“ Life cycle of investment project” Investment

“ Life cycle of investment project”

Investment project — long-term allocation of funds (with or without recourse to the project’s sponsor) to carry an investment idea through to its stable-income generation stage. A viable investment project aims at achieving a profitable return that ensures, timely payment of interest and principal, attractive return on the invested capital, and positive and consistent cash flows.

The life cycle of the investment project — is the length of time from inception of an investment idea until its full implementation or elimination of the object (if necessary). The life cycle of an investment project is determined by three main phases: • Initial (pre-investment) phase. • Investment phase. • Operational phase.

At the initial phase , potential initiators (owners) of the project must themselves find an answer to the question on feasibility and economic attractiveness of the entrepreneurial effort. During the investment phase of the project, concrete actions are taken requiring much bigger expenses and of irrevocable nature. During the investment phase of an industrial project design specifications and estimates are made; equipment is ordered; industrial sites are prepared; equipment is delivered and installed; start up and adjustment works are performed; personnel training is organized, advertizing campaign is carried out. Operational phase. It begins from the date of putting principal equipment into operation (in case of industrial investment) or purchase of real estate or other assets. During this phase, the plant is put into operation, production or provision of services is started, external loans are paid back if they were used. This phase is characterized by appropriate income with consequent expenses.

Simple form of the investment cycle: 1) Formation Project. At this stage management analysis of the current state of companies and outlines several priority areas of development. The result of analysis of a business idea or investment project. 2) Development (training) project. Stage which is gradually refined and improved project design in all areas — commercial, technical, financial, economic, institutional, etc. , and is searching for and gathering background information for the decision of individual project objectives. 3) Examination of the project. The most important phase of the project cycle, or when he holds investor examination investment project in all directions, or draws for this authoritative consult Company. 4) Implementation of the project. Stage of development of real business ideas to the moment when the Draft is put into operation. It also includes the main part of the project, whose mission — to see if enough money flows, generating project, to cover investments and provide the desired investor returns. 5) Evaluation of results. Conducted after both projects are in general, and in the process of its implementation. The main goal — to compare ideas, out in the Draft, with the degree of their actual implementation.

Investment risk – is a qualitative indicator that depends on political, social, economic, financial, ecological, criminal situation and legislative environment. Its value shows probability of loss on investment and income from it. At present, the following types of risk are calculated:

• economic (tendencies in economic development of the region); • financial (regional budget balance level and finances of companies); • social (level of social tension); • ecological (level of environment pollution, including radioactivity); • criminal (level of crime in the region considering greatness of crime, economic crime and crimes associated with illegal drug turnover);

• legislative (legal conditions for investment in certain spheres or sectors, procedure of using separate factors of production). For calculation of this risk, both federal and regional laws and normative acts were considered as well as documents directly or indirectly regulating investment activity; • managerial (quality of budget regulation, availability of program documents, development of management system, level of infant mortality as integral indicator of social sphere results).