Determining the Value of Own Investment Capital of Industrial Enterprises

Abstract

The article is devoted to the determination of the value of own investment capital of industrial enterprises while preparing the economic justification for investment projects of industrial enterprises. The cost of own investment capital is one of the main factors that form the requirements for the profitability of projects. The accuracy of determining the value of own investment capital significantly influences the reliability of the conclusions about the economic attractiveness of projects. The article presents in a formalized form the conditions for the acceptability of investments, taking into account the value of investment capital (individual elements) in the context of the organizational and legal forms used. The approaches to determining the value of own investment capital are specified. Methods for adjusting the cost of own investment capital of the alternative are suggested, if the investment project under consideration differs in terms of the level of financial risk. The first method can be used by public industrial enterprises. It is based on the capital asset pricing model (Capital Asset Pricing Model) and Hamada’s equation. The second method assumes that the industrial enterprise has the possibility of applying for credit resources to the relevant institutions. It is based on assessments of the level of financial risk associated with the enterprise with an investment decision. The article describes the main stages of implementation of methods. Examples are given that reflect the necessary calculations.