Ressources used to get more ressources later Cost – can be estimatet or we know Sales/benefits - has to estimate

1. Investment
• Chap. 11 (10)

2. Intro
• Have any of you tried to invest?

3. What is an investment?
• Ressources used to get more ressources later
• Cost – can be estimatet or we know
• Sales/benefits - has to estimate

4. ©Financial Management, Lone Hansen, Torben Rosenkilde Jensen & Morten Dalbøge, Hans Reitzels Forlag, 2016

5. Investments
• Build a ship
• Farmer
• Machine
• Marketing

6. Investment dilemma
• Many options
• Return
• Risk - longer period => higher risk
• Forced investment - otherwise closes the
company

7. Remember opportunity cost
• What could alternatively be invested in?
• Large investments locks(can not make new
investment) the company for many years
• Business value - which can not be easily
quantified

8. Investment calculations
• It is good to have knowledge about there are
different methods, but it is not active
knowledge!
• Calculations can all be found in excel.
– Variable:
– investment amount
– The annual net payments
– The scrap value
– The calculation rate
– The lifetime

9. The capital value method
• Calculate the present value of future
payments
• If the value is positive, the investment is
beneficial

10. ©Financial Management, Lone Hansen, Torben Rosenkilde Jensen & Morten Dalbøge, Hans Reitzels Forlag, 2016

11. The internal rate of return method
• Displays in% a return on that investment - is it
greater than the calculation rate, the
investment is favorable
• When the capital value is 0 then we have the
internal rate

12. Payback method
• How long does it take before the investment
is paid back
• Can also be used for process optimization - it
costs 100 hours and we save 10 hours a week
• Used in the IT world - how we optimize
operation
• Short-term investments

13. Real life – when is interest importent?
• Financial investments
• Companies where payments are relatively
known and the investment is long-term and
large
– Leasing
– Utilities - gas, electricity etc..
– Real Estate – Rent
– Shipping

14. ©Financial Management, Lone Hansen, Torben Rosenkilde Jensen & Morten Dalbøge, Hans Reitzels Forlag, 2016

15. ©Financial Management, Lone Hansen, Torben Rosenkilde Jensen & Morten Dalbøge, Hans Reitzels Forlag, 2016

16. Case bun
Look only on production - not the sales part(you
just produce and can sell all you want at a price of
2,50 kroner) You can use the owen from 23 to
0600.
You can now invest in machines (you can not
change the owen)
Find a machine to invest in and make a calculation
Calculate the profit that the business make

17. Work in Excel
• Build NPV – inv. 10.000.000 and paymet is
560.000 per year, interest is 6%. What are
your NPV after 20 years?
• What are the payback after 20 years?

18. Hotel
• Minibar or vending machines?

19. Think
• What do you need?
• Start in one corner and work you through…
• You will find new things on the way…
• Inspiration - What have we worked with?

20. Minibar or vending machines?
• Budget – cost, sales (and cash flow)
– Initial
– Maintence
• Lifetime on machines
• Process map