Profitability vs. emission intensity: Electrolysis strategies in Germany's evolving hydrogen market

Latterly, fast pyrolysis has attracted industry increasing interest as one of the potential processes to convert lignocellulosic biomass into bio-oil.Being the study of economic viability one of the most important stages during the development of biorefineries.Hence, the objective of this work is to evaluate the techno-economic feasibility of centralized unit for the production of bio-oil via fast pyrolysis using eucalyptus residues from pulp and paper industry sources in the State of the São Paulo (SP), Brazil.This work identified 243,000 ton/year of eucalyptus residues in SP; those residues were distributed in 16 biorefineries (preceded by the letters A, B, C, D) with 106 km of radius, and one biorefinery with 125 km of radius located.The total simulated bio-oil production was 60 million L/year (46% bio-oil yield).According to the total bio-oil produced, SP could contribute 3.4% of bio-oil to co-processing with gas oil at refinery that producing 20 million ton per year.Jointly, a discounted cash flow (DCF) analysis was evaluated to estimate the attractiveness of each biorefinery through the minimum selling price (MSP).The MSP for a simulated large-scale biorefinery was 194 USD/ton (12 USD/GJ).Due to the DCF being based on assumptions, sensitivity, and Monte Carlo analysis were done, as it allows us to look at the impact that changes to these assumptions may have on feasibility.The sensitive analysis showed the MSP was sensitive to the variation of plant capacity (available residues), it is a variable that could increase the MSP up to 50%, and decrease it up to 26%.The biorefineries presented a good economic performance based on economic indicators Net Present Value (NPV), Internal Rate of Return (IRR) and discounted payback.They are C4 (NPV: 15 MM USD, IRR: 33%, Payback 2.0 years), C3 (NPV: 12 MM USD, IRR: 30%, Payback 2.3 years), D3 (NPV: 7 MM USD, IRR: 26%, Payback 3.13 years), B4 (NPV: 5 MM USD, IRR: 24%, Payback 3.5 years), C5 (NPV: 4 MM USD, IRR: 22%, Payback 4.2 years), B3 (NPV: 3 MM USD, IRR: 22%, Payback 4.4 years), C6 (NPV: 1 MM USD, IRR: 16%, Payback 7.1 years), D4 (NPV: 0.83 MM USD, IRR: 15%, Payback 8.1 years), B5 (NPV: 0.67 MM USD, IRR: 14%, Payback 8.7 years), A4 (NPV: 0.22 MM USD, IRR: 12%, Payback 12.5 years).

NPV, IRR, PI, PP, and DPP: A unified view

Summary Computing the internal rate of return(IRR) of an investmentefficiently and under a wide range of conditions is a problem ofteninsufficiently addressed in finance literature. This paper reviewsarticles and books that deal with the IRR. The term is defined, andexamples are given. Problems that arise in computing and using the IRR arediscussed. Finally, a program is presented that computes and analyzes theIRR efficiently for a wide range of cash flows. Introduction The IRR is a widely used criterion for measuringinherent project acceptability and for comparing and rankingdifferent projects. The literature points out a number ofdefects, some of which remain controversial. This paperreviews some of the literature on the subject, particularly papers that deal with the IRR on a quantitative basis, and presents a computer program that calculates ordescribes the IRR under a wide range of conditions. Definitions of the IRR The simplest definition of the IRR. as stated by Jean, is the interest rate that makes the net present value (NPV)of a project equal to zero. If a curve of NPV vs. discountrate (DR) is drawn, the IRR ideally is the intersection ofthis curve with the x axis, which may never occur or may occur one or more times. Several other definitions of the IRR exist. Cissell andCissell state that the IRR is the rate that makes theinflows and outflows equal at a certain point in time. Thisis essentially the same as the first definition because a zeroNPV implies zero value at all times. Renwick has two definitions that help to clarify theway the IRR works. The IRR is the equivalent of therequired rate of interest on a savings account, with positivecash flows viewed as withdrawals and negative cash flowsviewed as deposits, so that the balance is zero at the endof the project. Alternatively, the IRR can be viewed asdenoting total profits expressed as a percent of totalinvestment outlay, as opposed to the NPV, which measurestotal dollars of net profit directly. Bernhard defines the IRR with an equation. First, to define the initial investment (PO, which is usuallynegative) and succeeding cash flows (PI to P, for Years1 through n), the IRR is the interest state such that ..........................................(1) He refers to this as the simple IRR. where a moregeneral IRR is the set of IRR's that solve the following equation: ..........................................(2) This allows interest rates to vary from year to year as inreal life but produces a measure that is very difficult tocompute or to use. The simple IRR is a special case ofthe general one, where all the IRR's are equal. Someinteresting consequences of this approach are discussedlater. Bernhard also points out that the literature usesmany alternative terms for the IRR, including yield, marginal efficiency of capital, profitability index, interest rateof return, and the project rate of return by the discounted-cash-flow, investor's, or scientific method. Computation of the IRR Literature on the actual means of computing the IRR isquite varied. A good portion of the literature states thatthe IRR is usually found by trial and error. Vichaspresents a technique based on interpolation of financial-table values that is valid but of limited accuracy. In fact, much better techniques are available. Eq. 1 can be rewritten as a polynomial in x by makingthe substitution x = 1 / (1 + IRR) as follows: ..........................................(3) Finding IRR = (1/x) - I corresponds to finding acceptablereal roots to Eq. Some authors have restricted therange of acceptable IRR's to positive real numbers, making the range of x 0 is lesser than x less than 1. Other authorsallow consideration of negative IRR's down to 1 and work on the range 0 less than x less than oo. It is clear that projects with negative IRR's are not normally acceptable. but externalconsiderations and ranking requirements could mean suchprojects need to be considered. P. 577^

Purpose – It is well known that internal rate of return (IRR) and net present value (NPV) rankings of mutually exclusive investments are sometimes inconsistent. This inconsistency, when it occurs, requires decision makers to choose between the two ranking methods. The purpose of this paper is to deduce sufficient conditions for consistent IRR and NPV investment rankings of mutually exclusive investments. Design/methodology/approach – Deductive reasoning is used to obtain the sufficient conditions required for consistent rankings of mutually exclusive investments. Findings – There are different sufficient conditions (methods) that can be used to resolve inconsistent IRR and NPV rankings. However, the different methods do not necessarily produce the same consistent rankings. In particular, different size adjustment methods and reinvestment rate assumptions can produce different IRR and NPV consistent rankings. This paper suggests the appropriate criteria for selecting a particular method for ranking mutually exclusive investments. Research limitations/implications – Like all deduced models, the results apply only to the set of assumptions and preconditions adopted in the model. Furthermore, the application is to ranking mutually exclusive investments. Practical implications – There is probably no other issue in the capital budgeting literature that has generated more attention and debate than the consistency (or lack thereof) between IRR and NPV rankings. This paper summarizes conditions that can be followed to resolve the conflict which should have near universal interest to those working in the capital budging area. This paper offers alternative methods for obtaining consistent IRR and NPV rankings which can be used to improve investment ranking decisions. The particular method used should depend on the decision environment. Guides for choosing the appropriate ranking method are described in the paper. Social implications – Significant decisions, projects, and investments are evaluated using either IRR or NPV methods. This paper shows that existing evaluation methods can lead to sub-optimal investment choices and provides an improved framework that facilitates better investment choices. Lacking an understanding of the sufficient conditions for IRR and NPV consistency – means that resource allocations have been made to investments and projects that are not optimal. Originality/value – To the best of the authors’ knowledge, the results are this paper have not been published nor are they available elsewhere. That said, this paper builds on important earlier work which is carefully cited and credited.

The objective of the research were to determine the volume increments, to find out the optimum ages and maximum increment, to know which plant effort was more profitable than each types exploitations, to analyze the financial feasibility and to know the farmers' financial needs and the level of interest by sensitivity analysis. This research was conducted in community forest of Sungai Merdeka Village Km. 38 Samboja District, Kutai Kartanegara Sub District of East Kalimantan Province. The research data was taken based on a purpose sampling system in the research plots of each Model I to V covering an area of 0.25 ha. Model I consisted by super teak 15 years 10x2 m spacing combined with king grass with an interest rate of 5% resulted in an estimated 6.5-year Pay Back Period (PP); Net Present Value (NPV) Rp. 186,346,058, -; Net Benefit/Cost (B/C) Ratio 3.99; Internal Rate of Return (IRR) 28%; Equivalent Annual Annuity (EAA) Rp. 12,122,078 and effort scale of 3 ha. Model II consisted by super teak 15 years 10x10 m spacing with an interest rate of 5% produce an estimated 18.5-year PP; Rp. (15,890,541,-) NPV; Net (B/C) Ratio to 0.72; (IRR) to 3%; (EAA) to Rp. (1,033,703,-) and (41) ha effort scale. Model III consisted by Solomon Teak 13 years 10x10 m spacing with an interest rate of 5% produce an estimated 10.4 year (PP); (NPV) to Rp. 97,546,242, -; Net (B/C) Ratio to 2.38; (IRR) to 10%; (EAA) to Rp. 6,345,523,- and 7 ha effort scale. Model IV consisted by sungkai 13 years 2x4 m spacing combined with papaya by an interest rate of 5% produce an estimated 13.1 years (PP) value; (NPV) to Rp. 41,099,472, -; Net (B/C) Ratio to 1.83; (IRR) to 22.5%; (EAA) to Rp. 2,673,580, - and 16 ha effort scale. Model V consisted by Sungkai 13 years with an interest rate of 5% produced an estimated 18.1 year (PP); (NPV) to Rp. -13.141,863, -; Net (B/C) Ratio 0.73; (IRR) to 3.2%; (EAA) to Rp. -854,897, - and (49) ha effort scale. Its concluded that by 5% discount factor, Model I, Model III and Model IV were feasible because they have an IRR value higher than Minimum Acceptable Rate (MAR) 5% and Net B/C Ratio higher than 1. Model II and Model V were not feasible because they have an IRR value lower than MAR 5% and Net B/C Ratio lower than 1. The optimum production of all models was reached at the ages of 25 years. The highest MAI was achieved in Model IV of 7.34 m3 ha-1 year-1 and the total volume was 183.56 m3 ha-1 year-1, while the lowest MAI was achieved in Model II of 6.25 m3 ha-1 year-1 and the total volume was 33.10 m3 ha-1 year-1. Based on the analysis of effort scale resulted that Model I could be the best choice and most feasible than other because it had the lowest effort scale value, while Model V was the least feasible option to be cultivated because it has the highest scale of effort. Model I, Model III and IV shown the NPV positive value to Rp. 186,346,058, -; Rp.97,546,242, - and Rp.41,099,472, -, while Model II and Model IV shown the negative value of Rp.(15,590,541,-) and Rp.(13,141,863,-).

A Resolution to the NPV - IRR Debate?

Comparative risk evaluation and sensitivity analysis of the Libyan EPSA IV and its modified model LEPSA I

Developers in the planning and development is also limited by government policy, a policy based on the occupancy of the balance in the housing, a problem for developers on the feasibility of the investments made in order to get the maximum benefit compared to the cost of construction of suchhousing. Research on Griya Field Development Project aims to determine the feasibility of investment in the existing Housing Development Programme and to determine the maximum profit generated as compared to the cost of development of investment in Housing Development Program. For the condition of the plan, this residential project at a cost of Rp.15.345.000.000, while for the existing conditions cost as much as Rp.12.845.000.000. The feasibility study is based on the financial aspects of using parameter Net Present Value (NPV), Benefit Cost Ratio (BCR), Internal Rate of Return (IRR) After research it is known, for repayment periods of 10 years (NPV Rp.1.364. 728 246, BCR and IRR 1,046 3,698%), for a period of installment / credit 15 years (NPV Rp.4.300.736.040, BCR and IRR 1,130 6.239%), and future installment/ credit 20 years (NPV Rp.4.300.736.040, BCR 1.182 and 6.698% IRR). So based on the condition of the plan, the investment feasibility studies on the financial aspects with parameters NPV, BCR, IRR based on a long period of installment/credit (with the value obtained by this project is not less than the installments to 10 years and not more than the installments to 20 years) is profitabl feasible (feasible). Sensitivity analysis of the calculation results, for future installments/credit 10 years can be seen that the investment will be worth the financial aspects if revenue fell 10%, fixed costs and revenues and expenses fell by 10%. While the sensitivity analysis for future installments/credit 15 years, a period installment/credit 20 years to remain profitable/feasible (feasible). Keyw ords : Feasibility Investments, NPV, BCR, IRR, Sensitivity Analysis

Two of the most important criteria are the net present value (NPV) and the internal rate of return (IRR) for choosing among investment projects. In many circumstances, investment projects are ranked in the same order by both criteria. In some situations, however, the two criteria provide different rankings. The debate is an old one (e.g. going back to Böhm-Bawerk, 1884). Let us explain the essence of the NPV and IRR indicators. The basis of economic calculations in the field of investment is the idea that a cash euro today is more valuable than a euro promised in a year. If a bank lends N euros to an entrepreneur today, then in a year the bank demands to return N(1 + E) euros, where E is the bank interest. Another type of calculation is carried out by the entrepreneur. If he invests N euros in some project today, then in a year he hopes to receive N(1 + IRR) euros, where IRR is the internal rate of return of the project implemented by the entrepreneur. Naturally, the value of IRR is only an assumed, indicative, and the entrepreneur is expecting IRR more than E. The present work arose from discussions of the results of the French economist Pierre Masse “Le Choix des investissements, critères et méthodes” published in 1959. The main goal of the paper is to give the proof of both IRR and NPV formulas (in a particular simplified case) and a geometric interpretation of these very complex equations (useful for the training purpose, at least). The analysis of IRR and NPV indicates an unequivocal choice among the criteria NPV and IRR. This confirms a simple numerical example on the fallacy of Masse’s IRR reasoning. No unambiguous solution has been found yet. It can be explained if we allow that the bank interest relates to Macroeconomics, largely concerned with nation scale projects but the entrepreneur interest relates to Microeconomics, to internal rate of return. The world continues to search for a single consistent criterion for evaluating investments.

There are numerous methods while assessing efficiency of investment ventures that are based on discount technique and which take into consideration time value of money. All these methods have both good and bad sides. Hence the methods of net present value and internal rate of return represent basic methods in this group; we will focus our attention on those flaws which result in paradoxical situation in ranking projects and alternative decision-making while choosing specific investment variations. When it comes to independent projects there is a rule that if the project has positive net present value or in other words if the internal rate of return is higher than the rate of investment criterion, the project should be accepted; otherwise, if the net present value is negative or if the internal rate of return is lower than the rate of investment criterion, the project should be rejected; if the net present value is equal to zero or in other words if the internal rate of return is equal to the rate of investment criterion, one should behave indifferently towards such investment proposal. In case of choosing one among many projects that are available to a decision-maker while all of them are assessed with positive net present value and with internal rate of return higher than rate of investment criterion, should one give advantage to a project with higher net present value and less internal rate of return or to a project with less net present value and higher internal rate of return?.

In this work, the technical and economical evaluation of the application of different Photovoltaic (PV) on grid systems was studied based on experimental results and theoretical models. Six types of 20 kWp PV grid-connected systems working at Applied Science Private University, Jordan were involved in study. The Six types of different PV systems studied were: Poly-Crystalline South directed (Poly S), Mono-Crystalline South directed (Mono S), Mono-Crystalline East West directed (Mono EW), Poly-Crystalline East West directed (Poly EW), Thin-Film directed to the south, and a Concentrated PV type with automatic two axes tracking (Con Tracker). For the 20-kWp grid connected systems, the yearly production, the yearly savings, the initial investment costs and the Operating & Maintenance (O&M) costs were estimated, evaluated and compared to get the most beneficial investments by using different economical methods. Con Tracker system presented the most feasible system with higher Net Present Value (NPV) (71733.06 JD), Internal Rate of Return (IRR) (45%), and short Payback Period (PBP) (3 years) than those values of Thin-Film with NPV (42638.15 JD), IRR (37%) and PBP (3 years), Poly S with NPV (44887.23 JD), IRR (34%) and PBP (3 years), Mono S with NPV (48267.89 JD), IRR (33%) and PBP (3 years), Mono EW with NPV (40998.52 JD), IRR (29%) and PBP (4 years), finally Poly EW with NPV (35793.14), IRR (28%) and PBP (4 years).

The paper attempts to assess the impact of variability of selected geological (deposit) parameters on the value and risks of projects in the hard coal mining industry. The study was based on simulated discounted cash flow analysis, while the results were verified for three existing bituminous coal seams.The Monte Carlo simulation was based on nonparametric bootstrap method, while correlations between individual deposit parameters were replicated with use of an empirical copula. The calculations take into account the uncertainty towards the parameters of empirical distributions of the deposit variables. The Net Present Value (NPV) and the Internal Rate of Return (IRR) were selected as the main measures of value and risk, respectively.The impact of volatility and correlation of deposit parameters were analyzed in two aspects, by identifying the overall effect of the correlated variability of the parameters and the indywidual impact of the correlation on the NPV and IRR. For this purpose, a differential approach, allowing determining the value of the possible errors in calculation of these measures in numerical terms, has been used.Based on the study it can be concluded that the mean value of the overall effect of the variability does not exceed 11.8% of NPV and 2.4 percentage points of IRR. Neglecting the correlations results in overestimating the NPV and the IRR by up to 4.4%, and 0.4 percentage point respectively. It should be noted, however, that the differences in NPV and IRR values can vary significantly, while their interpretation depends on the likelihood of implementation.Generalizing the obtained results, based on the average values, the maximum value of the risk premium in the given calculation conditions of the „X“ deposit, and the correspondingly large datasets (greater than 2500), should not be higher than 2.4 percentage points. The impact of the analyzed geological parameters on the NPV and IRR depends primarily on their co-existence, which can be measured by the strength of correlation. In the analyzed case, the correlations result in limiting the range of variation of the geological parameters and economics results (the empirical copula reduces the NPV and IRR in probabilistic approach). However, this is due to the adjustment of the calculation under conditions similar to those prevailing in the deposit.

The purpose of the study is to evaluate the feasibility of students boarding house around University of Muhammadiyah Malang. The analytical tool are Net Present Value, Payback Period, Average Rate of Return, Internal Rate of Return, Profitability Index.The results of the analysis of boarding house owned by Mr. Rofiq show that the Net Present Value is 226.968.193,1 rupiahwhich is more than null ( eligible ) . Value Payback Period is six years one month and seven days which is less than 20 years (feasible ) . Internal Rate of Return is 17,2063 % which is higher than COC , it is declared eligible. T he value of Average Rate of Return is 43 % which is more than 15 % ( feasible). T he value of Profitability Index is 1,44 which is more than one ( feasible ) .The results of the analysis of boarding house owned by Mrs. Atnah show that Net Present Value is 22.370.869,3 rupiah which is more than null, it is declared eligible. Value Payback Period is twelve years two months and twentythree days is less than 20 years ( feasible ) . Internal Rate of Return is 17,8111 % which is higher than COC , it is declared eligible . The value of Average Rate of Return is 38 % which is more than 17 % ( feasible) . T he value of Profitability Index is 1.058 which is more than one ( feasible ) . In other words, the investments wasconducted by both the owner of boarding house was proceed.The results of the analysis of boarding house owned by Mr . Sofi show that Net Present Value is minus 170.035.625,2 rupiah which is not more than null (unfit) . Value Payback Period is 32 years 2 months 12 days is more than 20 years ( not feasible ) . The results of the value of the Internal Rate of Return is 3,7435 % is less than COC which is declared unfit. T he value of Average Rate of Return is 2% which is not expected (less than 15%) declared unfit. The value Profitability Index is 0.32 which is less than one, it is declared unfit. Keywords: Net Present Value , Internal Rate of Return, Payback Period , Average Rate of Return , Profitability Index .

Internal Rate Of Return Revisited

This study analyses the investment feasibility of building Apartment X in Alam Sutera, Tangerang, by comparing two scenarios, namely direct apartment construction and gradual apartment construction, in the context of the impact of the Covid-19 pandemic. The methods used are Net Present Value (NPV) and Internal Rate of Return (IRR) to evaluate the potential benefits of both approaches. The data analysed includes development costs, sales of residential units, building operating costs, as well as revenue from environmental management fees (IPL) for residential areas and commercial shops, commercial shop rents and so on. The results show that the direct development scenario produces an NPV value of IDR 87,860,840,681 with an IRR value of 13.08%, while the phased development scenario produces a higher NPV value of IDR 112,893,521,357 with an IRR of 14.51%. Both scenarios fulfil the investment feasibility criteria because the resulting NPV value is greater than Rp 0, and the IRR value is also higher than the MARR set at 10%. Furthermore, investment in apartment X project is feasible to be implemented both directly and in stages, but gradual development provides more optimal and more profitable results compared to direct development. This study provides important insights for property developers in determining the right investment strategy in the post-pandemic economic conditions. Abstrak Penelitian ini menganalisis kelayakan investasi pembangunan Apartemen X di Alam Sutera, Tangerang, dengan membandingkan dua skenario yaitu pembangunan apartemen secara langsung dan pembangunan apartemen secara bertahap, dalam konteks dampak pandemi Covid-19. Metode yang digunakan adalah Net Present Value (NPV) dan Internal Rate of Return (IRR) untuk mengevaluasi potensi keuntungan dari kedua pendekatan. Data yang dianalisis mencakup biaya pembangunan, penjualan unit residensial, biaya operasional gedung, serta penerimaan dari iuran pengelolaan lingkungan (IPL) area residensial dan toko komersial, sewa toko komersial dan lain sebagainya. Hasil menunjukkan bahwa skenario pembangunan secara langsung menghasilkan nilai NPV sebesar Rp 87.860.840.681 dengan nilai IRR 13,08%, sedangkan skenario pembangunan secara bertahap menghasilkan nilai NPV yang lebih tinggi, yaitu Rp 112.893.521.357 dengan IRR 14,51%. Kedua skenario memenuhi kriteria kelayakan investasi karena nilai NPV yang dihasilkan lebih besar dari Rp 0, dan nilai IRR juga lebih tinggi daripada MARR yang ditetapkan sebesar 10%. Selanjutnya investasi pada proyek apartemen X layak untuk dilaksanakan baik secara langsung maupun bertahap, tetapi pembangunan bertahap memberikan hasil yang lebih optimal dan lebih menguntungkan dibandingkan dengan pembangunan secara langsung. Studi ini memberikan wawasan penting bagi pengembang properti dalam menentukan strategi investasi yang tepat dalam kondisi ekonomi pasca-pandemi.