An abstract of a master's thesis
"Simulation Cashflow"
Yakhiv Anna
Introduction
An investment activity has become more intense since Ukraine came out of economic crisis. In order to get investments in the conditions of the market economy it is necessary to prove to the potential investor the attractiveness of money investment into the future investment project. It seems impossible to prove the investment attractiveness of the project without considering the set of risk (risk-management). Thus, the solution of practical tasks of modeling different investment projects cashflow is an issue of the day at the current stage of the economic development of Ukraine.[1]
The example of economical and mathematical model (EMM) of generating the specific investment project
cashflow is given in reference.[2] However, essential simplifications and restrictions do not permit to use it in practice in Ukraine.
The main objects of this paper are:
- To develop the real economical and mathematical model of generating the investment project cashflow in conformity with economic conditions in Ukraine and abolish incorrect assumptions and restrictions;
- Investment risk evaluation based on the analysis of the obtained economic-mathematical model;
1. The analysis of known economic-mathematical model
To solve these tasks the modeling was used in the paper because the analytical solution came across with overwhelming
mathematical difficulties (multiple convolutions of source densities of accidental parameters probability of the studied economical
and mathematical model).
The following was done in the firs part of the problem definition: calculation of value added tax, which is charged on the revenue from the sales of products, if the annual revenue exceeds 3600 exemption limits.
In the second part of the problem definition: the algorithm of implementing accidental cashflow with the aid of the computer program (VBA, MS EXCEL) was developed and the program was tested.
A comparison of the results of researching the developed economical and mathematical model at constant values of accidental parameters and with various laws of their distribution was made.
The following was applied as a characteristic of calculating investment risk of the studied EMM:
- Expectation value of accidental cashflow amounts;
- Interval estimate of accidental cashflows.
where, Q is an annual production output;
P is an expected price;
v is variable cost
F is fixed charges during one year;
I0 is seed money;
n is the term of the project in years;
t is a tax rate;
2. Estimation of investment risk on the basis of results of modelling
Substituting raw values of the model parameters, we received that annual cashflow was 12 250 000 hryvna.
Let us define the volume of a cashflow taking into account an assumption that EMM parameters can change
in time and have some laws of distribution. Input data are shown in table 1. Table 1 - Input data
| Model parameter | Q | P | V | F |
| Distribution law | Regular | Regular | Regular | Regular |
| Expectation value |
10 000 | 11 000 | 9 000 | 5 000 000 |
| Dispersion | 5 | 10 | 5 | 1 |
The volume of annual cashflow of the project taking into account The volume of annual currency flow of the project taking into account the risk was calculated as a result of modeling and was 12 212 974 hryvna. We see that this volume differs from the earlier calculated one and it is less by 37 026 hryvna. This amount characterizes the risk level of the given project.
Thus, it is clear that the uncertainty reduces the amounts of expected cashflows. Taking into account the risk, the average currency flow will be 12 212 974 hryvna, that is 37 026 hryvna less then the value obtained while calculating without taking into account the uncertainty factor and the risk.