FPA Workshop 2 Risk assessment of the investment project

Task 1.
According to the given data rate sensitivity of NPV of the project to changes in sales volume and selling prices.

The most likely option

Years of Implementation, pcs. Variable costs / unit. Fixed costs Cost of sales price discounting Revenue Profit ratio at r = 10% discounted net cash flow
1st 1000 3500 3500 4 4000 500 0.9091 454.55
2nd 1000 3500 3500 4 4000 500 0.8264 413.20
3rd 1000 3500 3500 4 4000 500 0.7513 375.65
Total 1243.40


Change NPV DURING swing physical volume of sales by 20%
The change in the NPV swing selling price by 20%

Task 2.
Conduct scenario analysis NPV change depending on changes in sales volume, sales prices, cost of individual components. Estimated probability of each of the scenarios presented in the table.

The most likely option

Years of Implementation, pcs. Variable costs / unit. Fixed costs Cost of sales price discounting Revenue Profit ratio at r = 10% discounted net cash flow
1st 1000 3500 3500 4 4000 500 0.9091 454.55
2nd 1000 3500 3500 4 4000 500 0.8264 413.20
3rd 1000 3500 3500 4 4000 500 0.7513 375.65
Total 1243.4

The best scenario - improvement by 10%
The worst-case scenario - the deterioration of 10%

Task 3.
The Company expects to realize the investment project with the initial investment at the level of 240 mln. Rubles. With a probability of 50% in the first year of the project will bring 200 million. Rubles. However, if market forces will develop positively, the project will in the first year, 500 mln. Rub. (25% chance). Adverse market conditions lead to the fact that the project in the first year would cover only operating costs and net cash flow is equal to 0. The successful implementation of the project in the first year, the second year will allow to increase sales and bring incremental flow of the project up to 900 mln. Rubles. with a probability of 40%. Otherwise, the result of the first year will be doubled. The unfavorable development of the project in the first year, is likely to affect the state of affairs in the second year: 70% chance the result will be negative - 100 million. And only a 30% chance you can count on 100 million. Positive cash flow. If the most likely outcome a company with a 50% increase in cash inflow of 500 mln. Rubles. or save the results of the previous year.
It is necessary to estimate the expected NPV of the project.
Task 4.
Open Joint Stock Company "Chelyabinsk Tube Rolling Plant" was founded 65 years ago and is one of the largest companies for the production of pipes in Russia. ChTPZ share in the total production of pipe products manufactured in the Russian Federation, is about 12%.
On CTRP, the following types of pipe production:
• hot rolling pilger pipe-rolling plants;
• hot rolling mill with an automatic installation;
• cold rolling tube;
• arc welding of longitudinal welded pipes submerged;
• Continuous oven welding;
• pipe welding currents of radio frequency.
The company produces more than 3600 type sizes of tubes from carbon, low alloy alloy, stainless steels and various alloys. The tubes have a circular cross section, not only, but also oval, flat-oval, square, rectangular and hexagonal sections. The plant is the only supplier of hot Russian seamless pipes with diameters greater than 325 mm and cold-seamless pipes with diameters greater than 120 mm.
The consumers of the plant's products are oil, gas and energy complex of Russia, the company's engineering, construction industry, agriculture and other industries. ChTPZ products are exported to more than 20 countries, including Germany, Italy, USA, Turkey, Egypt, Syria, China, Iran and others.
All made Chelyabinsk Tube Rolling Plant products are certified in Russian and international certification bodies. Among razrab