APT Arbitrage Pricing Theory
CAPM Capital Assets Pricing Theory
CF Cash Flows
CP Commercial Paper
CEQ Certainty-Equivalent
DPP Discounted-Payback Period
EP Economic Profit
EVAEconomic Value Added
IRR Internal Rate of Return
MIRR Modified Internal Rate of Return
MIBOR Moscow Interbank Offered Rate
MTN Medium-Term Notes
NPV Net Present Value
PP Payback Period
PI Profitability Index
RADR Risk-Adjusted Discount Rate
STN Short-Term Notes
SWOT Strength Weakness Opportunities Threats
WACC Weighted Average Cost of Capital
METHOD
Approach
The main two ways of drawing scientific conclusions are inductive and deductive. The induction is based on the empirical facts, while deduction is based on theories. An inductive approach means that the study is based on empirical facts, which will later be the foundation of general conclusions. An inductive conclusion can not be considered completely reliable, as it is built on empirical material that rarely includes all aspects.
A deductive point of view is focused on theories, and from there the researcher investigates whether reality agrees with the theory .Deductive theory as the most common perception of the relationship between theories and practice. Based on the present knowledge regarding a certain area, the researcher deducts one or more hypothesizes that have to pass an empirical review.
The authors have used a deductive approach to study, as they have performed their empirical studies based on existing theories. The theories have been adapted to match the situation a company acting in strict regulation and having standard business processes. Obvious that companies building their processes in different ways, but in terms of pharmaceutical industry I see the standard procedure of project estimation. The use method of estimation invest project in a processes when it consider the cross-border contract.
Data collection method
The choice ofdata collection method depends on affects the quality and cost of the data collected. There are lots of data collection methods such as mail questionnaire, telephone interview, or expert’s interview. For example, mail questionnaires are very good for collecting factual data, but they are less effective when sensitive or complex data are needed. Quality and cost are highest with expert’s interviews or telephone interviews whereas quality and cost are lower with mail questionnaires. Investment project and its analysis to make decision that needs to be analyzed from much important point of views. If it could not oversee some of the components, wrong decision could be made.
Investment decision depend on key factor analysis of situation including market overview to choose the project having potential for long-term profit generation, costs evaluation as well as analysis of probable growth, finance analysis of required return from the project and choice of appropriate method of investment appraisal.
I have decided that case study method is the best solution for conducting research in the chosen field. Exceptional or unusual situation can be subject of single-case study, highlighting remarkable characteristics or investigating unexpected results. That is why I have chosen this method. Evidence for case study comprises both qualitative and quantitative data. Quantitative data deals with numbers and calculations whereas qualitative data is descriptive data. The case studies I used are based on quantitative data. I’ve conducted investment appraisal and calculated ratios: NPV, IRR, PP, and PI. At the same time qualitative data such as market reviews, simulation model, scenario, and SWOT analysis, is an important source for conclusions. I’ve tried to find information already gathered and analyzed by investment professionals and published in special reviews. To avoid subjectivity of one source of information. I used information that was confirmed by at least two sources.
Primary data
To extract the main parts in it the authors ask information from specialists in this sphere through interviews and question lists. Beside this I research trends in financial statements and different internal documents to confirm received information .The interviews with the managers were and instead of a questionnaire I used an interview guide with some of the questions decided previous to the meeting.
As information basis for model creation the data received from experts of a various profile, responsible for result as a whole serves. With that end in view authors had been spent interviews and answers to the questionnaires made by us are received. Reception of the information on production in whole, the basic stages of building and influence of each of them on result of work of the company as a whole was the interview purpose.
When analyzing needed data for performance measures as a starting point was the limitation of work – system should be resource effective and simple – and in this term the existing annual reports and other company documentation was investigated and used as a data source.
Secondary data
Secondary data was collected through the books, articles, and web sates to construct a theoretical base convenient for the aim of the research. After collection the materials the selection was made to use in research to the most useful theories. I have tried to involve the performance measures more additional sources.
Data processing
The articles also were in order to provide better understanding for respondents the strategy of may research. Qualitative method to explain whether the researcher logic valid conceptions, relevant to the research. For example, proposed four criteria for judging the soundness of qualitative research and explicitly offered these as an alternative to more traditional quantitatively-oriented criteria. Their proposed criteria and the quantitative criteria are referred to the degree to which the results of qualitative research can be generalized or transferred. From a qualitative perspective transferability is primarily the responsibility of the one doing the generalizing. The idea of dependability, on the other hand, emphasizes the need for the researcher to account for the research occurs. The researcher is responsible for describing the changes that occur in the setting and how these changes affected the way the research approached the research. Conformability refers to the degree to which the results could be confirmed or corroborated by others. The researcher can document the procedures for checking and rechecking the data throughout the research.In order to rely on the data, I’ve used several independent sources of information and checked. For example, it is choice of the Beta. The most common way to estimate the Beta of a stock is to figure out how the stock price has responded to market changes in the past. We obtained Beta through a calculation of the covariance. According the input for the cost of common equity is usually used CAPM model. As I mentioned above, the company’s contracts portfolio is representative. The contracts evaluated fall within the range of company’s existing projects. It’s possible to estimate the value of contracts by finding out data from the capital market. Since the company is listed o in the Russian finance market it is possible to use this dates for calculation. Computing Weighted Average Cost of Capital (WACC) According to Brealey-Meyers-Allen Eight Edition (2006) when the firm uses debt financing, the company’s cost of capital is not the same as, the expected rate of return on the firm’s stock; but is higher because of financial risk. In may analysis, the cash flows being discounted are pre-debt cash flows, that is, cash flows to the firm, and then the appropriate discount rate is the cost of capital .The cost of capital is the average of the cost of equity and the after-tax cost of debt, weighted by their market value proportions. The company's cost of capital was calculated as a weighted average of the returns expected by investors.