Investment project valuation: a new equity perspective.: An article from: Engineering Economist

This digital document is an article from Engineering Economist, published by Institute of Industrial Engineers, Inc. (IIE) on April 1, 2009. The length of the article is 2913 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available immediately after purchase. You can view it with any web browser.

From the author: We suggest a new approach to calculating a project's net present value, termed the displaced equity method. Based on a straightforward formula, it analyzes a project partially financed with debt from the perspective that every year the amount of outstanding debt displaces an equivalent amount of equity that otherwise would be tied up in the project. Although they represent distinct shareholders" perspectives, the displaced equity method and the equity residual method yield identical net present values and internal rates of return. Every year, the project's value calculated with the displaced equity method is equal to the sum of the project's debt and equity values. In practice, when the schedule of expected outstanding debt amounts is known, using the displaced equity method is an easy way to estimate the project's net present value.

Citation Details
Title: Investment project valuation: a new equity perspective.
Author: Denis Babusiaux
Publication:Engineering Economist (Magazine/Journal)
Date: April 1, 2009
Publisher: Institute of Industrial Engineers, Inc. (IIE)
Volume: 54 Issue: 2 Page: 101(8)

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