paid with a constant amount of money during the repayment period, the interest (due to the remaining original capital) must be paid in the year when the interest is incurred. The study results show that the amount of the annual payment in option 1 is smaller than in Option 2 in the first four years (of ten years of debt repayment). Thus, capital and interest payment in Option 2 may be more detrimental than Option 1 in the first three years of debt repayment, and the amount of money from debt repayment is greater than the profit obtained from power generation. Thus, depending on the profit in the first years when the power plant comes into operation, the investor needs to decide on a reasonable way to repay the loan so that the project can self-finance.

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