Minimum Attractive Rate Of Return Research Articles

Renewable Energy Integration on a High Inflation Economic Scenario by Means of Firework Algorithm, Genetic Algorithm and Monte Carlo Simulation

This paper presents a solution to the Renewable Energy Integration Problem (REIP) by finding the Optimal Configuration of components required in a hybrid microgrid located in Kuwait, such that the cost of energy (COE) is minimized when considering several components such as: solar panels, wind turbines, electric batteries, converters, inverters, diesel generators and connection to the power grid. The optimal configuration is found by evaluating the interaction and effects of several combinations of components via Monte-Carlo simulation, and such configurations are in turn optimized by means of 2 alternative stochastic algorithms: The Genetic Algorithm and the Fireworks Algorithm. The two approaches are compared, concluding that the Fireworks Algorithm provides more variety of configurations along the iterations before reaching convergence. The evaluation by Monte-Carlo simulation is calculated, by means of Present Worth (PW) with a minimum attractive rate of return (MARR) set to 7 percent to represent a high inflation rate-scenario, concluding that both methods can be safely used to optimize the design of hybrid micro-grids under high economical stress.
 
 Received: 18 August 2023 / Accepted: 25 October 2023 / Published: 5 November 2023

Land Readjustment Model for Transit-Oriented Development (TOD) Projects: Generating Optimal Financial Benefits

Transit-Oriented Development (TOD) projects are increasingly recognized as vital components of sustainable urban planning, aiming to create compact, walkable, and mixed-use communities centered around high-quality public transportation systems. However, implementing TOD projects poses significant challenges, especially in land acquisition and redistribution. This research addresses these issues in the context of the MRT Jakarta project and proposes a land readjustment approach as a potential solution. The study combined qualitative and quantitative methods to compare existing and ideal land use in the TOD area and benchmark successful TOD models from different countries. A comprehensive financial analysis was performed to assess the potential financial impacts of the proposed model. The analysis reveals differences between the existing land use in the Fatmawati TOD area and the ideal TOD model, suggesting the need for adjustments to achieve better land use diversity and economic vibrancy. The financial analysis demonstrates positive feasibility for the TOD project, surpassing the minimum attractive rate of return (MARR) threshold. However, the potential value of the reserved area covers only 16% of the total land readjustment (LR) costs, indicating the necessity for further measures to enhance financial feasibility. The study proposes leveraging existing apartment buildings as temporary relocation sites, optimizing resources, and increasing overall financial viability to address substantial relocation costs. Exploring different property redistribution scenarios reveals the importance of balancing landowners' benefits with the developer's financial feasibility for a successful TOD project. Overall, this research provides valuable insights and a comprehensive framework for implementing thriving and sustainable transit-oriented communities in Jakarta. Further research and collaboration among stakeholders are essential to refine the proposed model and ensure successful TOD project implementation in the future. Doi: 10.28991/CEJ-2023-09-10-012 Full Text: PDF

Perhitungan Kelayakan Investasi Mesin Amplas Pada UD. Surya Sejati Dengan Pendekatan NPV Dan IIR

Surya Sejati is a company engaged in manufacturing backrests, seats and table bases, in the production process of table mats there are problems of wasting time in the process of refining table mats, this study aims to analyze the activities of the production process and provide suggestions in the form of a sanding machine , and the results obtained are reduced production time, and work efficiency, the feasibility of the sanding machine will be tested by calculating the depreciation, machine costs, and production capacity time on the sanding machine, in calculating the feasibility of the sanding machine investment using the NPV (net present value) approach ) and IIR (internal rate of return) in order to determine whether the investment is feasible or not in business management at UD. Surya Sejati, in the calculation of investment feasibility the NPV value is more than 0, which is Rp.478,626,819. and the IIR (internal rate of return) value is 30% and the MAAR (Minimum Attractive Rate of Return) value is 12%, with a value (IIR > MAAR)

Highest and Best Use (HBU) Analysis on Vacant Land in Jakarta Garden City, East Jakarta

Land availability in the capital of Indonesia, Jakarta, is dwindling. However, its population is growing. This growth affects population density and activity to rising, as well as the need for land, especially for housing purposes. Moreover, land prices are also escalated over time. Hence, to optimize the available land utilization and value, it is necessary to find the best designation and produce the highest land value. The Highest and Best Use Analysis is used to achieve this goal. By evaluating several aspects, namely, physical, legal, financial, and maximum productivity. This research was applied to an asset of vacant land in Asoca Street, Jakarta Garden City, Cakung, East Jakarta with an area of 3.725,68 m2. After the analysis, it is obtained that apartment is the best designation, producing the highest increase in land value of Rp 131.366.494/m2 and productivity after developed by 591,04%. It is also feasible to develop, because with an investment period of 10 years, the designation produces a net present value greater than zero, which is Rp 418.641.935.213, an internal rate of return greater than the minimum attractive rate of return of 7% which is 22,76%, and a payback period of 4 years, 3 months, and a day.

Financial Analysis of Solar Rooftop PV System: Case Study in Indonesia

The primary barrier to the dissemination of photovoltaic (PV) technology is its high cost as compared to other alternative options. This paper discusses some financial aspects of rooftop PV systems: module cost, BOS cost, useful lifetime, minimum attractive rate of return, and O&M cost. An equation and numerical calculation were made for estimating the unit cost of electricity of a rooftop system. The numerical calculation and simulation were made by taking the condition of Indonesia as the case study. It was assumed that (i) the useful lifetime of the PV system is 20 years, (ii) the annual maintenance cost is two percent of the total capital cost of the system, (iii) taxes and insurance costs are not to be paid, and (iv) capacity utilization is 20 percent. It is found that rooftop PV systems have the potential to provide power at competitive prices for residential with other alternative options for power generation.

Computational tool for technical-economic analysis of photovoltaic microgeneration in Brazil

This paper proposes a new computational tool, called SolarEnergy, which was implemented through an innovative methodology to perform technical-economic analysis of photovoltaic (PV) microgeneration in Brazil. SolarEnergy calculates energy flow and energy bill savings based on the rules of the Brazilian NEM scheme. From the maximization of the net present value, SolarEnergy provides the optimal nominal power according to the orientation and slope of PV panels and the electricity consumption profile. This functionality is crucial to avoid undersizing or oversizing, which commonly occurs in practice. In addition, the tool provides the following information: (i) electricity generation, (ii) net present value, (iii) modified internal rate of return, (iv) discounted payback time, and (v) sensitivity analysis of key parameters (e.g., nominal power, pv system cost, electricity tariff, and minimum attractive rate of return). Currently, such particularities are characterized as relevant differences in relation to other computational tools. The validation and applicability of SolarEnergy are demonstrated from case studies of PV systems installed in the state of Goiás, Brazil.

Comparison of Performance and Economic Efficiency for Greenhouse Solar versus Hot Air Drying: A Case of Crispy Mango Production

This study aimed to compare the performance and economic efficiency of greenhouse solar and hot air drying. These are widely used and inexpensive techniques for preserved fruit production in Thailand. Two drying methods were used to dry mango fruit, var. Nam Dok Mai. During the process of both drying methods, the moisture content of mango slices was reduced from an average 85.6% to 12.5% wet basis. To determine the most profitable dryer system for investment, economic analyses of greenhouse solar and hot air drying, involving the main variables affecting their profitability, were investigated, including production and maintenance cost, capital costs, revenue, and drying capacities. The internal rate of return (IRR), net present value (NPV), benefit to cost ratio (BCR) and payback period (PBP) were all evaluated. The results of economic evaluation revealed that high values of IRR, NPV, and BCR, and low value of PBP made the two drying systems cost efficient. However, when the incremental rate of return (ROR) was determined, 66% incremental ROR was much greater than the minimum attractive rate of return (MARR = 4.875%). Consequently, the greenhouse solar drying method proved to be the most suitable method for small-to-medium-scale entrepreneurs to produce crispy mango.

Analysis of economic viability under risk conditions of a beef cattle feedlot system in São Paulo State, Brazil

Purpose: Assess the sensitivity and economic viability of the beef cattle feedlot system using as a reference a farm located in northern São Paulo State, Brazil.
 Methodology: A multidimensional approach was used to assess sensitivity. Financial results were analyzed in terms of cash flow using the net present value (NPV) as a viability indicator. Risks were incorporated using Monte Carlo simulations, considering feed, animal purchase, and animal selling prices as discrete random variables. The value measure was NPV, calculated using a minimum attractive rate of return of 7.55% per semester. Probabilities were estimated by relative frequency analysis.
 Results: The probability of a feedlot being economically attractive was 30.2%, indicating that the system was not viable in 69.8% of the cases. Sensitivity analysis showed that the feedlot was most vulnerable to fluctuations in selling price (a 1% increase in fed cattle price generated a 46% increase in NPV), followed by feeder cattle price (a 1% increase in feeder cattle price led to a 29% reduction in NPV) and feed price (a 1% increase in feed price produced a 12% reduction in NPV).
 Contributions of the Study: The findings of this study may support new evaluations in representative samples, complement previous studies on the topic, and assist decision makers.

Multiple Internal Rates of Return and Decision Criteria Among Mutually Exclusive and Independent Projects

This paper focuses on solving methods of unique and multiple internal rates of return of the series of cash flow when net present value is equal to zero, and decision criteria of accepting the independent project. When a project's cash flow has only two sign variations, the internal rate of return (IRR) rule is simple and for analysis, the case with an investment’s cash flows with three or more sign variations to have multiple solutions. The study, also, discussed selecting the best one among mutually exclusive projects on the basis of incremental internal rate of return (IRR) analysis. In the case of mutually exclusive projects, selecting projects based on the minimum attractive rate of return (MARR), accept a pure investment opportunity if IRR ≥ MARR, otherwise reject and accept a pure borrowing opportunity if IRR ≤ MARR, otherwise reject. In practice, the internal rate of return is a popular rule for the project accept/reject decisions.

Sensitivity Analysis to Determine the Prospect of Tollroad Investment: Case Study Krian-Legundi-Bunder-Manyar Tollroad

PT Waskita Bumi Wira as the Toll Road Business Entity (BUJT) is investing in the Krian-Legundi-Bunder-Manyar Toll road with a viability gap fund (VGF) scheme. In the 2016 Toll Road Concession Agreement (PPJT) between BPJT-BUJT-PII, several acceptable investment variables have been agreed, namely: total investment value = Rp12,224,389,000,000, average daily traffic volume (LHR) = 21,874 vehicle / day, loan interest = 12.5%, toll tariff for group 1 = Rp1,250 / km, internal rate of return on equity (IRRonEquity) = 17.64%, payback period of 14 years and net present value (NPV) = Rp. 3,731,695,000,000. During the construction, there was a design change and a delay in land acquisition, this causes cost overrun. With a concession period of 45 years, inaccurate risk factors in the prediction of traffic volume growth rates, specific and non-specific risk factors and other uncertainties greatly affect the investment prospects. Therefore investment needs to be reviewed before this toll road is divested in 2025 by sharpening the minimum attractive rate of return (MARR) and LHR variables, then comparing them with the initial business plan. The estimated selling price of the divestment is also examined in this study. The investment valuation criteria that will be used in the sensitivity analysis are NPV and IRRonEquity. The approach in determining MARR is the use of MARRpremium = 15.81%. Sensitivity analysis with a deterministic approach is carried out to obtain limits on changes in investment costs, land acquisition costs, LHR traffic, loans (syndicated loans) to NPV in several tariff scenarios. This research shows that the NPV value is very sensitive to changes in investment costs. It is also known that in the toll tariff scenario according to PPJT compensation can be given in one of the conditions: investment costs increase by more than 7%, LHR traffic is less than 75%, or an increase in loans (syndicated loans) of more than 9%. The analysis of the stochastic approach shows that the probability of not exceeding the investment budget revenue limits due to changes of 37.29% to 46.56%.

Investment analysis of boarding house in tanah abang district

Shelter is one of the basic human needs, including in Indonesia. Shelter can be a boarding house, apartment or hotel. Therefore, there are many investors competing to accommodate these needs because there is opportunities in the investment. Especially in Tanah Abang District, Central Jakarta, which is rapidly developing in boarding house construction. In investing, a feasibility study in financial side is needed that will be faced with uncertainty. This study aims to conduct an investment analysis by analyzing the configuration of boarding room units to maximize the profit using Linear Programming method then to do a risk analysis using the Monte Carlo simulation method to determine the probability of investment success rate. The result of this study shows the best configuration are 2:1:1 for type A: B: C units, with a Net Present Value < 0, Internal Rate of Return < Minimum Attractive Rate of Return, and Payback Period < 15 years. There are < 50% of investment success rate.

Techno-economic and performance evaluation of energy production by anaerobic digestion in Brazil: bovine, swine and poultry slaughterhouse effluents

This work describes anaerobic treatment system modeling, using up-flow anaerobic sludge blanket reactors (UASB) reactors, aiming at biogas energy use, under hydraulic retention times (HRT) of 12, 24, 48, 120 and 240 h, from bovine (slaughter capacity: less than 20, 20 to 40, 40 to 80 and more than 80 heads.h−1), swine (less than 80, 80 to 200, 200 to 400, 400 to 800 and more than 800 heads.d−1) and poultry (less than 600, 600 to 1500, 1500 to 3000 and more than 3000 heads.h−1) slaughterhouse effluents. To techno-economic potential evaluate, four scenarios were designed using the combination of maximum and minimum values for the installation of the treatment system (reactors) and the generator system. The scenarios were applied for all classes of slaughterhouses throughout HRTs established under two project concepts: i) full implementation of the treatment and generator systems and; ii) partial implementation, only the generator system. Economic viability analyzes were performed using Net Present Value (NPV), Internal Rate of Return (IRR) and Minimum Attractive Rate of Return (MARR) criteria. In scenario 1, using minimum unit values for the treatment system (USD 43.23.m−³) and the generator set (USD 287.80.KW−1) and HRT of up to 48 h, all bovine, swine and poultry slaughterhouse classes presented potential and economic viability for energy generation, with gains of up to USD 831.462.78 to bovine slaughterhouse, USD 91.977.88 to swine slaughterhouse and USD 179.150.63 to poultry slaughterhouse. The scenarios 2 and 4 result in unviability for al simulations. The scenario 3 result in viability under specific conditions of implementation (total and/or partial); HRT (12, 24, 48 h and sporadically 120); In 24-h HRT show negatives IRRs; and attractive ratio criteria (use of IRR as MARR). In simulated conditions of scenario 1 the techno-economic analysis is HRT of 24 h and HRT of 12 h in scenario 3, both with the need for post-treatment systems. HRTs of 120 and 240 h were found to be infeasible due to system size and costs involved, as well as a non-significant increase in energy generation when compared to lower HRTs.

Analysis capital budgeting investment projects substation 150 kV for tires company

The electricity consumption continues to increase, including in Indonesia, where the average electricity consumption rises 6.86% per year. In line with the ever-increasing production needs of companies needing more electrical energy during these electrical disturbances often occur due to power shortage. Therefore, the company proposes the investment of the construction of substations 150kv Expected to improve the reliability of electrical energy supply. This research conducted to analyze the value of investment carried by tire companies using historical data and company forecasts using the technical method of economics to analyze its finances. Based on the calculation result with the Payback period (PP) and Discounted Payback Period generates 5.35 years and 6.24 years. Meanwhile, in the calculation of net present value (NPV) obtained favorable results in the 6th year of Rp 40,944,770,640.32, using an interest rate of 5%. In the calculation of the internal rate of return (IRR), the result of 5.5% concluded that the project return is higher than the minimum attractive rate of return (MARR) of the company by 5.17% of the Bank Indonesia interest rate. Then based on the sensitivity analysis gained that the lower the interest rate on this project, then the faster the return on the investment, and vice versa. The overall analysis of the scenario stated that the investment is worthy of running because it brings profit directly to the company.

SIMULASI ANTRIAN PASIEN RAWAT INAP UNTUK MENGURANGI WAITING LIST VIP DI RUMAH SAKIT

Inefficiency of service and the waiting time can occur in inpatient services, especially in VIP rooms. Reduction in waiting lists for patients entering the VIP room is carried out by increasing the bed capacity and the allocation of health workers. The study was conducted by modeling the service system in hospitalization, which began from the patient service at the Emergency Room (IGD) until service in the VIP room of a hospital in Sukabumi. The model was built with 2 scenarios, scenario 1 was designed to improve the performance of the IGD by adding beds and health workers so that patients had an alternative choice in class 1 before getting service in the VIP room, and scenario 2 was designed by not changing the system in the emergency room, but adding 10 VIP rooms. Scenario 2 is a solution and can visually improve the VIP service system by reducing the waiting time by 50.55 hours, with the investment value of net present value (NPV) &gt; 0 and internal rate of return (IRR) 32.2%, against the Minimum Attractive Rate of Return (MARR) 12% per year profitable. Scenario 2 by adding 10 VIP rooms, initially 25 units to 35 units, effectively being able to produce improvements in significantly reducing the waiting list originally from 50.94 hours to 39 minutes there was a decrease (99.23%), and could reduce the utility level or busyness of service in VIP was originally 93.49% to 87.19%. From the results of NPV analysis &gt; 0, and IRR 32.2% assuming MARR 12% per year, constructing 10 VIP rooms in 5 years can give a profit of 20.2% per year. Scenario 2 can be used as the basis for hospitals in making inpatient service system policies, especially in VIP rooms.

Assessment of technical-financial analysis of a zero energy building for Brazilian hot and temperate tropical climate

The growing concern about the consumption of electric energy and environmental resources has led to research on sustainable approaches in construction. Efficient buildings have been built not only to attract new investments but also to take environmental considerations into account. Energy-efficient buildings, known as Zero Energy Buildings (ZEB), use a variety of passive strategies for energy efficiency, as well as for reduction in demand for air conditioning, heating and lighting. However, in order to design a ZEB it is necessary to search for energy efficiency strategies related to the climate where the building is located. These techniques impact directly on cost benefit and energy performance. The objective of this research is to identify efficient approaches for housing, taking into account the influence of climate, of solar irradiation for energy generation, for two Brazilian capitals, Salvador and Curitiba. The cities have the climates classified as Af (tropical climate) and Cfb (hot and temperate), respectively. The methodological procedures were divided into three stages: quantification of the consumption of each passive strategy adopted in order to determine the energy saving; analysis of electricity, quantifying the balance between electric demand and generation; and assessment of the life cycle cost of the net present value considering minimum attractive rate of return and payback. The Internal Rate of Return (IRR) was also calculated. The results show that for the city of Salvador the payback is 6.75 years and IRR of 15.06% and for Curitiba payback is 10.25 years and IRR of 8.49%. These outcomes demonstrate that in hot climate payback happens in less time, due to the high incidence of solar radiation in the year. The application of ZEB becomes advantageous due to the fact of climatic diversity, high solar radiation and mild winter and results in higher returns in less time.

Project Appraisal and the Intrinsic Rate of Return

Building upon Magni (2011)’s approach, we propose a new rate of return measuring a project’s economic profitability. It is called the intrinsic rate of return (IROR). It is defined as the ratio of project return to project’s intrinsic value. The IROR approach decomposes the NPV into project scale and economic efficiency. In particular, NPV is found as the product of the project’s total invested capital and the excess rate of return, obtained as the difference between the IROR and the minimum attractive rate of return (MARR). This approach provides correct project ranking and is capable of managing time-varying costs of capital. In case of levered projects, shareholder value creation is captured by the equity IROR, which we call Intrinsic Return On Equity (IROE) (net income divided by total equity capital invested). If the project is unlevered, the IROE and the IROR lead to the same decision; if the project is levered, and the nominal value of debt is not equal to the market value of debt, the IROE should be preferred to project IROR.

Probabilistic valuation for power generation projects from sugarcane in reserve energy auctions

The power generation from renewable sources is an interesting alternative to the diversification of the energy matrix of a country. This paper presents a probabilistic valuation method for power generation projects from renewable sources. It focuses on biomass plants that use sugarcane bagasse. The main objective is to bring a wider knowledge surrounding projects for investors that participate in energy auctions. Therefore, the highlight is for the net present value that allows us to analyze the financial viability of projects. Two stochastic variables are involved in the problem, the power generation and the energy price in the short-term market. Monte Carlo Simulation and Discounted Cash Flow methods are employed. A case study is carried out for a biomass plant. Sensitivity analysis is presented for different values of investment, bid, and minimum attractive rate of return. For each simulated scenario, the probability distribution of the net present value, the average net present value, and the internal rate of return are calculated. For the analyzed case study, the return of the project is more sensible to the bid value than the investment cost. The proposed method can be used as a tool to assist investors in energy auctions from renewable sources.

Analysis of the economic viability of a photovoltaic generation project applied to the Brazilian housing program “Minha Casa Minha Vida”

In Brazil, distributed grid-connected solar photovoltaic (PV) plays an increasingly role due to advances in PV technology, combined with decreasing capital costs and subsidies. Therefore, this paper aims conduct an economic analysis of two projects in “Minha Casa Minha Vida” (MCMV) governmental program, one in the state São Paulo and the other in the state of Piauí, using distributed photovoltaic power generation. The MCMV is the Brazilian government's housing program that gives access to home ownership to low-income Brazilians in urban and rural areas. Such analysis was undertaken by the evaluation of the net present value (NPV) and internal rate of return (IRR), considering a Minimum Attractive Rate of Return (MARR) and by varying the annual growth of energy tariffs over 25 years of operation, which represents the expected lifespan of solar panels. These two cities were chosen because their federal states have different actions with respect to tax matters. Such difference, in particular, will be examined and explored in this article. Results show that even though Piauí presents a higher average solar radiation than São Paulo, the impact of ICMS exemption guarantees an advantage of investing in São Paulo.

Financial analyses of potential biojet fuel production technologies

AbstractBio‐based jet fuels are projected by the International Civil Aviation Organization (ICAO) to play a major role in meeting greenhouse gas emissions reduction targets. Recent literature has identified promising pathways for biojet fuel production, including several pathways approved by the ASTM International. Despite the importance of this topic, only a few studies have examined the financial metrics of biojet production, and different assumptions make it difficult to compare results. This paper evaluates and compares the financial viability of six key biojet fuel production pathways using appropriate biomass feedstocks. The pathways were analyzed from a technical and financial perspective, utilizing a common discounted cash flow approach and Monte Carlo analysis, considering internal (e.g. scale‐up to commercial scale) and external (e.g. oil price) uncertainties. The hydroprocessed esters and fatty acids technology with oil feedstock had the most promising financial results, with an internal rate of return of over 26% and a 70% probability of exceeding the minimum attractive rate of return (MARR = 15%) even under the most pessimistic scenario. The next most attractive pathway was catalytic hydrothermolysis, which had favorable financial performance, but only under a scenario that assumed an oil price range of $93 to $140 per barrel. Pyrolysis and gasification with Fischer‐Tropsch synthesis presented high financial risk under an oil price range of $50 to $93 per barrel and low technical development scenarios, whereas the alcohol‐to‐jet and direct‐fermentation‐to‐jet technologies were found to be unlikely to achieve the MARR for any of the scenarios. © 2017 Society of Chemical Industry and John Wiley &amp; Sons, Ltd

A Rigorous Mathematical Approach to the Economic Rate of Return (ERR) and its Application to Economic Analysis

The economic rate of return (ERR) is a measure of the profitability of a revenue generating investment based on a single external discount rate which is the hurdle rate or the minimum attractive rate of return (MARR). In this paper, we will highlight on the practical and reasonable interpretation of the (ERR) as a reinvestment rate of the present worth of costs. We shall give the usual mathematical definition of the (ERR) and derive an alternative, more useful, and applicable definition in terms of the benefit-cost ratio. We will also investigate the behavior of the (ERR) function in terms of the (MARR) as a variable. A relationship between the (ERR) and the internal rate of return (IRR) will be established. Finally, the applicability of the (ERR) method as an economic analysis method will be demonstrated.