- •Abstract
- •1. Introduction
- •1.1. Background
- •1.2. Problem and research questions
- •1.3. Aim and Limitation
- •1.4. Outline of thesis
- •1.5. Abbreviation and definition
- •Irr Internal Rate of Return
- •2. Method
- •2.1. Approach
- •2.2. Data collection method
- •2.3. Primary data
- •2.4. Secondary data
- •2.5. Data processing
- •2.6. Validity, reliability and generalization
- •3. Theories
- •3.1. Principal-Agent Problems
- •3.2. Wacc and opportunity cost of capital
- •3.3. Capm and apt
- •3.4. Estimating β
- •3.4.1. Operating leverage and β
- •3.5. The risk and discount rates for international projects
- •3.6. Purposes of performance measurement
- •3.6.1. Eva, Book roi, and ep
- •3.7. Working capital, depreciation and tax
- •4. Own research
- •4.1. Review of pharmaceutical market in Russia
- •3.1.1. Russian companies and them place in market
- •3.1.2. Pharmaceutical company “Zdorovie Ludi”
- •3.2. Research strategy (Roadmap of decision)
- •3.3. International and European contracts
- •3.4. National contracting in a global economy
- •3.5. National contract low and human rights
- •3.6. (Step 1) Juristic analyses and common mistakes of the contract
- •3.6.1. The formation and scope of a contract:
- •3.6.2. The content of a contract:
- •3.6.3. Policing a contract:
- •3.6.4. Performance, discharge and breach of the contract:
- •3.7. (Step 2) Controlling of strategy and consideration the contract as investment project
- •3.8. Transformation the contract to the invest project
- •Risk of delivery (for buyer)
- •Techniques of payment (risk for buyer)
- •3.9. (Step3) Forecast of outflow and inflow
- •3.10. (Step 4) Determination the risk and discount rate
- •3.10.1. Country risk analysis
- •3.11. Commercial counterparty risk analysis
- •3.12. (Step 5) Procedure of estimation and comparison of the contract
- •3.13. Book Rate of Return (Advantages and disadvantages)
- •3.14. Payback Period and Discounted-Payback Period (Advantages and disadvantages)
- •3.15. Internal (or discounted-cash-flow) rate of return (irr) and mirr (Advantages and disadvantages)
- •3.15.1. Lending or borrowing position
- •3.15.2. Multiple rates of returns
- •3.15.3. Mutually exclusive projects
- •3.16. The cost of capital for near-term and distant cash flows
- •3.17. Profitability Index (pi, advantages and disadvantages)
- •3.18. Net Present Value (npv, advantages and disadvantages)
- •3.18.1 Calculate npv with glance of inflation
- •3.18.2 Calculating npv in other countries and currencies
- •3.19. (Step 6) Performance and agency problems
- •4. Results
- •4.1. Simulation model analysis and calculation
- •4.2.1. Wacc as discount rate
- •4.2.2. Manager’s working capital use penalty points
- •4.2.3. Risk-Adjusted Discount Rate (radr) and ceq
- •4.3. Summary of Simulation model analysis
- •4.4. Scenario analysis and calculation
- •4.4.1. Discount rates that based on wacc
- •4.4.2. Discount rates that based on radr
- •4.5. Summary of scenario analysis
- •4.6. Final analysis and Decision Card (Step 7)
- •Decision Card
- •4.7. What could be improved and suggestion for future research.
- •Conclusion
- •References
- •Appendix 1 – 7 (Simulation Model and Scenario analysis calculation) (Excel) Appendix 1 (Excel)
- •Appendix 2 (Excel)
- •Appendix 3 (Excel)
- •Appendix 4 (Excel)
- •Appendix 5 (Excel)
- •Appendix 6 (Excel)
- •Appendix 7 (Excel)
- •Appendix 8 (Interview questions and structure of survey) part 1
- •A) Survey for managers
- •B) Survey for specialist
- •Part 2 Survey of experts
- •Part 3 Results and Conclusion a) Survey for managers
- •Conclusion
- •B) Survey for specialist
- •Conclusion
- •C) Survey of experts
Conclusion
1. The most important conclusion is that for the international contract estimation as invest project the methods that distinguish the time value the contract (NPV, PI and Discounted Payback Period) are the most convenient and those methods which have the forecasted cash flows base. In other words, methods which have accounting dates base might show the incorrect result of estimation.
2. The calculation of IRR shows that it is not necessary to use the contract for estimation especially in the current economical situation (higher inflation and rise-free rates). If manager is used the rules of IRR in practice the manager could reject lot of good contracts (projects).
3. The principals-agents problems could be solved by using the performance measurement indicators and methods of estimation, and the contract as the result of manager’s activities and Managers Penalty Point.
4. The dates which I receive during the estimation of each contract can be used in short-term financing planning if I summarize the dates of each single contract to company portfolio of contracts.
5. I could not find out the special standards for pharmaceutical branch with the exception of industry Beta. In my case, I calculate the industry Beta using statistic dates of countries BRIC. Unfortunately in my country there aren’t useful and systematic statistic risk data, but the industry Beta of pharmaceutical branch in BRIC country is roughly equal. It helps me to calculate it for my case. Other common rules work as usual. For example, a common known theorem MM is good works which I consider in the questions about structure of capital.
6. The best way to use the accounting dates is to use it for compeer forecaster and real results of the company, but the key factor in contract decision is the forecasted dates. They provide the decision maker with the needed information in real time.
7. The results of research can be applied in practice by using the regalement of decision (Seven Steps). This regalement can be used by senior and junior management of export-import company. I think in Russian Federation it’s very important to widely use the methods of estimation of project (contract), which is based on forecasted cash flows and methods which distinguish the time value of money especially this methods are fresh enough for Russian export-import company.
9. For the future research the area of Commercial Paper (CP) would be highly topical, in other words the market share of Short-Term Note (STN) and Medium-Term Note (MTN) will increase essentially after the crisis.
References
Act of legislation
1. Civil Code of Russian Federation.
2. INCOTERMS (2000).
3. EC Directive on Unfair Terms in Consumer Contracts (93/13/EEC).
4. Human Right Act 1998, Great Britain.
5. UNIDROIT Principles of International Commercial Contracts (2004).
6. United Nations Convention on Contracts for the International Sale of Goods (CISG 1988).
7. Unfair Contract Terms Act 1977, Great Britain.
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Articles
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32. W.F. Sharpe, “The capital Asset pricing Model: A ‘Multi-Beta’ Interpretation,” in H.Levy and M.Sanat (Eds), Financial Decision making under Uncertainty, Academic Press, NY, 1977.
Websites
33. www.bloomberg.com
34. www.bis.org
35. www.cbr.ru
36. www.duke.edu/~charvey
37. www.econ.yale.edu/~shiller
38. www.euroland.com
39. www.djindexes.com
40. www.fintools.com
41. www.finance.yahoo.com
42. www.forbes.com
43. www.fibv.com(Word Federation of Stock Exchanges)
44. www.globalfindata.com
45. www.evca.com (European Venture Capital Association)
46. www.jaxworks.com(illustration of accounting breakeven analysis)
47. www.natur-produkt.ru
48.www.pharmavestnik.ru
49. www.valueline.com
50. www.valuepro.net
51. www.quicken.com
52. www.riskmetrics.com
53. www.smartmoney.com