PPT and Presentation script on vertical farming Investment analysis (calculation of profitability)

Description

This was a group assignment and presentation, and our topic was about vertical farming.

I am responsible for the third part about Investment analysis (calculation of profitability). I need a PPT and presentation for me to talk about. The number of words may be about 4-500 words or it is up to you.

Need to answer the following：

What kind of parameters are necessary for calculation?

What are the numbers for each parameter?

What is the size of the initial investment cost?

How do you raise the investment (debt or equity in what ratio?)

Calculation of profitability: 1) Payback Period, 2) Present Value, and 3) Internal Rate of Return (IRR)

I think most of the speech time should be spent on the last part of the Calculation of profitability: 1) Payback Period, 2) Present Value, and 3) Internal Rate of Return (IRR).

You may need to use Excel to calculate, please send it to me and include the screenshot in the PPT.

Unformatted Attachment Preview

Instructions on assignment 2&3 on research projects. You are expected
to research the technologies of your choice, analyze them based on the
suggested instructions, and make progress and final presentations.
13
1. Technology (Project) Overview
p What kind of technology? How does it work? Describe them in detail.
p Who (what companies) has the technology? How has the technology
been developed?
p What are the competing technologies (if there are any)?
p How does the technology help to solve the environmental crisis or
contribute to sustainable development?
14
2. Calculation of environmental impact reductions
p How does the technology reduce environmental impacts?
p How can you calculate the reduction of environmental impacts?
p What is the result of the calculation?
Example/Discussion: Landfill gas utilization project
15
Example/Discussion: Landfill gas utilization project
16
Example/Discussion: Landfill gas utilization project
17
3. Investment analysis (calculation of profitability)
p What kind of parameters are necessary for calculation?
p What are the numbers for each parameter?
p What is the size of the initial investment cost?
p How do you raise the investment (debt or equity in what ratio?)
p Calculation of profitability: 1) Payback Period, 2) Present Value, and
3) Internal Rate of Return (IRR)
18
4. Environmental and social (negative) impacts
p Does the technology bring any environmentally negative impacts? If
so, what kind of impacts?
p Does the technology bring any socially negative impacts? If so, what
kind of impacts?
19
5. Barriers for technology diffusion, technology transfer, or technology
innovation
p In diffusing, transfer, innovating the technologies, what are the
barriers (financial, technological, institutional/political)?
p How can we overcome the barriers?
20
Additional Instructions on assignment 2&3 on research projects.
n Time of each presentation is limited to 10 minutes . Please manage
your time and limit your time of your presentation to 10 minutes.
n While the time of your presentation is limited to 10 minutes, you are
expected to conduct thorough research and analysis of the assigned
technologies. Please illustrate your research and analysis in detail in
your material while you need to control your time of your presentation.
(You do not need to present everything written in your presentation
material.)
n In your presentation material, please indicate who, in each group, is
responsible for which part of the presentation material by including a
name of a person who is responsible for a specific part of the
presentation material.
21
Additional Instructions on assignment 2&3 on research projects.
n A list of references is an important component of your presentation
material. The research that you are illustrating in your presentation
should be based on academic studies – please research your topic
among academic journals and address your research topic in the
academic context.
n It would be best to have some empirical component in your research.
It is not required to conduct quantitative analysis but please conduct
some analysis on your research topic rather than just compiling the
information that you find on internet.
n It is recommended to include pictures and graphs if they help to make
your presentation easier for the audience to understand.
n It is better to avoid too much information on your slide. Please make
your presentation easy for the audience to follow and interesting for
them.
22
Year 0
Initial investment
Cash flow
Present work factor
（Discount Rate=6％）
PV
NPV
Year 1
Year 2
-100
–
20
20
-100
0.94
18.9
-81.1
0.89
17.8
-63.3
Year 3
Year 4
Year 5
Year 6
Year 7
20
20
20
20
20
0.84
16.8
-46.5
0.79
15.8
-30.7
0.75
14.9
-15.8
0.7
14.1
-1.7
0.67
13.3
11.6
Year 1
-100
Discount rate=
NPV=
Year 2
Year 3
40
10%
30
Year 4
35
Year 5
40
55
Now
Investment option 1
Project investment
Investment option 2
Bond
Year 1
Year 2
Year 3
-100
20
20
20
-100
3
3
3
Year 4
52
103
Year 1
Project investment
IRR=
Year 2
-100
24%
Year 3
40
Year 4
35
40
Year 5
55
Item
Value
Financial Details
Initial investment (US$)
Electricity tariff (US$/kWh)
Electricity sales (kWh)
Project life (years)
1,310,000
0.06
8,760,000
10
Expenses
O&M costs (US$/year)
144,550
Depreciation (10%/year)
131,000
Repayment per annum
65,500
Interest (6.3 %/year)
41,265 (2014)
Corporate tax (20% of profit)
19,573 (2014)
US$
Items
Initial investment
Gas wells and piping
Gas compressors and flare
Generators
Project management
Total
Equity
Debt
Repayment
Balance of loan
Revenues
Running cost
Total running cost
50%
50%
Loan repayment
Balance owing on loan
Estimated power sold (kWh)
Electricity tariff rate（US$)
Electricity sales
O&M cost
Interest rate
Depreciation
Construction
starts
2014
2015
2016
2017
2018
2019
65,500
589,500
8,760,000
0.06
525,600
144,500
37,139
131,000
(312,639)
65,500
65,500
65,500
65,500
524,000
458,500
393,000
327,500
8,760,000 8,760,000 8,760,000 8,760,000
0.06
0.06
0.06
0.06
525,600
525,600
525,600
525,600
144,480
143,070
136,470
103,730
33,012
28,886
24,759
20,633
131,000
131,000
131,000
131,000
(308,492) (302,956) (292,229) (255,363)
2020
2021
300,000
200,000
800,000
10,000
1,310,000
655,000
655,000
kWh
1kWh当たり
6.3%
10.0%
65,500
655,000
8,760,000
0.06
525,600
144,550
41,265
131,000
(316,815)
65,500
262,000
8,760,000
0.06
525,600
79,370
16,506
131,000
(226,876)
65,500
196,500
8,760,000
0.06
525,600
61,450
12,380
131,000
(204,830)
2022
65,500
131,000
8,760,000
0.06
525,600
48,200
8,253
131,000
(187,453)
2023
65,500
65,500
8,760,000
0.06
525,600
38,260
4,127
131,000
(173,387)
Year
2014
2015
2016
2017
2018
2019
Item
Profit & losses
Revenue and expenditure
Payback
CASH FLOW
IRR (10years)
Revenues
Running cost
Repayment
Corporate income tax (20%)
（Profit & loss for this term）
Added-back depreciation
Profit & loss before depreciation
Accumulated profit & loss
before depreciation
(1,310,000)
(1,310,000)
16.48%
525,600
525,600
525,600
525,600
525,600
525,600
(316,815)
(65,500)
(28,657)
(312,639)
(65,500)
(29,492)
(308,492)
(65,500)
(30,322)
(302,956)
(65,500)
(31,429)
(292,229)
(65,500)
(33,574)
(255,363)
(65,500)
(40,948)
114,628
117,969
121,286
125,716
134,297
163,790
131,000
131,000
131,000
131,000
131,000
131,000
245,628
248,969
252,286
256,716
265,297
294,790
245,628
494,597
746,884
1,003,599
1,268,896
1,563,686
(1,064,372)
245,628
(815,403)
248,969
(563,116)
252,286
(306,401)
256,716
(41,104)
265,297
253,686
294,790
2020
2021
2022
2023
525,600
525,600
525,600
525,600
(226,876)
(65,500)
(46,645)
(204,830)
(65,500)
(51,054)
(187,453) (173,387)
(65,500)
(65,500)
(54,529)
(57,343)
186,579
204,216
218,118
229,371
131,000
131,000
131,000
131,000
317,579
335,216
349,118
360,371
1,881,265
2,216,482
2,565,599 2,925,970
571,265
317,579
906,482
335,216
1,255,599 1,615,970
349,118
360,371
Energy and Environmental Technology
Investment Analysis
p Does the introduction of cash crop make financial sense? (examples:
medlar or sugar stevia leaf)
1
p Does the use of renewable energy resources (for electricity
generation) make financial sense?
Photos Taken by
Myself
2
Two types of investment:
n Debt investment
n Equity investment
Calculation of Return:
n Payback
n (Net) Present Value
n IRR (Internal Rate of Return)
Example:
-100 + 20／(1+r) ＋ 20／(1+r)2＋ 20／(1+r)3＋52／(1+r)4＝0
r=3.98%
3
p Payback period: The length of time required to recover the cost of an
investment. (Source: Investopedia)
Initial
investment
Cash flow
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
-100
–
–
–
–
–
–
20
20
20
20
20
20
4
The problem with the payback period is that it ignores the value of time.
Question: Do you want to receive $100 today or a year later? (Which
does it make financial sense to choose?)
5
If the interest rate 3%, the value of the money a year later is:
100*(1.00+0.03)=103
Then, what is the value of $100 a year later at 3% interest rate (or
discount rate) is TODAY?
x*(1+0.03)= 100
x
=100/（1+0.03）
=97 (This is called “Present Value.”）
If it is 100 two years later…
100/（1+0.03）2＝94.3
Time is money.
Show excel.
6
The interest rate is the discount rate.
The Present Value (PV) is the value of cash today.
The sum of the cash today that is expected in the future is called Net
Present Value (NPV).
7
Case：
Initial investment: 100
Cash flow every year from the investment: 20
Discount rate: 6％
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Initial
investment
-100
–
–
–
–
–
–
–
Cash flow
–
20
20
20
20
20
20
20
PV
–
18.9
17.8
16.8
15.8
14.9
14.1
13.3
-100
-81.1
-63.3
-46.5
-30.7
-15.8
-1.7
11.6
NPV
8
What about the rate of return (or the discount rate) when the NPV is 0?
This is called “Internal Rate of Return (IRR).”
The IRR is the interest rate. $100 investment at 3% IRR is $103 next
year.
Show excel.
9
Two cases： Which case is more financially attractive?
Case A： Project investment with $20 earning every year and sell the facility at $32 in
Year 4.
Case B： Bond investment with 3% coupon and receive the full investment back in
Year 4.
For both investments, the total amount of earned cash is $112.
Year 0
Year 1
Year 2
Year 3
Year 4
Case A
Project investment
-100
20
20
20
52
-100
3
3
3
103
Case B
Bond
10
Internal Rate of Return
Case A（Project investment）：
Case total in PV
＝-100+20／(1+0.03)＋20／(1+0.03)2＋20／(1+0.03)3＋52／(1+0.03)4
＝2.8
Case B（Bond investment）：
Cash total in PV
＝-100+3／(1+0.03)＋3／(1+0.03)2＋3／(1+0.03)3＋103／(1+0.03)4
＝0
Case A is financially more attractive by $2.8.
11
Internal Rate of Return
If you calculate the IRR…
Case A（Project investment）：
-100 + 20／(1+r) ＋ 20／(1+r)2＋ 20／(1+r)3＋52／(1+r)4＝0
r=3.98%
Case B（Bond investment）：
-100 + 3／(1+r)＋3／(1+r)2＋3／(1+r)3＋103／(1+r)4 ＝ 0
r=3.00%
In principle, if the IRR is higher than the hurdle rate (the rate of return
that could have occurred otherwise in another investment opportunity),
for example, the interest rate of loan from the bank, it is concluded that
the investment is financially attractive.
12
Can we judge then that Case A (project investment) is more attractive
than Case B (bond investment)?
In reality, however, the risk of project investment can be much higher
than the bond investment. It is necessary to consider project-specific,
business-specific, and other types of risk holistically.
13
Financial risk assessment: What are the project-specific, businessspecific, and other types of risk?
The market in fresh Medlar is weak and a large amount of dried Medlar is sold in other
regions. It is expected that the market in Medlar is faced with problems including high cost
on processing, absence of regional brands, as well as unfavored choice by local residents.
鲜枸杞在本地的市场并不好、干枸杞则大量销往外地（加工成本高, 无自主品牌, 本地人不爱吃).
14
Questions: What kinds of risk do you observe in the following projects?
1. Wind
2. Solar
3. Biomass
15
6
R. Wüstenhagen, E. Menichetti / Energy Policy 40 (2012) 1–10
Model 2 (Extended Model)
Cognitive Aspects
Energy Policy
Risk
Return
Type of
Investor
Perceived Risk
Portfolio
Aspects
Expected Return
Investment in
Renewable
Energy
gy
Prior
Investment
Fig. 4. A more differentiated model of renewable energy policy and investment.
road needs some initial investment, path creation in the energy
system is not for free.
3.6. Conclusion: A more differentiated picture of renewable energy
of incumbent’s solar energy activities may be explained by the
(Source:
Wüstenhagen
Menichetti,
2012)
rather disruptive nature
of solar
photovoltaic&technology
(Bower
and Christensen, 1995), which does not fit an oil firm’s mainstream business model. The successful exploitation of market
16
opportunities in this field requires the development of new
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17
variables indicated
gnificantly different
ibution is non-nortistics were used to
her the sample was
test was used. The
tistically significant
n-respondents with
p = 0.279, 2-sided)
p = 0.061, 2-sided).
he population and
ntire population.
were presented with
eneral risks of the
scores, as presented in Table 3, the political risks that concern respondents, in descending order, were: demonstrations, riots and insurrection (mean 4.35); wars (mean
4.23); economic sanctions (mean 3.98); revolutions, coup
d’état and civil wars (mean 3.55); terrorism (mean 2.98);
Table 2
Relative importance of general risks by mean
General risks
! Political
! Financial
! Cultural
! Natural
Importance
Mean
SD
%a
Valid N
Level of importance
4.05
3.79
3.12
2.21
1.03
0.83
1.13
1.15
76.1
62.7
40.4
16.2
42
43
42
43
Most important
Least important
a
The percentage of respondents who scored 4 ‘very concerned’ and 5
‘extremely concerned’.
(Source: Khattab et al., 2007)
18
A. Al Khattab et al. / International Journal of Project Management 25 (2007) 7
some industries over other
ernment risk can change a
a
b
Valid
Political risks
Mean SD %
ernment related risks no
N
industry to industry but a
! Demonstrations, riots and insurrection 4.35
0.72 86.0 43
host-country government
! Wars
4.23
0.95 86.0 43
minimising risks that can
! Economic sanctions
3.98
1.24 78.5 42
ating on its soil.
! Revolutions, coups d’état and civil wars 3.55
1.11 61.9 42
In this paper, the vuln
! Terrorism
2.98
1.26 34.8 43
host-government related r
! Taxation restrictions
2.98
1.14 37.2 43
c
2.95
1.11 32.5 43
! Currency inconvertibility
firm-specific characteristic
d
! Contract repudiation
2.74
1.20 27.9 43
number of countries need
e
! Import and/or export restrictions
2.72
1.44 41.8 43
transactions between the h
! Ownership and/or personnel
2.60
1.15 23.8 42
and, therefore, are particul
restrictions
currency inconvertibility
! Expropriation and/or confiscation
2.37
1.09 16.2 43
a
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WZXdbeaZiZY#AZVaYjZY^a^ZcXZ^cXajY^cVaaaVcYi^iaZl^aaWZgZk^ZlZY#>[i]Zegd_ZXi^h
dcank^VWaZYjZidi]ZedlZgVcYgZZcViig^WjiZh^ihZaah!Vi]dgdj]gZk^Zld[i]Zd[[iV`Z
XdcigVXiVcYhjWh^YngZ^bZl^aaWZeZg[dgbZY#
7DM(#HIGJ8IJG:D;67>D;J:AEA6CI
(Justice, 2009)
21
(Mazzucato & Semieniuk, 2018)
22
In order to assess a business model as a whole, there are other
important issues to consider other than financial analysis.
Who are the target customers? (targeting)
Are there any competitors? (positioning—blue ocean or red ocean?)
How big or attractive is the market?
How do you promote the products?
How do you procure materials for production?
What resources and capabilities do you have?
23
Break-even point analysis:
Amount ($)
Total revenue
Break even point
Total costs
=Fixed costs
+variable costs
Fixed costs
Volume sold (#)
24

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