The phased approach to time value of money in economic analysis of investment projects

Vadim Daskovskiy and Vladimir Kiselyov

MPRA Paper from University Library of Munich, Germany

Abstract: Method discounting cash flow (DCF) is analyzed in the article. Article is demonstrating complete economic insolvency DCF. The fallacy of discounting method causes serious distortion of the results. It’s wide usage entails negative consequences not only for the concrete investor, but also for the economy on the whole. The new method of the phased approach to time value of money in economic analysis of investment is represented in our article. The recommended phased method of allowing for the time factor is distinguished by: • reducing investment projects’ (IP) cash flow to two evaluation aspects: investments by investment stage completion and cash flow by maintenance completion; • allowing for investment stage fund freezing; • exchange of discount factors for the financial market’s capital accrual rate. To test operability of allowing for the time factor in modeling IP economic flows, banks’ feasibility study of credit repayment was used.

Keywords: investment efficiency; investment project; profit; the discount rate; projection period; investment phase; operation phase; net present value (NPV); discounting cash flow (DCF) (search for similar items in EconPapers)
JEL-codes: D61 D81 E22 G11 G31 G32 M21 O16 O22 (search for similar items in EconPapers)
Date: 2010-05
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