Net Present Value Calculations Research Articles

Techno-economic analysis and Monte Carlo simulation of green hydrogen production technology through various water electrolysis technologies

The green hydrogen produced by water electrolysis combined with renewable energy is inevitable for a sustainable and clean energy society. However, the green hydrogen production cost is still more expensive than fossil fuel-based methods such as steam methane reforming and it is the biggest challenge. In this study, to determine the most economical way to obtain green hydrogen, a technoeconomic analysis was performed on four different water electrolysis technologies, that is, alkaline water electrolysis (AWE), proton exchange membrane electrolysis (PEMEC), solid oxide electrolysis with electric heaters (SOEC (E.H)), and solid oxide electrolysis combined with a waste heat source (SOEC (W.H)). It is assumed that the SOEC (W.H) system is linked to the adjacent power plant and receives waste heat. The net present value calculation, sensitivity analysis, and Monte Carlo method were performed for the 4 cases presented above. Calculated unit hydrogen production cost was 7.60, 8.55, 10.16, and 7.16 $/kgH2 for AWE, PEMEC, SOEC (E.H), and SOEC (W.H), respectively. The analysis results show that the SOEC (W.H) has the most competitive case due to sensible heat energy saving and higher stack efficiency. Sensitivity analysis determined the most influential cost factor, and consequently, it seems necessary to reduce capital costs along with subsidizing electricity costs and tax rates to compete with gray hydrogen.

Economic impact assessment indicators of circular economy in a decentralised circular water system — Case of eco-touristic facility

The transition from a linear make-use-dispose model to a Circular Economy (CE) model has gained momentum in recent years. To date, substantive efforts have been put by researchers and practitioners on environmental assessment of circular water systems (CWS). Yet, the economic aspect of CWS has not received the same attention. This research is an attempt to bridge this gap by evaluating the economic viability of a decentralised hybrid rainwater- wastewater-greywater (HRWG) system. For this purpose, a framework of Shadow Pricing- Life Cycle Cost-Benefit (SLCCB) to analyse a CWS is proposed. Shadow pricing could compliment the established Life Cycle Costing (LCC) methods. The main parameters (costs and benefits) of the proposed SLCCB framework are divided into two types: Internal and External. The Internal pricing covers the capital expenditure (CAPEX) and operational expenditure (OPEX), while the External pricing covers the environmental and social costs-benefits of implementing CWS. The proposed SLCCB added to the classical Net Present Value (NPV) and Payback Period (PP) calculations could provide a more realistic evaluation of the economic performance of CWS. To demonstrate the efficacy of the new CE model, a new CWS in Greece was studied.A sensitivity analysis was conducted to assess the impact of the reclaimed water tariffs, internal costs, life span of the project, and the annual discount rate on the SLCCB. The results of the study reveal that the SLCCB of CWS is highly sensitive to these parameters. The economic feasibility of CWS boost with increasing discount rate and reclaimed water tariffs, as well as with decreasing project's life span and internal costs. The conclusion of this research demonstrates that investment in CWS is economically viable if External parameters are taken into consideration.

Evaluation of 35 kWp on grid solar power plant based on economic and environmental factors in ESDM office Jawa Tengah, Indonesia

The existence of Solar Power Plant is very much needed in supplying clean, cheap and sustainable electricity. New renewable energy power plants are very important to replace power plants that use fossil fuels. Therefore, it is necessary to evaluate the performance of Solar Power Plant that is how much the operational costs and how much CO2 emissions can be reduced. This study describes an investment feasibility assessment or economic analysis using the calculation of NPV (Net Present Value), PI (Probability Index) and DPP (Discount Payback Period) and environmental analysis, that is knowing the amount of CO2 emission reduction from the use of Solar Power Plant analysed using criteria according to IPCC standards (Intergovernmental Panel on Climate Change). The research location of Solar Power Plant on Grid 35 KWP Office of the Energi and Sumber Daya Mineral (ESDM), Jawa Tengah, Indonesia. The results of this study indicate that the NPV of this PV mini-grid > 0 is Rp. 3,331,537.-PI, 1.0039, DPP 24 years 6 months and Payback Period 8.74 years, which means this investment is feasible to continue. Meanwhile, the CO2 emission that can be reduced is 44.718.42 kgCO2/year. These results indicate that Solar Power Plant on Grid 35 KWP the ESDM office location in Central Java is feasible and profitable from an economic and environmental criterion.

CASE STUDY: ACTIVE LEARNING TEACHING METHOD FOR COURSES IN FINANCIAL MANAGEMENT

The use of case studies is an active learning teaching method that enables students to apply and analyze course material. The focus of the described case is cash flow estimation for a new project, capital budgeting decision. The case is designed to specifically consider the effects of changing exchange rates and determine ways to mitigate exchange rate risk. This case study includes discussion questions related to objectionable business activity, weighted average cost of capital, cash flow estimation, net present value calculation, exchange rate risk, and sensitivity analysis. This case is appropriate for both undergraduate and graduate courses in financial management. Additionally, this case can be used in courses in entrepreneurial finance.

Net-Metering vs. Net-Billing from the Investors Perspective—Impacts of Changes in RES Financing in Poland on the Profitability of a Joint Photovoltaic Panels and Heat Pump System

The paper explores the impacts of changes in renewable energy sources (RES) financing in Poland on the profitability of coupled photovoltaic panels and heat pump systems. The profitability analysis is conducted with the use of Net Present Value calculation and the return on investment period. The degree of change in profitability of using photovoltaic panels in Poland is dependent on the method of their financing. The analysis is carried out for two different photovoltaic support schemes: (1) the net-metering scheme currently in force in Poland; (2) the net-billing system scheduled for implementation in the year 2022. It is assumed for the analysis that two alternative heating and electricity supply systems for a single-family building will be operated: (a) a standard solution used in Poland consisting of a natural gas-fired boiler for heating and the purchase of electricity from the power grid, (b) an air/water heat pump used to heat the building, and electricity obtained from photovoltaic panels, also used to power the heat pump. A sensitivity analysis is carried out, examining the impact of several key parameters relevant for the profitability of such investments, such as average annual increase in the purchasing or selling prices of electricity, purchasing prices of natural gas, and inflation rate. The conclusions concern the possible consequences of introducing a new support scheme for photovoltaics in Poland. The highest profitability of all considered solutions is for the current scenario for heat pump and pv installation with the capacity to meet the demand in the last year of operation. The introduction of changes in the new RES law (2021) in Poland will reduce the profitability of investments in pv panels, leading to a slowdown in the investments in the pv installations.

PECULIARITIES OF DETERMINATION OF ECONOMIC INDICATORS OF EXECUTIBILITY OF IMPLEMENTATION OF MEASURES TO INCREASE ENERGY EFFICIENCY

The work is devoted to the analysis of the peculiarities of determining the economic indicators of the feasibility of implementing measures to improve energy efficiency. In contrast to energy saving, which aims to reduce the consumption of energy resources, energy efficiency is a matter of appropriate energy consumption. That is, the use of less energy for the same level of supply of buildings or industries. The topic is relevant, because now energy prices are rising every year. At the same time, the International Energy Agency estimates an increase in total resource needs by 25% by 2040.
 To achieve this goal, standard measures aimed at improving the energy efficiency of buildings, the effects of the implementation of these measures, a number of economic indicators, including PP, ARR, NPV, PI, BCR, SIR, MARR, IRR and DPP, were analyzed, evaluated and grouped. The focus was on the dynamic group of indicators due to the fact that their calculation involves the use of a discounting procedure. The general scheme of all dynamic indicators is the same and is based on forecasting costs and revenues for the planning period. The indicators of this group take into account changes in the value of money over time, which is neglected by the indicators of the static group. The most popular indicators are the calculation of net present value (NPV) and the definition of profitability index (PI). This work can be used to solve the problem of low energy efficiency and insufficient funding for the modernization of the building

Analisis Finansial Agroindustri Coco Fiber di Kabupaten Padang-Pariaman

The potential of coconut owned by Padang Pariaman Regency with production reaching 35,436 tons in an area of 40,755 hectares strongly supports the development of agroindustrials in the countryside. The development of rural industries will create new jobs so that the community economy will increase. Coconut has a lot of derivative products, one of which is cocofiber produced from coconut coir. Coconut coir itself is one of the remaining coconut products that can be processed so as to increase the value of the product. Location determination and financial analysis can help potential investors to make cocofiber agroindustry development decisions. The method used to determine the location of the factory is gravity location model (GLM), using data on the coordinate point of coconut IKM in Kab. Padang Pariaman. For financial analysis is calculated using Net Present Value (NPV) and Internal Rate of Return (IRR). Both of these methods are expected to illustrate whether the development plan of the cocofiber industry in kab. Padang pariaman should be done or not. Based on the results of calculations using the GLM method, the optimal factory location selected is in the Limau River area of Padang Pariaman Regency with coordinate points (-0.55904, 100.0827). NPV showed a positive value and the IRR gave a result of 11.6%. The results showed that the calculation of NPV and IRR obtained results that showed that the construction of a cocofiber factory on the Limau Kab. Padang Pariaman River was feasible to carry out.

A New Comprehensive Approach to Assess the Probability of Success of Development Programs Before Pivotal Trials.

The point at which clinical development programs transition from early phase to pivotal trials is a critical milestone. Substantial uncertainty about the outcome of pivotal trials may remain even after seeing positive early phase data, and companies may need to make difficult prioritization decisions for their portfolio. The probability of success (PoS) of a program, a single number expressed as a percentage reflecting the multitude of risks that may influence the final program outcome, is a key decision-making tool. Despite its importance, companies often rely on crude industry benchmarks that may be "adjusted" by experts based on undocumented criteria and which are typically misaligned with the definition of success used to drive commercial forecasts, leading to overly optimistic expected net present value calculations. We developed a new framework to assess the PoS of a program before pivotal trials begin. Our definition of success encompasses the successful outcome of pivotal trials, regulatory approval and meeting the requirements for market access as outlined in the target product profile. The proposed approach is organized in four steps and uses an innovative Bayesian approach to synthesize all relevant evidence. The new PoS framework is systematic and transparent. It will help organizations to make more informed decisions. In this paper, we outline the rationale and elaborate on the structure of the proposed framework, provide examples, and discuss the benefits and challenges associated with its adoption.

Peatlands Are More Beneficial if Conserved and Restored than Drained for Monoculture Crops

Peatlands are especially important but fragile tropical landscapes. The importance of peatlands is owing to their ability to 1) sequester a considerable amount of terrestrial carbon, 2) store freshwater, and 3) regulate floods during the rainy season. Nowadays, extensive peatland degradation occurs because of peatland utilization for agriculture purposes, causing severe environmental consequences such as carbon emission, loss of biodiversity, risk of flooding, and peat fire. Meanwhile, local planners and decision makers tend to overlook the long-term strategic function of peatlands for carbon storage and hydrological regulation, preferring peatland utilization for short-term economic benefits. The objective of our study is to quantify the total ecosystem services (except biodiversity) of a tropical peatland landscape in various peat-utilization scenarios to help build awareness among local planners and decision makers on the strategic tradeoff between peatland utilization and restoration. Studies on the total ecosystem services in a tropical peatland landscape involving hydrological regulation are still rare. Based on the net present value calculation, provisioning services, carbon regulation, and hydrological regulation in our study area account for 19, 70, and 11% of the total ecosystem services, respectively. Based on uncertainty analysis, at any combination of the social cost of carbon emission (within a range of USD 52.7–USD 107.4) and discount rate (within a range of 5–10%), the enrichment of peatlands with paludiculture crops (e.g., jelutong) shows superior ecosystem services compared to other peatland-utilization scenarios. Conversely, planting peatlands with monoculture crops, which are associated with peatland drainage, shows a rapid decrease in the total ecosystem services. The fluvial carbon export in our study, which is often neglected in a peatland carbon budget, increases the estimate of the total carbon budget by 8%. Restoring undrained peatlands with paludiculture crops such as jelutong contributes positively to carbon sequestration and potentially reduces carbon emissions by 11%. These quantitative findings can help local planners and decision makers in understanding the tradeoff between the long-term benefits of peatland restoration and the short-term economic benefits of peatland utilization for monoculture crops.

ASPEK BISNIS USAHA NGAMBING DI KELAPA GADING JAKARTA UTARA

The writing of the Ngambing business plan is due to the changing lifestyle of the general public who are interested in new, practical products that can support this lifestyle. So the author opened a goat satay box rice business which is rarely found. Ngambing has competitors in the same industry, but are presented with their own uniqueness. Therefore, an analysis of the industry and competitors has been carried out and the results can be seen the advantages and disadvantages of each business. Ngambing provides products in the form of goat satay rice boxes with various choices of Indonesian spices. And use a variety of marketing strategies. Ngambing has a production plan flow that involves internal and external parties. Ngambing plans the need for five employees to carry out its operational activities. The initial investment required by Ngambing is Rp. 695,868,373. Sources of funds obtained from personal savings and parents. Ngambing has considered the impacts and risks of existing businesses, and tries to minimize them according to applicable standards. From the results of the calculation of Net Present Value, Payback Period, Profitability Index, and Break Even Point are declared feasible to be run by the company.
 Keywords: NPV, Payback Period (PP), Profitability Index (PI), BEP.

Notional Interest Deduction – Impact on the Cost of Equity in Investment Projects

Purpose: The Notional Interest Deduction (NID) was introduced to achieve equal treatment of debt and equity financing by granting an additional tax deduction from self-financing. Our purpose was to analyze the practical meaning of the introduced mechanism as a factor of the Weighted Average Cost of Capital (WACC) calculation and evaluation of the efficiency of development projects. In the art, the WACC is used to determine the rates of discount for the calculation of future cash flows (CF) and net present value (NPV) of investment projects. Design/Methodology/Approach: The NID mechanism is recognized as the Allowance for Economic Growth (ACE) and the countries benefiting from this relief are recognized as applying the ACE regime. The individual ACE regime is monitored and evaluated for compliance with the European Code of the Conduct Group for business taxation. The documents published by the Council of the European Union became the basis for the tax shield rate analyses and assessment of the impact of NID on WACC changes. Findings: It has been shown that the benefits of NID mechanism can correct Weighted Average Cost of Capital in minus and the differences between countries result from the ACE regime model used, the method of calculating the qualified base and the method of determining the reference rate for the calculation of the notional interest deduction. Practical Implications: The presented use of the notional interest deduction mechanism will fill the gap in the literature on the subject and indicate new opportunities to study the efficiency of the development of organizations. The results can also help practitioners to identify a mechanism whose use may be beneficial to the company due to the possibility of a more precise assessment of the efficiency of the investment project. Originality and Value: The NID mechanism is relatively new and the issues related to it have not yet received much analysis, in particular in connection with non-tax benefits. Meanwhile, taking into account the effects of ACE regime in discounting cash flows may affect the decision to implement or reject an investment project.

Viability analysis for use of methane obtained from green hydrogen as a reducing agent in copper smelters

This study explores the use of green hydrogen as a flexible and environmentally-friendly energy vector in copper mining. The refining of copper sulphide ores involves several stages, such as comminution, froth flotation and smelting. The latter produces a higher concentration of copper through chemical transformations of copper sulphide ores. Reducing agents such as coal, coke, ferrosilicon and diesel are typically used in this step, but these reagents unfortunately have a considerable environmental footprint. The main goal of this work was therefore to perform a techno-economic analysis for methane production from the use of green hydrogen as a reducing agent for the smelting stage. The methodology involved the evaluation of the project based on a Net Present Value calculation and a sensitivity analysis of the main parameters which were performed using Oracle Crystal Ball software. The main results show a Net Present Value of 5.459 M USD and an 11.8-year pay-back. Multiparametric analysis shows that NPV is positive with 97.32% of confidence and that the main variable affecting the NPV is the methane price (contribution to variance of 97,8%). We conclude that the use of green hydrogen in copper smelting is a technically viable solution with economic and environmental benefits. The economic evaluation could be further improved with the incorporation of the heat and oxygen by-product, further reducing the CO2 emission.

Research on the impact of financial transmission rights on transmission expansion: A system dynamics model

With the development of the power market, the traditional transmission congestion management method of using a power generation plan is no longer applicable, and congestion management using financial transmission rights (FTRs) is becoming a trend. However, after the introduction of FTRs, the profit from transmission lines changes, and those changes affect the expansion of and investment in transmission lines. Therefore, this paper constructs a system dynamics analysis model and presents specific calculation methods and a case analysis. Load growth, construction time, congestion, the step nature of the bid from generating units, and relative changes in the locational marginal prices (LMPs) at the sink and source nodes under the expansion and non-expansion scenarios are considered for a simulation calculation of net present value of transmission expansion project. Sensitivity analyses of factors such as generator bid prices, transmission expansion costs, the proportion of expansion capacity to transmission congestion, and the market maturity of FTRs are analysed. The results show that decision-making on the basis of transmission expansion investment in combination with FTRs is feasible and such decision-making can reflect the value of transmission expansion via the market, which conforms to market rules. That decision-making method is very important for the marketisation of power transmission.

Net Present Value, Duration, and CAPM in Light of Investment Theory: A Comment on Kruk

In her paper “Corporate Risk Evaluation in the Context of Austrian Business Cycle Theory” recently published in this journal, Joanna Kruk aims to investigate how artificially low interest rates resulting from central bank intervention distort individual investment appraisals and ultimately result in both entrepreneurial misjudgment and resource-wasting malinvestment, fueling the business cycle. She identifies entrepreneurs’ net present value calculations, supposedly unadjusted for risk, as a major issue and suggests adjusting those calculations for risk via both the duration method and the Capital Asset Pricing Model to mitigate the distorting effects. Her argumentation is, however, trapped in neoclassical reasoning and is adversely affected by several misconceptions of the net present value criterion. This comment seeks to reveal those fallacies and explain how to address uncertainty when using net present value calculations to make those calculations part of the solution rather than part of the problem of entrepreneurial misjudgment. The findings are derived from German investment theory rooted in the Austrian school of thought, meaning that they differ compared to those of neoclassical finance theory.

Muğla İli Köyceğiz İlçesinin Elektrik İhtiyacının Hibrit Enerji Sistemleri İle Karşılanması ve Teknoekonomik Açıdan İncelenmesi

In this study, technoeconomic analyses and environmental comparisons of various hybrid systems that will ensure that electricity needs are met independently of the grid of Köyceğiz district of Mugla, which has a population of about 40,000, were made. The unit energy cost of the hybrid energy system consisting of Solar Panel-Wind Turbine and Battery, which is planned to meet the electricity needs of the district with an average daily electricity consumption of 150,000 kWh, has been made net present value calculations. Homer (Hybrid Optimization Model for Electric Renewable) program was used to make these analyses. During the evaluations, various parameters (generator working load, wind turbine tower height, battery operating intervals, etc.) were changed for the system to be installed and sensitivity analyses were made. As a result of the study, the unit energy cost of the system, which can be installed independently of the grid, was calculated as $0.182/kWh. Environmentally renewable and sustainable is the positive side of these systems. In addition, it has been observed that the cost decreases when parameters such as fuel cost, discount and inflation rates change.

Practical Applications of An Inconvenient Fact:Private Equity Returns and the Billionaire Factory

In <b>An Inconvenient Fact: <i>Private Equity Returns and the Billionaire Factory</i></b>, from the December 2020 issue of The <b><i>Journal of Investing</i></b>, author <b>Ludovic Phalippou</b> (of the <b>Saïd Business School</b> at the <b>University of Oxford</b>) challenges the perception that private equity (PE) provides institutional investors with higher returns that justify its higher fees. PE is not available to the general public—and since PE investments are not continuously traded, there are no publicly available measures of PE rates of return. Therefore, PE firms use internal rate of return (IRR) as their primary advertised performance measure. However, a more appropriate measure of PE performance is based on a net present value (NPV) calculation, such as the public market equivalent (PME). Using this performance measure, Phalippou shows that US PE has produced about the same net-of-fees returns as the most common US stock indexes since 2006. Meanwhile, a small number of PE managers have become billionaires by receiving incentive fees based on absolute performance, not performance relative to any benchmark. The author questions who really benefits from PE investing, explains why pension funds and universities continue to embrace it, and offers suggestions to make PE investing more sustainable. <b>TOPICS:</b>Private equity, statistical methods, performance measurement

Pooling the cable: A techno-economic feasibility study of integrating offshore floating photovoltaic solar technology within an offshore wind park

In this paper, a techno-economic analysis is performed to assess the feasibility of adding an offshore floating solar farm to an existing Dutch offshore wind farm in the North Sea, under the constraint of a certain fixed cable capacity. The specific capacity of the cable that connects the offshore park to the onshore grid is not fully used due to the limited capacity factor of the wind farm. The principle of cable pooling allows to add floating solar capacity. Using weather data it is found that adding solar capacity leads to forced curtailment due to the cable capacity, but this is quite limited as result of the anti-correlation of the solar and wind resource. For the economic analysis, different scenarios regarding subsidy measures are considered for the calculation of net present value and levelized cost of electricity. Also the optimum additional PV capacity for each scenario is computed. The results show that with higher cost per Wp, optimum PV capacity decreases, but more favourable subsidies lead to higher optimized PV capacities. As the aim of the paper is not limited to a case study a methodology is developed for generalization of the techno-economic analysis of a hybrid solar/wind park. In this generalization, the initial investment, system degradation, cable capacity, number of hours when each system is active, and energy price, are implemented to compute the optimum PV capacity regarding the net present value as an indicator for economic analysis of the project.

Analysis of Financial Problems of Wind Farms in Poland

Wind energy has been operating in Poland for over 20 years, but many opinions on its profitability are based on publications from other countries and simulations prepared by manufacturers. However, the truth is that the climatic specificity of various countries and price relationships, especially energy prices and subsidies, significantly differentiate this profitability depending on the country. The publication aimed to look at the profitability of wind farms in Poland from three perspectives: financial analysis, NPV (Net Present Value) calculation for older wind farms (2006–2014), and break-even price of energy for these farms (for a non-negative NPV). The research hypothesis set out in the publication stated that wind farms from this period require higher energy prices than current market prices in Poland to achieve a return on invested capital. An element of novelty was calculating the energy price range that would provide an opportunity for at least some of the older farms operating in the green certificates scheme to achieve a positive NPV. We also attempted to demonstrate that the loss of control over the prices of green certificates, which took place in 2014–2017, led to such a decrease in energy prices that the 2006–2014 wind farms suffered a net loss.

An Inconvenient Fact:Private Equity Returns and the Billionaire Factory

In <b>An Inconvenient Fact: <i>Private Equity Returns and the Billionaire Factory</i></b>, from the December 2020 issue of The <b><i>Journal of Investing</i></b>, author <b>Ludovic Phalippou</b> (of the <b>Saïd Business School</b> at the <b>University of Oxford</b>) challenges the perception that private equity (PE) provides institutional investors with higher returns that justify its higher fees. PE is not available to the general public—and since PE investments are not continuously traded, there are no publicly available measures of PE rates of return. Therefore, PE firms use internal rate of return (IRR) as their primary advertised performance measure. However, a more appropriate measure of PE performance is based on a net present value (NPV) calculation, such as the public market equivalent (PME). Using this performance measure, Phalippou shows that US PE has produced about the same net-of-fees returns as the most common US stock indexes since 2006. Meanwhile, a small number of PE managers have become billionaires by receiving incentive fees based on absolute performance, not performance relative to any benchmark. The author questions who really benefits from PE investing, explains why pension funds and universities continue to embrace it, and offers suggestions to make PE investing more sustainable. <b>TOPICS:</b>Private equity, statistical methods, performance measurement

Visual Presentation of MIRR and MNPV Calculations

Project cash flows and modified cash flows are presented in an illustrative graphic within Excel for the live or virtual classroom. Further, the graphic computes and displays the relevant modified internal rate of return (MIRR) and modified net present value (MNPV), with associated formulas. The presentation allows for a discussion of the reinvestment assumption attributed to the internal rate of return (IRR) and the net present value (NPV) calculations.