Epsilon Archive for Student Projects

Abstract

This report presents an investment calculation based on an assumed initial investment of a new saw line to an existing sawmill. In order to get as close to reality as possible, we have received data material from northern forest owners who recently made an initial investment in their sawmill in Kåge.

In order to calculate and evaluate investments are several different methods, but we, we have chosen to use the discounted cash flow method. The method sums up with the help of a fixed cost of capital together with any future costs and revenues, thereby giving a present value of the investment. We also do a sensitivity analysis to examine how selected factors affect the investment research they change.

The study is carried out to a fictitious investment, and therefore the result should not only be studied as a result of the figures. The purpose of this study was that with the help of an investment calculation studying the profitability of a hypothetical investment, and by means of a sensitivity analysis to study the sensitivity of investment to changes.

The result demonstrates that the calculations according to the present value method requires a lot of information of the prospective investment. The result also shows that just because an investment looks very profitable out, it can still be very sensitive to changes, and even at very small changes in the market can turn to the investment unprofitable.

The study also shows some difficulties in the investment calculation. Difficulties such as estimating costs and revenues, constant development and change in the market, and to study how changes in various factors affecting the investment.