Zorka Novak-Pintarič (Author), Zdravko Kravanja (Author)

Abstract

This paper demonstrates the correct application of discounted cash flow methodology for evaluating and designing energy and chemical production plants. Such processes usually correspond to capital intensive long-term projects. Simple economic criteria, like the profit or production cost are insufficient for this type of decision making because they do not take into account the time value of money and underestimate the profitabilities of the evaluated plants. This paper shows that some of those criteria based on the discounted cash flows establish suitable compromises between long-term cash flow generation and profitability. As several alternative options are usually evaluated in parallel, it is shown how to rank mutually exclusive alternatives properly and how to select the best option from among them. Two large-scale case studies demonstrate that using discounted cash flow methodology can result in substantially different decisions than non-discounted criteria, however, these decisions are affected by several input parameters.

Keywords

analize;denar;profitabilnost;procesi;discounted cash flow analysis;time value of money;net preset value;profitability;process;

Data

Language: English
Year of publishing:
Typology: 1.01 - Original Scientific Article
Organization: UM FKKT - Faculty of Chemistry and Chemical Engineering
UDC: 66.02
COBISS: 20329750 Link will open in a new window
ISSN: 1848-9257
Views: 796
Downloads: 394
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Other data

Secondary language: Slovenian
Secondary keywords: analize;diskontirani denarni tok;denar;dobičkonosnost;profitabilnost;procesi;časovna vrednost denarja;neto sedanja vrednost;proces;
URN: URN:SI:UM:
Type (COBISS): Scientific work
Pages: str. 163-176
Volume: ǂVol. ǂ5
Issue: ǂno. ǂ2
Chronology: 2017
DOI: 10.13044/j.sdewes.d5.0140
ID: 10852675