Determination Of Residual Value Within The Cost Benefit Analysis For The Projects Financed By The European Union
AbstractThis paper will be later used within the Doctoral thesis: "The Mechanism of Financing Investment Projects by Usage of European Structural Funds", which is currently under development at the University Babeș Bolyai Cluj Napoca, Faculty of Economics and Business Management, under the coordination of the prof. univ. dr. Ioan Trenca. An increasing debate is rising recently between the academic community, the business community, the private lending institutions(banks, investment funds, etc.) and the officials of the Romanian Government and of the European Union regarding the proposed method for calculation of the residual value in the European financed investment projects. Several methods of calculation of the Residual Value were taken into consideration and contested by different parties in order to prepare and to submit financial analysis studies for investment projects proposed to be financed within the European Regional Development Fund(ERDF). In this context, the present paper proposes to address the three main methods of calculation of the residual value and later to study its impact over the indicators, especially over the Internal Rate of Return, obtained in the financial analysis for an investment project proposed by a Romanian medium sized company. In order to establish the proper method which should be used for selection and calculation of the residual value previously published studies and official documentations were analyzed. The main methods for calculation of the residual values were identified as being the following: A. the residual market value of fixed assets, as if it were to be sold, B. accounting economic depreciation formula and C. by using the net present value of the cash flows. Based on these methods the research model was elaborated, and using the financial data of the proposed infrastructure investment was created a case study. According to the realized study a pattern was established for proper determination of residual value and for determination of IRR and methods A and C were proposed to be used. This paper tries to analyze a specific problem of the Romanian enterprises which access European funding, so it can be further used to improve the current methodology of the ERDF programme in Romania: Sectorial Operational Programme "Increase of Economic Competitiveness".
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Oradea, Faculty of Economics in its journal The Annals of the University of Oradea. Economic Sciences.
Volume (Year): 1 (2011)
Issue (Month): 2 (December)
Contact details of provider:
Postal: Universitatii str. 1, Office F209, 410087 Oradea, Bihor
Fax: 004 0259 408409
Web page: http://anale.steconomiceuoradea.ro/
More information through EDIRC
Cost benefit Analysis; Residual value; IRR; Investment; Structural Funds; Valuation;
Find related papers by JEL classification:
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- F35 - International Economics - - International Finance - - - Foreign Aid
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catalin ZMOLE).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.