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Indicators of efficiency of investments

Calculation of key performance indicators in the Budget Plan Express
Payback period – PB
Discounted payback period – DPB
Net discounted (present) value – NPV
Profitability index – PI
Internal rate of return – IRR
Average rate of return – ARR
Modified IRR – MIRR (Modified Internal Rate of Return)
Economic profit measure EVA (Economic Value Added) and other complex indicators

Indicators of efficiency of investments. Calculation of key performance indicators in the Budget Plan Express


The software product "Budget-Plan Express" calculates all the key indicators (integral indicators) of the investment performance of projects - PB, DPB, NPV, PI, IRR and others, converting them into financial analytics, which take into account investment and financial risks.

Investment analysis is the most important final part of the business plan. In the investment analysis, methods for evaluating the effectiveness of projects, developed for calculating the main indicators of the economic efficiency of investment, are applied. In most software products, the calculation parameters do not have flexible settings, that is, the settings simply do not exist. Budget-Plan Express offers a fairly open architecture settings for calculating performance indicators . Most likely, for most users there will be enough "default" settings.

Nevertheless, the possibility of universal settings is likely to be interesting, most likely, by a small circle of specialists who would like, in special cases, to get a more in-depth investment analysis with a full understanding of what the program will consider.

Budget-Plan Express calculates all the key integrated indicators, as well as other indicators that are calculated, including, on their basis:

  1. payback period - РВ, months;
  2. discounted payback period - DPB, months;
  3. net discounted (present) income – NPV;
  4. profitability index - PI;
  5. internal rate of return - IRR, %;
  6. average rate of return - ARR, %;
  7. modified internal rate of return – MIRR, %;
  8. other indicators based on the data calculated in the program.

Calculation of key performance indicators in the Budget Plan Express

Indicators of efficiency of investments or "integral indicators" are calculated after the calculation of "Financial analysis" – «Main menu → Data → Calculate → Financial analysis» (same: F9). Previously, before this, the calculations of all plans (and necessarily - financial plans) must be performed. All newly calculated integral indicators are displayed on the first page - "Project Information".

☛ Whenever the balance table is recalculated, the values of the integral indicators are reset to zero. Also, the removal of the values of integral indicators occurs when the complete data of the financial table is deleted («Main menu → Data → Delete table»).

Also, see the information on changing settings settings - in the section «General settings. Investment analysis».


Integral and other indicators calculated in Budget-Plan Express

☛ Note that Net Cash Flow (NCF) is the basis for calculating investment performance indicators (integrated indicators). To obtain a net cash flow from the total cash flow, financing (credit financing and equity instruments) is completely excluded.

Discounted cash flows are calculated using the formula, the inverse formula of a complex rent, by default (post-mortument). Thus, all cash flows, including initial investments, are actually discounted from the second month of the project - as it should be (if the parameter "prenumerando" or the step of discounting "year" is not set).

☛ Please note that the method of discounting "postnumerando" and "prenemerando" is used in the program only for the present value of net investments , and does not apply to the cash flow of net proceeds.

The user can also set in the settings the calculation option for the present value of the net investment "prenumerando" independently.

To reduce the impact of discounting on initial investments, set the discounting step in the settings to "month" (possible step settings are "month", "quarter", "year"). The effect of discounting in this case will increase gradually - from month to month.

If the initial investment is made before the beginning of the month of settlement (the month index specified in the settings), they, along with other cash flows, are not discounted (see the NPV calculation example).

To include the "past periods" cash flows into the calculation, the option "Balance at the beginning is assumed to be zero" must be disabled.


    Example calculation NPV, postnumerando, with a discount rate of 5%:

    n Cash flow Initial investment Discount coefficient CF (1+r)-t NPV
    CF I (1+r)-t
    0 0 80 1,00 -80 -80
    1 0 70 0,95 -67 -147
    2 0 0 0,91 0 -147
    3 50 0 0,86 43 -103
    4 50 0 0,82 41 -62
    5 50 0 0,78 39 -23
    6 50 0 0,75 37 14
    7 50 0 0,71 36 50

    Net discounted (present) value – NPV – methods for evaluating the effectiveness of projects in the development of business plans. Budget-Plan Express all calculated indicators of efficiency of investments

In some cases, you can specify a discount rate of zero for the first year to offset the effect of the discount at the start of the project.

Only the degree n calculated in the same complex rent formula depends on the choice of the discount step (month, quarter, year). The degree naffects the discount factor: (1 + r)-n, with the specified annual rate, as shown in the following example.

Example of degree change n, for some periods 1, 2 year a (month, quarter, year):

Period (month) 1 12 13 14 15 16 24
Coefficient n, in "n" month -1/12 ... -12/12 -13/12 -14/12 -15/12 -16/12 ... -24/12
Coefficient n, in "n" quarter -1/4 ... -4/4 -5/4 -5/4 -5/4 -6/4 ... -8/4
Coefficient n, in "n" year -1 ... -1 -2 -2 -2 -2 ... -2

The annual rate for future periods is the rate of the last (third) year.

☛ Note that the finding of the value of interest (credit) money and discounted money differ in formulas that are inverse to each other.

The step of discounting the "month" seems more realistic, but sometimes interest money is calculated at an annual rate (in increments of "a year"), when this, for example, is a condition of a loan agreement, similarly with a step to calculate the discount factor, and in some cases it is necessary set the annual (quarterly) calculation step.

The detailed plan (by months) is calculated for 36 months (3 years). In subsequent periods of the project, after 3 years, the average monthly values ​​for each year are calculated, respectively, and the monthly, quarterly and annual discounting steps are also applied to them.

The estimated year of the project (12 months) may not coincide with the calendar year, i.e. if the project starts, for example, from 3 months and lasts, for example, 3 yeara. Then the last month of this project is 38 months (3 + 36 - 1 = 38). The calculation year is similar to taken into account when calculating the discount factor.

The maximum number of years of project calculation is 15 years, but not more than 180 months.

☛ Note that even if the project is planned in the horizon up to 3 years (36 months), it may not be enough to calculate the project payback and other integral indicators, therefore, the calculation period can be extended to 15 years (180 months).





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