- •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
4.4.2. Discount rates that based on radr
Please see the formula 4.7 where I use the RADR method to estimate the discount rate and took the MIBOR as risk-free rate, therefore the discount rate is (25.2705).
r= r (f) + ß(r (m) – r (f)) = 18.59 + 0.723(27.83 – 18.59) = 25.2705
Experts’ estimation Optimistic is 25.275; Most Probable is 25.9880, and Pessimistic is 26.4999 (see the Appendix 9 Part 2)
I would like to present the result of calculation with MIBOR as risk-free rate to calculation the discount rate by use the RADR method. The result of calculation is in tables as the following:
Optimistic scenario discount rate is 25.2705
|
Contract I |
Contract II |
Contract III |
NPV |
227 874.43 |
2280 634.24 |
243 429.73 |
PI |
0.6329 |
0.63349 |
0.70559 |
IRR |
11.35 |
13 |
20.36 |
Table 4.15
Most Probable scenario discount rate 25.9880
|
Contract I |
Contract II |
Contract III |
NPV |
227 808.12 |
227 959.50 |
243 372.27 |
PI |
0.63280 |
0.63322 |
0.705428 |
IRR |
11.35 |
13 |
20.36 |
Table 4.16
Pessimistic scenario discount rate 26.4990
|
Contract I |
Contract II |
Contract III |
NPV |
227 765.14 |
227 919.49 |
243 340.88 |
PI |
0.63268 |
0.63354 |
0.705335 |
IRR |
11.35 |
13 |
20.36 |
Table 4.17
See the formula 4.8 of calculation with WACC as Risk-Free Rate, where the risk-free rate is WACC, therefore the discount rate is (23.5171).
r= 12.26 + 0.723(27.83 – 12.26) = 23.5171
Experts’ estimation Optimistic is 23.5171; Most Probable is 24.4988, and Pessimistic is 24.4988 (see the Appendix 9 Part 2)
I would like to present the result of calculation with WACC as risk-free rate to calculation the discount rate by use the RADR method. The result of calculation is in tables as the following:
Optimistic scenario discount rate is 23.5171
|
Contract I |
Contract II |
Contract III |
NPV |
228 019.81 |
228 158.59 |
243 548.71 |
PI |
0.63337 |
0.6336 |
0.705904 |
IRR |
11.35 |
13 |
20.36 |
Table 4.18
Most Probable scenario discount rate is 24.4988
|
Contract I |
Contract II |
Contract III |
NPV |
227 933.38 |
228 076.09 |
243 465.80 |
PI |
0.63314 |
0.63354 |
0.705569 |
IRR |
11.35 |
13 |
20.36 |
Table 4.19
Pessimistic scenario discount rate 24.9790
|
Contract I |
Contract II |
Contract III |
NPV |
227 892.99 |
228 038.49 |
243 435..81 |
PI |
0.63303 |
0.63344 |
0.705611 |
IRR |
11.35 |
13 |
20.36 |
Table 4.20