3. Real estate valuation
3.5. Approaches to real estate valuation.
3.5.2. Cost-effective approach
Cost-effective approach- this is a set of assessment methods based on determining the costs necessary to restore or replace the object of assessment, taking into account accumulated wear and tear. Based on the assumption that the buyer will not pay more for a finished object than for the creation of an object of similar utility.
Information required to apply the cost approach:
- wage level;
- amount of overhead costs;
- equipment costs;
- profit rates for builders in a given region;
- market prices for building materials.
Advantages of the cost approach:
1. When evaluating new objects, the cost approach is the most reliable.
2. This approach is appropriate or the only possible in the following cases:
§ technical and economic analysis of the cost of new construction;
§ justification for the need to update the existing facility;
§ assessment of special purpose buildings;
§ when assessing objects in “passive” sectors of the market;
§ analysis of the efficiency of land use;
§ solving problems of object insurance;
§ solving tax problems;
§ when agreeing on the values of a property obtained by other methods.
Disadvantages of the cost approach:
1. Costs are not always equivalent to market value.
2. Attempts to achieve a more accurate assessment result are accompanied by a rapid increase in labor costs.
3. The discrepancy between the costs of purchasing the property being valued and the costs of new construction of exactly the same property, because During the appraisal process, accumulated depreciation is deducted from the construction cost.
4. The difficulty of calculating the cost of reproduction of old buildings.
5. The difficulty of determining the amount of accumulated wear and tear of old buildings and structures.
6. Separate assessment of the land plot from the buildings.
7. The problematic nature of assessing land plots in Russia.
Stages of the cost approach(see Fig. 3.3):
- Calculation of the cost of a land plot taking into account the most effective use (Sz).
- Calculation of replacement cost or replacement cost (Svs or Szam).
- Calculation of accumulated wear and tear (all types) (Cizn):
· physical deterioration
- wear associated with a decrease in the performance of an object as a result of natural physical aging and the influence of external unfavorable factors;
· functional wear
- wear and tear due to non-compliance with modern requirements for such objects;
· external wear
- wear and tear as a result of changes in external economic factors.
Calculation of the cost of an object taking into account accumulated depreciation: Son = Свс-Сызн.
Determination of the final cost of real estate: Sit= Sz+Son.
3.5.2.1. Comparative unit method
This method involves calculating the cost of constructing a comparative unit of a similar building. The cost of a comparative unit of an analogue should be adjusted for existing differences in the objects being compared (layout, equipment, ownership, etc.)
If 1 m2 is chosen as a comparative unit, then the calculation formula will have the following form:
C o = C m 2 *S o *K p *K n *K m *K v *K pz *K vat,
C about - the cost of the assessed object;
C m 2 - the cost of 1 m 2 of a typical structure on the base date;
S o - area of the assessed object (number of comparison units);
K p - coefficient taking into account possible discrepancies between the data on the area of the object and the construction area (1.1-1.2);
Kn - coefficient taking into account possible discrepancies between the assessed object and the selected typical structure (for identical = 1);
K m - coefficient taking into account the location of the object;
K in - coefficient taking into account the change in the cost of construction and installation work between the base date and the date at the time of assessment;
K pz - coefficient taking into account the developer’s profit (%);
K VAT - coefficient taking into account VAT (%).
An important step is the selection of a typical object. In this case, it is necessary to take into account:
- single functional purpose;
- proximity of physical characteristics;
- comparable chronological age of objects;
- other characteristics.
3.5.2.2. Component breakdown method
This method involves breaking down the assessed object into building components - foundation, walls, floors, etc. The cost of each component is obtained based on the sum of direct and indirect costs required to construct a unit of volume according to the formula:
, Where
C building – the cost of constructing the building as a whole;
V j – volume of the jth component;
C j – cost per unit volume;
n – number of allocated building components;
Кн – coefficient that takes into account existing discrepancies between the assessed object and the selected typical structure.
There are several options for using the component breakdown method:
- subcontracting;
- breakdown by work profile;
- allocation of costs.
Subcontracting method is based on the fact that the general contractor hires subcontractors to perform part of the construction work. Then the total costs for all subcontractors are calculated.
Profile method similar to the previous one and is based on calculating the costs of hiring various specialists .
Cost Allocation Method involves the use of different units of comparison to evaluate different components of the building, after which these estimates are summed.
Rice. 3.3. The procedure for assessing the value of real estate using the cost approach
3.5.2.3. Quantitative survey method
This method is based on the use of detailed quantitative calculations of the costs of installation of individual components, equipment and construction of the building as a whole. In addition to calculating direct costs, it is necessary to take into account overhead costs and other costs, i.e. a full estimate for the reconstruction of the assessed object is drawn up.
Construction cost calculation
The cost of construction of buildings and structures is determined by the amount of investment required for its implementation. The cost of construction, as a rule, is determined at the stage of pre-design studies (drawing up a feasibility study for construction).
The estimated cost of construction of buildings and structures is the amount of money required for its implementation in accordance with the design documentation.
Based on the estimated cost, the size of capital investments, construction financing, as well as the formation of free (negotiable) prices for construction products are calculated.
The estimated cost of construction includes the following elements:
construction works;
equipment installation work (installation work);
costs of purchasing (manufacturing) equipment, furniture and inventory;
other costs.
Cost calculation methods.
When preparing estimates (calculations) for the investor and contractor on an alternative basis, the following cost calculation methods can be used:
resourceful;
resource-index;
base-index;
basic compensation;
based on a data bank on the cost of previously constructed or designed analogue facilities.
Resource method - calculation in current (forecast) prices and tariffs of resources (cost elements) is carried out based on the need for materials, products, structures (including auxiliary ones used in the process of work), as well as data on distances and methods of their delivery to the construction site , energy consumption for technological purposes, operating time of construction machines and their composition, labor costs of workers.
Resource-index method - This is a combination of the resource method with a system of indexes for resources used in construction.
Cost (price, cost) indices - relative indicators determined by the ratio of current (forecast) cost indicators and basic cost indicators for resources comparable in nomenclature.
Basis-index method - recalculation of costs along budget lines from the basic price level to the current price level using indices.
Basic compensation method - summation of the cost calculated at the basic level of estimated prices and additional costs determined by calculations associated with changes in prices and tariffs for the resources used during the construction process.
It must be taken into account that until the economic situation stabilizes and the corresponding market structures are formed, the highest priority methods for calculating the estimated cost are the resource and resource-index methods. In the practical activities of experts, the base-index method of calculating the estimated cost is more popular.
Determining the wear and tear of a property
Depreciation is characterized by a decrease in the usefulness of a property, its consumer attractiveness from the point of view of a potential investor and is expressed in a decrease in value over time (depreciation) under the influence of various factors. Depreciation (I) is usually measured as a percentage, and the monetary expression of depreciation is depreciation (O).
Depending on the reasons causing the depreciation of a property, the following types of wear and tear are distinguished: physical, functional and external.
Physical and functional wear and tear are divided into removable and irreparable.
Removable wear - this is wear, the elimination of which is physically possible and economically feasible, i.e. the costs incurred to eliminate one or another type of wear contribute to an increase in the value of the object as a whole.
Identifying all possible types of wear and tear is the accumulated wear and tear of a property. In monetary terms, total depreciation is the difference between the replacement cost and the market price of the valued object.
The cumulative accumulated wear is a function of the object's lifetime. Let us consider the basic evaluative concepts that characterize this indicator.
Physical life of the building (PL) - the period of operation of the building, during which the condition of the load-bearing structural elements of the building meets certain criteria (structural reliability, physical durability, etc.). The physical life of an object is laid down during construction and depends on the capital group of the buildings. Physical life ends when the object is demolished.
Chronological age (CA) - the period of time that has passed from the date of commissioning of the facility to the date of assessment.
Economic Life (EJ) determined by the operating time during which the object generates income. During this period, improvements made contribute to the value of the property. The economic life of an object ends when the operation of the object cannot generate the income indicated by the corresponding rate for comparable objects in a given segment of the real estate market. At the same time, the improvements carried out no longer contribute to the value of the object due to its general wear and tear.
Effective age (EA) calculated on the basis of the chronological age of the building, taking into account its technical condition and the economic factors prevailing on the valuation date that influence the value of the assessed object. Depending on the operating characteristics of the building, the effective age may differ from the chronological age up or down. In the case of normal (typical) operation of a building, the effective age is usually equal to the chronological age.
Remaining Economic Life (REL) building - the period of time from the date of assessment until the end of its economic life (Fig. 3.4).
Rice. 3.4. Life periods of a building and indicators characterizing them
Depreciation in valuation practice must be distinguished in meaning from a similar term used in accounting (depreciation). Estimated depreciation is one of the main parameters that allows you to calculate the current value of an appraised object on a specific date.
Physical wear and tear is the gradual loss of the technical and operational qualities of an object originally laid down during construction under the influence of natural and climatic factors, as well as human activity.
Methods for calculating the physical deterioration of buildings are as follows:
· regulatory (for residential buildings);
· cost;
· lifetime method.
Normative method calculating physical wear and tear involves the use of various regulatory instructions at the intersectoral or departmental level.
These rules describe the physical wear and tear of various structural elements of buildings and their assessment.
The physical wear and tear of a building should be determined using the formula:
, Where
And f - physical wear and tear of the building, %;
And i is the physical wear of the i-th structural element, %;
L i is the coefficient corresponding to the share of the replacement cost of the i-th structural element in the total replacement cost of the building;
P- the number of structural elements in the building.
The shares of the replacement cost of individual structures, elements and systems in the total replacement cost of the building (in percentage) are usually taken according to aggregated indicators of the replacement cost of residential buildings approved in the prescribed manner, and for structures, elements and systems that do not have approved indicators, according to their estimated cost .
This technique is used exclusively in domestic practice. Despite all the clarity and persuasiveness, it has the following disadvantages:
- due to its “normativity”, it initially cannot take into account the atypical operating conditions of the object;
- labor-intensive application due to the necessary detailing of the structural elements of the building;
- impossibility of measuring functional and external wear;
- subjectivity of specific weighing of structural elements.
At the core cost method The definition of physical wear and tear is physical wear and tear, expressed at the time of its assessment by the ratio of the cost of objectively necessary repair measures to eliminate damage to structures, an element, a system or the building as a whole, and their replacement cost.
The essence of the cost method for determining physical depreciation is to determine the costs of recreating building elements.
This method allows you to immediately calculate the wear and tear of elements and the building as a whole in cost terms. Since the impairment calculation is based on the reasonable actual costs of bringing worn-out items to “substantially new condition,” the result of this approach can be considered fairly accurate. The disadvantages of the method are the required detail and accuracy in calculating the costs of repairing worn-out building elements.
Determination of physical deterioration of buildings lifetime method . Indicators of physical wear and tear, effective age and economic life span are in a certain ratio, which can be expressed by the formula:
I – wear;
EV – effective age;
VF – typical period of physical life;
RSF – remaining period of physical life.
.
The use of this formula is also relevant when calculating percentage adjustments for wear and tear in compared objects (comparative sales method), when it is not possible for the appraiser to inspect the selected analogues. The percentage of depreciation of elements or the building as a whole calculated in this way can be translated into monetary terms (depreciation):
.
In practice, elements of a structure that have removable and irreparable physical wear are divided into “long-lived” and “short-lived”.
"Short-lived elements"- elements that have a shorter lifespan than the building as a whole (roofing, plumbing equipment, etc.).
"Long-lived elements"- elements whose expected lifespan is comparable to the lifespan of the building (foundation, load-bearing walls, etc.).
Removable physical wear and tear of “short-lived elements” occurs due to the natural wear and tear of building elements over time, as well as careless operation. In this case, the sale price of the building is reduced by the corresponding impairment, since the future owner will need to carry out “previously deferred repairs” in order to restore the normal operational characteristics of the structure (routine repairs of the interior, restoration of areas of leaking roofing, etc.). This assumes that the items are restored to a “virtually new” condition. Removable physical wear and tear in monetary terms is defined as the “cost of deferred repairs,” i.e. costs of bringing the object to a condition “equivalent” to the original one.
Irremovable physical wear of components with a short life span is the cost of restoring fast-wearing components, determined by the difference between the replacement cost and the amount of removable wear, multiplied by the ratio of the chronological age and the physical life of these elements.
Removable physical wear of elements with a long life is determined by the reasonable costs of its elimination, similar to the removable physical wear of elements with a short life.
Irremovable physical deterioration of long-life elements is calculated as the difference between the replacement cost of the entire building and the sum of removable and irreparable deterioration, multiplied by the ratio of the chronological age and the physical life of the building.
Functional wear. Signs of functional wear in the building being assessed - non-compliance of the space-planning and/or constructive solution with modern standards, including various equipment necessary for the normal operation of the structure in accordance with its current or intended use.
Functional wear is divided into removable and irreparable.
The cost expression of functional wear is the difference between the cost of reproduction and the cost of replacement, which excludes functional wear from consideration.
Removable functional wear determined by the costs of the necessary reconstruction, which contributes to more efficient operation of the property.
Causes of functional wear:
· shortcomings that require adding elements;
· deficiencies requiring replacement or modernization of elements;
· super improvements.
Deficiencies requiring addition - elements of the building and equipment that do not exist in the existing environment and without which it cannot meet modern performance standards. Depreciation due to these items is measured by the cost of adding these items, including their installation.
Disadvantages that require replacement or modernization of elements - items that still perform their functions, but no longer meet modern standards (water and gas meters and fire-fighting equipment). Depreciation for these items is measured as the cost of existing elements, taking into account their physical deterioration, minus the cost of returning materials, plus the cost of dismantling existing ones and plus the cost of installing new elements. The cost of returning materials is calculated as the cost of dismantled materials and equipment when used at other facilities (revisable residual value).
Superimprovements are positions and elements of a structure, the availability of which is currently inadequate to modern requirements of market standards. Removable functional wear and tear in this case is measured as the current replacement cost of the “over-improvement” items minus physical wear and tear, plus the cost of dismantling and minus the salvage value of the dismantled elements.
Unrecoverable functional wear caused by outdated space-planning and/or design characteristics of the buildings being assessed relative to modern construction standards. A sign of irreparable functional wear and tear is the economic inexpediency of spending on eliminating these deficiencies. In addition, it is necessary to take into account the market conditions prevailing at the date of assessment in order for the building to be adequately architectural for its purpose.
Depending on the specific situation, the cost of irreparable functional wear and tear can be determined in two ways:
1) capitalization of losses in rent;
2) capitalization of excess operating costs necessary to maintain the building in proper order.
To determine the necessary calculation indicators (rental rates, capitalization rates, etc.), adjusted data for comparable analogues are used. In this case, the selected analogues should not have signs of irreparable functional wear identified in the object being assessed.
Determination of impairment caused by irreparable functional wear and tear due to an outdated space-planning solution (specific area, cubic capacity) is carried out by the method of capitalizing losses in rent.
Calculation of irreparable functional wear and tear by capitalizing the excess operating costs required to maintain the building in good condition can be done in a similar way. This approach is preferable for assessing the irreparable functional wear and tear of buildings that feature non-standard architectural solutions and in which, nevertheless, the amount of rent is comparable to the rent for modern analogue facilities, in contrast to the amount of operating costs.
External (economic) wear and tear - depreciation of an object due to the negative influence of the external environment in relation to the object of assessment: the market situation, easements imposed on a certain use of real estate, changes in the surrounding infrastructure and legislative decisions in the field of taxation, etc. External wear and tear of real estate, depending on the reasons that caused it, in most cases is irreparable due to the unchanged location, but in some cases it can “remove itself” due to a positive change in the surrounding market environment.
The following methods can be used to assess external wear:
· capitalization of losses in rent;
· comparative sales (paired sales);
· economic life span.
| Previous |
This is the most common method for determining physical wear, along with the method of expert analysis of physical condition.
As mentioned above, the actual service life of machines and equipment may differ from the standard due to various factors: work intensity and operating mode, quality and frequency of maintenance and repair, environmental conditions, etc.
When using the effective age method, the following terms and definitions apply:
Life time(economic life span, Vss)- the period of time from the date of installation to the date of withdrawal of the object from operation (or the full operating life).
Remaining service life (V o)- the estimated number of years before the facility is withdrawn from service (or the estimated remaining operating time).
Chronological (actual) age (Bx) - the number of years that have passed since the creation of the object (or operating time).
Effective age (E) - the difference between the service life and the remaining service life (or the amount of operating time of the object over the past years).
V e = V ss - V o
The service lives normalized by industry standards for various groups of equipment and mechanisms indicate the permissible operating time of the equipment without a noticeable change in the quality of the machines’ performance of their functions. It is assumed that operating conditions will correspond to those recommended by equipment manufacturers, and repair and maintenance work will be carried out on time and with high quality. This approach is convenient for determining depreciation charges, however, when assessing the market value of machinery and equipment, the service life of the equipment is usually only a guideline for the appraiser.
The service life of machinery and equipment is only advisory for property appraisers, since it reflects their capabilities for average operating conditions. In each specific case of determining the remaining service life of equipment, the actual physical wear and tear at the time of assessment should be taken into account.
The coefficient of physical wear and tear for objects with different actual ages is determined differently.
1) For relatively new equipment under normal operating conditions, the coefficient of physical wear is determined by the formula:
Where: In - chronological age; Vss- life time.
It should be taken into account that a manufactured and temporarily unused machine, even if it is in a warehouse under conditions of careful conservation, has a partial deterioration in technical characteristics, and, consequently, a loss of value. In this case, the cost of the equipment at the time of start-up may differ significantly from the cost of new equipment, and this should be taken into account when assessing the cost.
2) For older, complex equipment, the physical wear rate is determined as follows:
where V e is the effective age;
B o – remaining service life.
3) For equipment that has worked longer than its economic life (service life) and continues to work, the coefficient of physical depreciation is determined as follows (although in the financial statements this equipment has 100% depreciation):
Where: In - chronological age.
In - remaining service life determined by expert opinion;
4) The service life of the equipment is significantly increased due to repairs, during which obsolete and worn-out mechanism components are replaced with new ones and the interfaces in the friction units are restored. This is especially significant during major equipment overhauls, when the main components of the equipment are replaced and the basic properties of the most important parts of the machines are restored.
If the object has undergone major repairs, the coefficient of its physical wear and tear is determined as follows:
The effective age of the object is calculated using the formula:
V e = V x1 * K 1 + V x2 * K 2 +……+ V x i * K i
Where B x1 ... B x i - accordingly, the chronological age of parts of the object that were repaired at different times and were not repaired;
K 1 ... K i - the percentage of these parts in the total volume of the object.
The effective age of an object in this case is the weighted average chronological age of its parts. The effective age can also be determined by weighing the investment in the property (repair costs in monetary terms).
To assess wear, the concept of effective age (TEA) of equipment is introduced. If chronological age (T) is the number of years that have passed since the creation of the equipment, then effective age (Tef) is the age corresponding to the physical condition of the equipment, reflecting the actual operating time of the equipment over the period (T) and taking into account the conditions of its operation and maintenance. Knowing the effective age of the object being assessed allows us to more reasonably judge its wear and tear.
If the effective age (Teff) of the equipment is known, then the coefficient of physical wear is determined by the formula:
Where TN
Standard phone service life.
Usually to determine Tef
expertly assess remaining service life Toast
object of evaluation before its withdrawal from operation and write-off. In this case:
The official service life of Nokia cell phones is 3 years (36 months), subject to compliance with the operating rules. Considering the high quality, reliability and degree of security of Nokia cell phones, the actual service life may significantly exceed the official one.
(Source: http://www.nokia.ru/support/faq/warranty-faq#01)
Thus, the effective service age of the assessment object as of the assessment date, based on the year of commissioning (December 2010), conditions and operating time, is 3 months.
The coefficient of physical wear and tear according to the effective age method is 0.08.
The average value of physical wear and tear based on the physical condition examination method and the effective wear and tear method is:
Functional wear
This model of Nokia N95 8Gb cell phone was released on the market about two years ago, therefore, the Appraiser considers it inappropriate to take into account functional wear and tear.
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k and, physical = (0.208 – 0.003.B).T 0.7;
where T is the chronological age of the machine.
In this method, the physical wear and tear coefficient is obtained based on the prices of used and new machines, that is, it reflects the reaction of the secondary market to the degree of physical wear of the machines.
Effective age method
To assess wear, the concept of effective age Teff of equipment is introduced. If the chronological age T is the number of years that have passed since the creation of the machine, then the effective age Teff is the age corresponding to the physical condition of the machine, reflecting the actual operating time of the machine for the period T and taking into account the conditions of its operation.
Knowing the effective age of the object being assessed allows us to more reasonably judge its wear and tear.
If the effective age Teff of the machine is known, then the coefficient of physical wear is determined by the formula:
k and, physical = T eff / T n
where Tn is the standard service life of the machine.
Usually, to determine Tef, an expert evaluates the remaining service life of the Toast of the object being assessed before its removal from service and write-off. In this case:
T ef = T n – Toast. Determining the remaining period assumes that the appraiser knows how the machine will be operated from the moment of assessment until the end of its service life (shift, load, working conditions, etc.).
Working with variable loads is typical for machines. Some of them (usually special ones or used in mass production) are characterized by ordered work with a periodic pattern. However, in general-purpose machines, the operating mode is formed under the combined influence of a large number of factors. It is practically impossible for an appraiser to establish sufficiently accurately the patterns of changes in the operating mode during operation of the machine. Therefore, he can only be content with information that indirectly characterizes the loading of the machine during operation only for the foreseeable time.
The method assumes that other ways of finding Teff are possible. For example, to determine Teff, you can use the method of adjusting the chronological age T of a machine using a number of coefficients that reflect the operating conditions of the machine. To do this, you can use indicators such as the nature of production, shifts and working conditions of the object being assessed. When assigning a useful life (service life), a very specific use of the machine was assumed. If it is known that the machine was operated under different conditions, then in order to determine the effective age, adjusting its chronological age in accordance with the changed conditions is quite justified:
T eff = T K cm K xp K ur,
where K cm is the shift coefficient equal to the ratio of the average actual shift of the machine to the nominal one, on the basis of which the useful life of the equipment is assigned. For example, for mechanical engineering this value is approximately 1.7–1.8. Khp is the coefficient of the nature (type) of production under which the machine actually operates (0.9–1 - for mass production, in which the equipment is fully loaded; 0.67–0.77 - for mass production; 0.5–0 .65 - for single production); since this coefficient characterizes the intra-shift use of equipment, it is often called the intra-shift utilization coefficient Kvi;
Kur - coefficient of operating conditions of the machine (1 - when working in a workshop room; 0.6–0.7 - when working in a separate room; 1.3–1.5 - under working conditions harmful to the equipment (high intensity of pollution or dust, high humidity, contact with a chemically active environment, etc.); with a very high intensity of pollution 3–5).
The product of all three coefficients will be called the machine utilization coefficient:
K use = K cm K vi K ur.
Thus,
T eff = T K isp.
Chronological age adjustment for the purpose of determining Teff can give reliable results if the values of the coefficients used sufficiently accurately reflect the operating conditions of the object being assessed for the entire period of its operation preceding the moment of assessment.
Let, for example, it is known that the chronological age of the machine is T = 10 years. The machine operates in two shifts (K cm = 1), in unit production (K vi = 0.67)
The effective age of the machine under such loading conditions can be estimated as:
Teff = 10. 1 . 0.67. 1 = 6.7 years,
that is, in fact, the car looks younger than its chronological age. Accordingly, it has better preserved its consumer properties.
To determine the physical wear rate, information about the useful life of the machine is needed. Let T n = 12 years (according to the customer’s accounting department). Then:
k and, physical = T eff / T n = 6.7 / 12 = 0.56 or 56%.
Comparing both approaches to determining Teff, it should be noted that both of them have a drawback in terms of the uncertainty of the operating conditions of the object beyond a certain time interval adjacent to the moment of assessment.
Weighted average chronological age method
The method can be applied when, after several years of operation of the machine, replacements and repairs of a number of its parts and assemblies, their age turns out to be different. In this case, the physical wear rate of the machine can be calculated using the formula:
k and, physical = T av / vzv / T n
where T avg/weighted is the weighted average chronological age of the car;
Main parameter deterioration method
The method assumes that physical wear is manifested in the deterioration of any one characteristic operational parameter of the machine (productivity, accuracy, power, fuel or electricity consumption, failure rate, etc.). If such a parameter is found for a given type of machine, then the physical wear coefficient is calculated as follows:
k and, physical = 1 – (X / X 0) b
where X 0, X are the values of the main parameter of the machine at the beginning of operation and at the time of evaluation, respectively; b is an exponent characterizing the strength of influence of the main parameter on the cost of the machine (usually for the braking coefficient, values of 0.6–0.8 are taken).
Method of accounting for the restoration of a machine after major repairs
The method is based on the obvious idea of a decrease in the consumer properties of PS machines and equipment during operation due to increased physical wear and tear and their partial restoration after repairs in general and major repairs in particular. The level of consumer properties of a machine at different stages of its existence can be expressed using some generalized relative indicator PS, which is a weighted additive function of the values of the main technical and economic indicators X i of the machine at the time of evaluation in relation to the values of the same indicators X io at the beginning of operation - productivity , accuracy, etc.:
PS = sum(X i /X io)
Unlike the previous method, here you can take into account several machine indicators at once.
In practical work, the appraiser is increasingly faced with a situation where it is necessary to determine the physical wear and tear of a machine that has significant chronological age and has already undergone one or more major repairs. If we imagine the change in the indicator of consumer properties of the PS of such a machine over this time, we will get a zigzag curve. The peaks on the curve correspond to major repairs, their height corresponds to the corresponding repair costs, and the distances between them correspond to repair cycles T r (operations between two major repairs).
The costs incurred restore the consumer properties of the machine in whole or in part and extend the overall service life of the machine, about which a corresponding entry is made in the accounting documents for the machine.
Typically, for each inventory item at an enterprise, a certain value of useful life Tn (service life) is assigned within the interval specified by the depreciation group, taking into account the expected load. Since machinery and equipment are recoverable objects, it is assumed that several major repairs (usually no more than three) will be carried out during their standard service life. The time between two major overhauls (or from commissioning to the first major overhaul) is called the repair cycle. Within each repair cycle, several routine repairs and technical inspections are carried out.
Depending on the recommendations of the machine manufacturer, when drawing up a long-term equipment repair plan, the enterprise assigns the duration T r of repair cycles for all machines. The average T r value for light and medium-sized technological machines is 5–6 years. From the operating experience of such machines, it can be assumed that during the repair cycle their consumer properties (PS) are reduced by approximately 50–60% of the original level, that is, with the above-mentioned duration of the repair cycle, the rate V of the decrease in the consumer properties of the machine is 8–10% per year.
Carrying out major repairs of machines, on the contrary, increases their consumer properties by an average of 20–40% of the original level. Moreover, larger values of the range correspond to later (second, third) major repairs. Increasing costs for major repairs reduce the efficiency of equipment use, which ultimately leads to the inexpediency of its further operation.
The value of the service life T n and the repair cycle T r for each inventory item is learned by the appraiser during the identification process.
Let's consider the definition of physical wear and tear for two points in time in the life of a machine:
a) The car has not yet undergone major repairs. It is assumed that the law of change in the consumer properties of the machine is linear.
The financial performance of a project is often highlighted (given the most attention) when presenting a project to an investor. Indeed, one cannot do without them, since an investor most often evaluates a project according to a number of basic indicators: IRR, NPV, PI (rate of return on investment costs), payback period, average rate of accounting profitability. At the same time, as a rule, he is not interested in the calculations themselves, but in the basic assumptions and reliability of the initial information.
Let us list the assumptions made in the calculations.
1. The tax conditions taken into account when justifying the project comply with the legislation of the Russian Federation and the Krasnodar Territory in force as of the 4th quarter of 2015: Tax Code of the Russian Federation, KZ No. 731 “On State stimulation of investment activities in the Krasnodar Territory”, Regulations “On the Expert Council for investment projects". Based on these standards, the following points were taken into account when forming the tax environment of the project:
the property tax rate is 2.2% per annum of the value of the enterprise’s property;
the income tax rate is 20% (when determining the amount of income tax payable to the budget, the benefit associated with the reinvestment of profits was not taken into account; at the same time, part of the interest payments on the repaid loan is equal to the forecast rate for similar loans in each the period under study was included in the cost of production);
when forming turnover for value added tax, the rate of this tax is assumed to be 18%;
VAT on permanent assets is offset in full at the time of putting fixed assets into operation and is subject to reimbursement from VAT amounts on current activities payable to the budget;
depreciation is calculated using the straight-line method, taking into account the belonging of assets to various groups of fixed assets (the average useful life of all property is approximately 12 years);
in accordance with clause 1.1 of Article 259 of the Tax Code of the Russian Federation, 10% of the cost of depreciable property is included in the expenses of the designed enterprise during the period when the main assets begin operating;
No other tax benefits are provided.
2. Among the factors determining the trends in pricing for the services of a new business center, the main ones are the following:
cost of utility bills for organizations;
labor costs;
cost of borrowed capital;
cost of marketing activities;
cost of production for food and beverage service.
In the period from 2002 to the present, the cost of utilities and the average wage are growing at a rate that is faster than the general rate of inflation (on average by 5 - 10%). In this regard, cost estimates of all utility costs (for electricity, water supply, gas, sewerage) for 4 years from the beginning of the project were carried out at the rate of 15% of the price index, then - 8% of the index. The average wage increase in the first 4 years of project implementation was taken to be 25%, then - 12%. The increase in food prices was accepted in the range from 12% in the first year of the project to 8% during the commissioning and subsequent operation of the hotel (taking into account the increased increase in prices for locally produced products and the negative increase in expensive, finished foreign-made products, including beverages).
- 3. The planning horizon is assumed to be 10 years, which is the average planning period for investments in commercial real estate. At the same time, the average period of capital reinvestment in real estate with characteristics similar to the project being implemented exceeds 10 years and is about 15 - 20 years. Therefore, the analysis took into account liquidation income in the amount of RUB 397 million. at current prices for 41 planning periods (period equal to 3 months), which in turn increased net present value by 56 million for calculations with a discount rate of 20%, and by 121 million rubles. for a rate of 12%.
- 4. The forecast of the Central Bank refinancing rate is based on the official forecast of the Ministry of Economic Development and Trade of the inflation rate until 2017 (namely: inflation + 2%). Based on it, the total budget efficiency (the amount of payments, taxes and fees paid to budgets and extra-budgetary funds of all levels) is 2523 million rubles. for an optimistic forecast and 1536 for a conservative one. The total budget efficiency, discounted to the initial moment of project implementation, is equal to 770 million and 472 million, respectively.
- 5. Current liabilities were determined taking into account payment for most types of services of the designed enterprise at the time of provision of these services. Settlements with suppliers of services and materials are carried out within a calendar month with a maximum deferment of payment (at least 20 days).
- 6. Other forecast values of control parameters (for example, the interest rate included in the cost), calculated for each planning period, are given directly in the calculation tables of the feasibility study.
- 7. Discount rates are set: taking into account the average return on investment in real estate in the Krasnodar Territory as an alternative option for project implementation (20%); average return on shares on the stock exchange (12%).
- 8. The rate on borrowed funds is 12%, the deferment of interest payments on the loan is 33 months.
- 9. The ruble inflation rate is at the level of the official long-term forecast of the Ministry of Economic Development and Trade.
- 10. Indices of wages, utilities and food products are growing at a rate outpacing general inflation.
In our project, two scenarios were considered: optimistic and conservative (Table 4, Figures 8 - 10).
An optimistic forecast implies occupancy of the hotel - 67%, sale of club memberships in 2.5 years, period of reaching the planned capacity from 15% to 67% in 4 quarters, number of employees - 164 people.
Table 4 - Integral indicators of the project depending on the occurrence of various scenarios
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Project indicators |
Optimistic scenario |
Conservative scenario |
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Main differences between the scenarios |
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Room utilization rate 1 Starting marketing and PR budget for 2 years Sale period for 150 club memberships Period of reaching planned capacity Number of employees |
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Financial indicators |
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Maximum rate on borrowed funds Simple payback period 2 Accounting rate of return Maximum amount of loan debt 3 Debt servicing period |
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NPV, at a discount rate of 20% Discounted payback period Return on investment costs |
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Budget efficiency |
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Consolidated budget effect Federal budget and extra-budgetary funds Regional budget |
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Note.1 - this coefficient is calculated as the average annual occupancy of the hotel, cottages and, accordingly, restaurants; 2 - payback period from the moment the hotel is put into operation; 3 - the amount of debt, taking into account capitalized interest, the need for working capital.
In Table 4, the conservative forecast implies 44% occupancy (the current average for Krasnodar hotels is 67%; over the past 5 years, the figure has been growing by an average of 1 - 2%), the sale of club memberships over 3 years, the period of reaching the planned capacity from 8% to 44% for 4 quarters, number of personnel - 140 people (Figures 8 - 10).
The pricing policy is similar to a 5-star hotel (from 10 thousand to 35 thousand rubles) and other private golf clubs in Russia.
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