1) The document discusses strategies for optimizing networks in a way that considers long-term risks and costs beyond just short-term savings.
2) It uses a hypothetical example of extending leased circuits to new hubs to illustrate how this could create hidden costs from penalties for not meeting commitments in other plans that were not considered.
3) The author advocates using forecasting and risk analysis to evaluate multi-year cash flows under different optimization scenarios and levels of demand change in order to select strategies that balance savings and risk over the long-run.
The Asset Return - Funding Cost Paradox: The Case for LDINorman Ehrentreich
Presentation for the IQPC Pension Plan De-Risking Conference on November 9th and 10th in New York (preliminary draft)
Proves that lower returning LDI strategies can result in lower funding costs than higher returning, but more volatile equity strategies. Furthermore argues that this is most likely the standard case in reality.
The Asset Return - Funding Cost Paradox: The Case for LDINorman Ehrentreich
Presentation for the IQPC Pension Plan De-Risking Conference on November 9th and 10th in New York (preliminary draft)
Proves that lower returning LDI strategies can result in lower funding costs than higher returning, but more volatile equity strategies. Furthermore argues that this is most likely the standard case in reality.
Monte Carl Simulation is a powerful and effective tool when used properly helps to navigate the expected Net Present Value NPV. This presentation helps to improve the pattern to ackowlege onthe Odessa Investment by Decision Dres.
Enhance your audiences knowledge with this well researched complete deck. Showcase all the important features of the deck with perfect visuals. This deck comprises of total of twenty three slides with each slide explained in detail. Each template comprises of professional diagrams and layouts. Our professional PowerPoint experts have also included icons, graphs and charts for your convenience. All you have to do is DOWNLOAD the deck. Make changes as per the requirement. Yes, these PPT slides are completely customizable. Edit the colour, text and font size. Add or delete the content from the slide. And leave your audience awestruck with the professionally designed Financial Expense PowerPoint Presentation Slides complete deck. http://bit.ly/31tQk6l
Schneider, Arnold, (2012) Managerial Accounting, United States, .docxanhlodge
Schneider, Arnold, (2012) Managerial Accounting, United States, Bridgepoint Education Inc
The Evaluation Methods
The evaluation methods discussed here are:
1.
Present value methods (also called discounted cash-flow methods).
(a)
Net present value method (NPV).
(b)
Internal rate of return method (IRR).
2.
Payback period method.
3.
Accounting rate of return method.
Nearly all managerial accountants agree that methods using present value (Methods 1a and 1b) give the best assessment of long-terminvestments. Methods that do not involve the time value of money (Methods 2 and 3) have serious flaws; however, since they are commonlyused for investment evaluation, their strengths and weaknesses are discussed.
Net Present Value Method
The net present value (NPV) method includes the time value of money by using an interest rate that represents the desired rate of return or, atleast, sets a minimum acceptable rate of return. The decision rule is:
If the present value of incremental net cash inflows is greater than the incremental
investment net cash outflow, approve the project.
Using Tables 1 and 2 found at the end of this chapter, the net cash flows for each year are brought back (i.e., discounted) to Year 0 andsummed for all years. An interest rate must be specified. This rate is often viewed as the cost of funds needed to finance the project and is theminimum acceptable rate of return. To discount the cash flows, we use the interest rate and the years that the cash flows occur to obtain theappropriate present value factors from the present value tables. A portion of Table 1 appears below showing the present value factors (theshaded numbers), corresponding to an interest rate of 12 percent, for each year during the Clairmont Timepieces project's life.
Periods
(n)
1%
2%
4%
5%
6%
8%
10%
12%
14%
15%
16%
0
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1
0.990
0.980
0.962
0.952
0.943
0.926
0.909
0.893
0.877
0.870
0.862
2
0.980
0.961
0.925
0.907
0.890
0.857
0.826
0.797
0.769
0.756
0.743
3
0.971
0.942
0.889
0.864
0.840
0.794
0.751
0.712
0.675
0.658
0.641
4
0.961
0.924
0.855
0.823
0.792
0.735
0.683
0.636
0.592
0.572
0.552
5
0.951
0.906
0.822
0.784
0.747
0.681
0.621
0.567
0.519
0.497
0.476
6
0.942
0.888
0.790
0.746
0.705
0.630
0.564
0.507
0.456
0.432
0.410
7
0.933
0.871
0.760
0.711
0.665
0.583
0.513
0.452
0.400
0.376
0.354
8
0.923
0.853
0.731
0.677
0.627
0.540
0.467
0.404
0.351
0.327
0.305
9
0.914
0.837
0.703
0.645
0.592
0.500
0.424
0.361
0.308
0.284
0.263
10
0.905
0.820
0.676
0.614
0.558
0.463
0.386
0.322
0.270
0.247
0.227
These present value factors are used in Figure 10.2 to discount the yearly cash flows to their present values. In Figure 10.2, the net cashinvestment ($95,000) is subtracted from the sum of cash-inflow present values ($137,331). When the residual is positive, the project's rate ofreturn (ROR) is greater than the minimum acceptable ROR. If:
Present value of incremental net cash inflows ≥ Incremental investment cash outf.
This deck consists of total of twenty two slides. It has PPT slides highlighting important topics of Operating Expense PowerPoint Presentation Slides. This deck comprises of amazing visuals with thoroughly researched content. Each template is well crafted and designed by our PowerPoint experts. Our designers have included all the necessary PowerPoint layouts in this deck. From icons to graphs, this PPT deck has it all. The best part is that these templates are easily customizable. Just click the DOWNLOAD button shown below. Edit the colour, text, font size, add or delete the content as per the requirement. Download this deck now and engage your audience with this ready made presentation. http://bit.ly/2UC81PE
The Total Economic Impact Of NetApp Solutions For Cloud Service ProvidersNetApp
In late 2011, NetApp commissioned Forrester Consulting to examine the total economic impact and business case justification for independent service providers to build and deliver storage-as-a-service (StaaS) to their customers using NetApp solutions. The purpose of this study is to give service providers a framework to evaluate the potential financial impact on their businesses if they build their cloud service offering on the NetApp platform.
Monte Carl Simulation is a powerful and effective tool when used properly helps to navigate the expected Net Present Value NPV. This presentation helps to improve the pattern to ackowlege onthe Odessa Investment by Decision Dres.
Enhance your audiences knowledge with this well researched complete deck. Showcase all the important features of the deck with perfect visuals. This deck comprises of total of twenty three slides with each slide explained in detail. Each template comprises of professional diagrams and layouts. Our professional PowerPoint experts have also included icons, graphs and charts for your convenience. All you have to do is DOWNLOAD the deck. Make changes as per the requirement. Yes, these PPT slides are completely customizable. Edit the colour, text and font size. Add or delete the content from the slide. And leave your audience awestruck with the professionally designed Financial Expense PowerPoint Presentation Slides complete deck. http://bit.ly/31tQk6l
Schneider, Arnold, (2012) Managerial Accounting, United States, .docxanhlodge
Schneider, Arnold, (2012) Managerial Accounting, United States, Bridgepoint Education Inc
The Evaluation Methods
The evaluation methods discussed here are:
1.
Present value methods (also called discounted cash-flow methods).
(a)
Net present value method (NPV).
(b)
Internal rate of return method (IRR).
2.
Payback period method.
3.
Accounting rate of return method.
Nearly all managerial accountants agree that methods using present value (Methods 1a and 1b) give the best assessment of long-terminvestments. Methods that do not involve the time value of money (Methods 2 and 3) have serious flaws; however, since they are commonlyused for investment evaluation, their strengths and weaknesses are discussed.
Net Present Value Method
The net present value (NPV) method includes the time value of money by using an interest rate that represents the desired rate of return or, atleast, sets a minimum acceptable rate of return. The decision rule is:
If the present value of incremental net cash inflows is greater than the incremental
investment net cash outflow, approve the project.
Using Tables 1 and 2 found at the end of this chapter, the net cash flows for each year are brought back (i.e., discounted) to Year 0 andsummed for all years. An interest rate must be specified. This rate is often viewed as the cost of funds needed to finance the project and is theminimum acceptable rate of return. To discount the cash flows, we use the interest rate and the years that the cash flows occur to obtain theappropriate present value factors from the present value tables. A portion of Table 1 appears below showing the present value factors (theshaded numbers), corresponding to an interest rate of 12 percent, for each year during the Clairmont Timepieces project's life.
Periods
(n)
1%
2%
4%
5%
6%
8%
10%
12%
14%
15%
16%
0
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1
0.990
0.980
0.962
0.952
0.943
0.926
0.909
0.893
0.877
0.870
0.862
2
0.980
0.961
0.925
0.907
0.890
0.857
0.826
0.797
0.769
0.756
0.743
3
0.971
0.942
0.889
0.864
0.840
0.794
0.751
0.712
0.675
0.658
0.641
4
0.961
0.924
0.855
0.823
0.792
0.735
0.683
0.636
0.592
0.572
0.552
5
0.951
0.906
0.822
0.784
0.747
0.681
0.621
0.567
0.519
0.497
0.476
6
0.942
0.888
0.790
0.746
0.705
0.630
0.564
0.507
0.456
0.432
0.410
7
0.933
0.871
0.760
0.711
0.665
0.583
0.513
0.452
0.400
0.376
0.354
8
0.923
0.853
0.731
0.677
0.627
0.540
0.467
0.404
0.351
0.327
0.305
9
0.914
0.837
0.703
0.645
0.592
0.500
0.424
0.361
0.308
0.284
0.263
10
0.905
0.820
0.676
0.614
0.558
0.463
0.386
0.322
0.270
0.247
0.227
These present value factors are used in Figure 10.2 to discount the yearly cash flows to their present values. In Figure 10.2, the net cashinvestment ($95,000) is subtracted from the sum of cash-inflow present values ($137,331). When the residual is positive, the project's rate ofreturn (ROR) is greater than the minimum acceptable ROR. If:
Present value of incremental net cash inflows ≥ Incremental investment cash outf.
This deck consists of total of twenty two slides. It has PPT slides highlighting important topics of Operating Expense PowerPoint Presentation Slides. This deck comprises of amazing visuals with thoroughly researched content. Each template is well crafted and designed by our PowerPoint experts. Our designers have included all the necessary PowerPoint layouts in this deck. From icons to graphs, this PPT deck has it all. The best part is that these templates are easily customizable. Just click the DOWNLOAD button shown below. Edit the colour, text, font size, add or delete the content as per the requirement. Download this deck now and engage your audience with this ready made presentation. http://bit.ly/2UC81PE
The Total Economic Impact Of NetApp Solutions For Cloud Service ProvidersNetApp
In late 2011, NetApp commissioned Forrester Consulting to examine the total economic impact and business case justification for independent service providers to build and deliver storage-as-a-service (StaaS) to their customers using NetApp solutions. The purpose of this study is to give service providers a framework to evaluate the potential financial impact on their businesses if they build their cloud service offering on the NetApp platform.
Capital Expense PowerPoint Presentation SlidesSlideTeam
This complete deck is oriented to make sure you do not lag in your presentations. Our creatively crafted slides come with apt research and planning. This exclusive deck with twenty two slides is here to help you to strategize, plan, analyse, or segment the topic with clear understanding and apprehension. Utilize ready to use presentation slides on Capital Expense PowerPoint Presentation Slides with all sorts of editable templates, charts and graphs, overviews, analysis templates. It is usable for marking important decisions and covering critical issues. Display and present all possible kinds of underlying nuances, progress factors for an all inclusive presentation for the teams. This presentation deck can be used by all professionals, managers, individuals, internal external teams involved in any company organization. http://bit.ly/2Skys9T
lng 1at the 1g out rank-Jigh orma -atten-a li.docxSHIVA101531
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Probability (P) times Outcome = EMV
P=.20 *
< P=.80
$300,000 = +$60,000
-$40,000 = -$32,000
-$50,000 = -$10,000
-$ 20,000 = - $2,000
$60, 000 = $42,000
~
*
Project 2 *
P= .70
Project 1 's EMV = $60,000- $32, 000 = $28, 000
Proj ect 2's EMV = -$10,000- $2,000 + $42, 000 = $30,000
FIGURE 11-7 Expected monetary value (EMV) example
no reimburse ment if it is not awarded the contract. The sum of the probabilities for
outcomes for each project must equal one (for Project 1, 20 percent plus 80 percent) .
Probabilities are normally determined based on expert judgme nt. Cliff or other people
in his firm should have some sense of their likelihood of winning certain projects.
Figure 11-7 also shows probabilities and outcomes for Project 2. Suppose there is a
20 percent probability that Cliffs firm will lose $ 50,000 on Project 2, a 10 percent probabili-
ty that it will lose $20,000, and a 70 percent probability that it will earn $60,000. Again,
experts would ne ed to estimate these dollar amounts and probabilities.
To calculate the expected monetary value (EJvfV) for each proj ect, multiply the proba-
bility by the outcome value (or each potential outcome for each project and sum the results.
To calculate expected monetary value for Project 1, going from left to right, multiply the
probability by the outcome for each branch and sum the results. In this example, the EMV
for Proj ect 1 is $28, 000.
.2($300 ,000) + .8( -$40 ,000) = $60,000- $32,000 = $28 ,000
The EMV for Project 2 is $30,000 .
.2 ( -$50 ,000 ) + .1(-$20 ,000) + .7($60,000) = -$1 0 ,000-$2 ,000 + .$42,000
= $30,000
Beca use the EMV provides an estimate for the total dollar value of a decision , you wa nt
to have a pos itive number; the higher the EMV, the bette r. Since the EJvfV is positive for
both Projects 1 and 2 , Clift"s firm would expec t a positive outcome from eac h and could bid
0n both proj ects. If it had to choose between the two proj ects , perhaps because of limited
resources , Clift"s firm should bid on Project 2 because it has a higher EMV.
443
Project Risk Management
consulting costs might be expanded in the description to say that the organiza-
tion might be able to negotiate lower-than-average costs for a particular consul-
tant because the consultant really e njoys working for that company in that
particular location.
• The categor:y under which the risk event falls: For example, defective server
might fall under the broader category of technology or hardware technology.
• The root cause of the risk: The root cause of the defective server might be a
defective power supply.
• Triggers for each risk: Triggers are indicators or symptoms of actual risk
ev ...
Market analysis of user-financed FTTP system in Palo AltoStephen Blum
The market potential and business case for a user-financed fiber to the premise system in Palo were evaluated by Tellus Venture Associates. Steve Blum, the president of the company, presented the findings to the city's utilities advisory committee on 6 June 2012.
Any incorporated company at the end of the financial year is required to prepare financial statements showing the assets & liabilities, profit or loss for the period, a cash flow statement &get it audited. the audited statements along with the auditor's report & directors report with all schedules is to be submitted to the ROC, shareholders at the annual general meeting, banks, financial institutions, all stakeholders.etc
These statements form the basis of ANALYSIS, WHICH CAN BE (A) VERTICAL ANALYSIS ( B)HORIZONTAL ANALYSIS (C )COMPARITIVE STATEMENTS (D)COST ANALYSIS (E)CASH FLOW ANALYSIS AND SO ON 'The main feature of these analyses will be explained with illustrative examples
Investment on Fixed Assets PowerPoint Presentation SlidesSlideTeam
This complete deck can be used to present to your team. It has PPT slides on various topics highlighting all the core areas of your business needs. This complete deck focuses on Investment On Fixed Assets PowerPoint Presentation Slides and has professionally designed templates with suitable visuals and appropriate content. This deck consists of total of twenty four slides. All the slides are completely customizable for your convenience. You can change the colour, text and font size of these templates. You can add or delete the content if needed. Get access to this professionally designed complete presentation by clicking the download button below. http://bit.ly/381e18A
Similar to White Paper A Strategy For Optimizing Networks (20)
Investment on Fixed Assets PowerPoint Presentation Slides
White Paper A Strategy For Optimizing Networks
1. 2012
A Strategy for Optimizing Networks
Akira Oyama, Principal Consultant
5/6/2012
2. Introduction
A leased network planner is responsible for a number of activities including interconnections, capacity
management, least cost network design and network optimizations. A company with large network operating
expenses tasks its leased network planners to achieve a certain level of network optimization. There is an
optimization target set each year to measure the plan's success.
Because a Key Performance Indicator (KPI) is based on the current year run rate savings for many organizations,
the planner’s network decision is generally based on the monthly cost reduction that can be measured.
Unfortunately, making an optimization decision solely on the measurable monthly savings will lead to mixed
results because the planner failed to address hidden costs that cannot be easily measured, cash flow beyond the
current year and risk factors incurred with the short-term level of cost savings
This paper's intent is to show additional elements needed in the planning decision process that enables the
planner to be able to make the better financial and risk management decisions.
Run Rate Savings
To illustrate a better planning process, I created a hypothetical arrangement where the planner is looking to
extend leased network hubs to minimize the individual circuit loop costs. These circuits are assumed to be under
the AT&T Managed Shared Network Service (MSNS) plan. I assumed the DS1 equivalent average cost is $100
with total DS1 equivalent count of 1,000 in this market. Because the planner, Ellen, is very good and diligent, she
was able to identify 20% of the total circuits with average per cost of $120 that for the extended Competitive
Local Exchange Carrier (CLEC) hubs. She expects per circuit savings of $60. She must also pay $3,000 a month to
establish the new CLEC hubs (10) for this project. To simplify the illustration, I assumed no termination liability
or non-recurring charges associated with this project. Under this scenario, Ellen is able to realize $108K
annualized net savings:
Gross monthly savings: $60 x 200 = $12,000
Net monthly savings: $12,000 - $3,000 = $9,000
Annualized net savings: $9,000 x 12 months = $108,000
Ellen thought that this is not a bad optimization project. The project is initiated and the run rate savings
eventually realized. Case closed. Unfortunately, the actually savings is not as great as Ellen originally thought.
Hidden cost
Ellen's first mistake is failing to understand the financial impact to the MSNS plan and overall cash flow as a
result of initiating the optimization project.
MSNS is a service in which the customer assigns to AT&T the responsibility for facility design and engineering and
routing of point-to-point circuits (DS0 through OC192) from serving wire centers to the aggregation point. 90%
of point-to-point circuits must be committed under this plan (total 900 DS1 equivalent circuits in this scenario).
Because establishing a CLEC transport will lead to the establishment of new demarcation points, 20% of 1,000
DS1 equivalent circuits in this market will result in a MSNS short fall of 100 DS1 equivalent circuits.
www.netstrategysolutions.com Page 1
3. Ellen now realizes that the optimization project will incur a MSNS shortfall penalty of $90,000 ($900 x 100 DS1
equivalent). The adjusted savings will only be $18,000 a year ($108K - $90K), hardly a good project to take on
when there will be additional resources required to extend the circuits and a new CLEC commitment must be
established with turning up the new hubs. If she had known the relationships between the AT&T embedded
plan and her optimization project, she likely would not have initiated the project.
Although it’s not always easy for any planner to incorporate the commitment based carrier plans in their overall
optimization analysis, it’s vital that they address the explicit as well as implicit financial impacts from making any
optimization and planning decisions. Thus, Ellen should
Always have a good understanding of embedded contracts and tariff plans as well as have an idea of how
these plans will be financially impacted as a result of optimization and planning decisions.
Out year Risk Assessment
Let’s assume that the AT&T MSNS plan has 3 years remaining. Ellen must assess the overall cash flow impact to
the MSNS plan for its remaining life as a result of initiating the optimization project. She will also need to
evaluate the potential cash flow risk based on the circuit demand and scale of the optimization project.
Although cash flow evaluation and risk assessment may sound like too much work for Ellen, she doesn’t need a
sophisticated tool to evaluate the multi-year cash flow under different forecast and optimization assumptions.
A simple forecasting tool, like regression analysis, can be applied to predict the future baseline demand. Once
the planner is able to capture the baseline forecast, she can project the multi-year cash flow impact as a result of
optimization decisions.
To illustrate this, I created a simple three-year cash flow projection based on different levels of optimization
project scope and forecast in Table 1. Although extending circuits by 20% will result in the highest financial
return over three year period when circuit growth is at 10% a year (+$397,800), this strategy will also lead to the
biggest financial loss if circuit growth decreases by -10% a year (-$415,800).
For example, establishing new CLEC hubs to minimize the mileage cost is a strategy based optimizing Time
Division Multiplexing (TDM). The AT&T MSNS plan is also a commitment plan based on point-to-point circuits.
Ellen will be taking a huge financial risk, if the customers decide to purchase Ethernet loops instead of TDM
circuits to support their data requirements. If she believes the circuit demand will be flat for the next 3 years as
a result of technology migration and after reviewing trends, scaling down to groom just 10% of circuits instead of
20% will result in the best return ($162,000).
www.netstrategysolutions.com Page 2
4. Annual Growth Projection (table 1)
% of Extension -10% -5% 0% 5% 10%
0% $ (270,000) $ (45,000) $ - $ - $ -
5% $ (313,200) $ (50,850) $ 81,000 $ 89,100 $ 97,200
10% $ (356,400) $ (97,200) $ 162,000 $ 178,200 $ 194,400
15% $ (399,600) $ (145,800) $ 108,000 $ 260,550 $ 291,600
20% $ (415,800) $ (167,400) $ 81,000 $ 311,400 $ 397,800
Ellen must understand the overall demand of the network and be able to select the right planning strategy to
maximize short and long-term cash flow while minimizing risk. She can also introduce another project with
different risk and cash flow characteristics to help reduce the overall project risk while achieving the desired cash
flow. Thus, Ellen should remember that
Trying to achieve the highest short-term monthly savings may not always be a good strategy and may be
taking on too much risk for additional incremental savings. It’s very important to understand the planning
strategy options and impact to the long-term cash flow and risk. Just as in an investment selection, Ellen must
select a project with appropriate risk levels for the desired return and counter the project risk by considering
the right mix of projects that lower the overall risk while maintaining cash flow.
Conclusion
I have seen many cases where planners are asked to initiate additional optimization projects to achieve a run
rate savings goal. Unfortunately, the planning and optimization decisions based on the monthly circuit savings
figure often ends up in creating long-term issues that must be addressed in subsequent years. In addition,
planners may treat these issues in the future as another optimization savings opportunity even though these
issues were created by poor planning decisions made in prior years.
Planning beyond short-term savings through the effective use of forecast and risk analysis in addition to a holistic
network view will help uncover long-term cash flow effects and the sensitivity to change in the cash flow. This
strategy allows the network planner to truly optimize the network.
www.netstrategysolutions.com Page 3