53 CONTENT CONTENT 1 ACKNOWLEDGEMENT 6 PREFACE 7 CHAPTER 1 THEORETICAL FRAMEWORK OF INVESTMENT PROJECTS AND FINANCIAL APPRAISAL OF INVESTMENT PROJECTS 8 1 1 The appraisal of investment projects in the[.]
1 CONTENT CONTENT ACKNOWLEDGEMENT PREFACE CHAPTER 1: THEORETICAL FRAMEWORK OF INVESTMENT PROJECTS AND FINANCIAL APPRAISAL OF INVESTMENT PROJECTS .8 1.1 The appraisal of investment projects in the commercial banks 1.1.1 Investment projects .8 1.1.2 Investment project Appraisal 10 1.2 Financial Appraisal of investment Project 12 1.2.1 Definition of financial appraisal of investment project .12 1.2.2 Objectives of financial appraisal of investment projects 12 1.2.3 Content of project financial appraisal .13 1.3 Financial Appraisal Quality of investment projects at Commercial Banks 25 1.3.1 The concept of financial appraisal quality of investment project 25 1.3.2 Indicators of financial appraisal quality of investment projects 25 1.3.3 Factors influencing financial appraisal quality of investment projects 26 CHAPTER 2: FINANCIAL APPRAISAL OF INVESTMENT PROJECT IN THE EXCHANGE OF MARITIME BANK 28 2.1 Overview of Maritime Bank and the Exchange of Maritime Bank .28 2.1.1 Overview of Maritime Bank .28 2.2.2 Overview of the Exchange of Maritime Bank 29 Supervisor:Nguyễn Thanh Hà Vũ Thùy Trang – Class:Finance A2 2.2 The financial appraisal of investment project in the Exchange MB 35 2.2.1 Assessing the situation of investment project at the Exchange 35 2.2.2 The process of financial appraisal of investment project in the Exchange MB 36 2.2.3 Content of financial appraisal of investment project at the Exchange MB 37 2.2.4 Introduction to specific project 40 2.2.5 Quality of financial appraisal of investment project at MB 53 CHAPTER 3: SOLUTIONS TO IMPROVE AND COMPLETING THE FINANCIAL APPRAISAL OF INVESTMENT PROJECTS IN THE EXCHANGE OF MB 57 3.1 Orientation of the financial appraisal of investment projects at the Exchange MB 57 3.2 Some measures to improve the quality of financial appraisal investment projects at the Exchange MB .58 CONCLUSION 66 REFERENCES 67 Supervisor:Nguyễn Thanh Hà Vũ Thùy Trang – Class:Finance A2 LIST OF TABLES Table Developing process of Maritime Bank 30 Table The process of financial appraisal of investment project in the Exchange of Maritime Bank……………………………………………………………………………………………………………36 Table Capital scale of stage .42 Table One year expected raw material of the project 42 Table Scale of project 44 Table Total investment of the project 46 Table Capital structure of the project 46 Table WACC of the project 47 Table Cash flow of the project 48 Table 10 Time debts can be paid 49 Table 11 DCRS .49 Table 12 Payment plan of medium-term loans 50 Table 13 Change in revenue affects NPV and IRR 51 Table 14 Change in investment capital affects NPV and IRR 52 Table 15 Current situation of medium-term loans 53 Supervisor:Nguyễn Thanh Hà Vũ Thùy Trang – Class:Finance A2 Supervisor:Nguyễn Thanh Hà Vũ Thùy Trang – Class:Finance A2 LIST OF FIGURES Figure 1: Growth of number individual customers from 2011 to 2013 33 Figure 2: Loans for enterprises from 2011 to 2013 35 Supervisor:Nguyễn Thanh Hà Vũ Thùy Trang – Class:Finance A2 ABBREVIATION MB CIC DPP DSCR IP IRR NPV PP Supervisor:Nguyễn Thanh Hà Maritime Bank Credit Information Center Discounted payback period Debt service coverage ratio Investment project Internal rate of return Net present Value Payback Period Vũ Thùy Trang – Class:Finance A2 ACKNOWLEDGEMENT I would like to express my profound gratitude to all people who have enthusiastically supported me during the past two months Without their help, I would have not completed this thesis on time I am deeply grateful to Dr.Nguyễn Thanh Hà, my supervisor, for his valuable guidance and great encouragement In addition, I would like to give my sincere thanks to Mr Nguyễn Minh Hùng –my mentor at Maritime Bank, who supported me gather data as well as information that are necessary for the thesis during my internship In addition, I am also truly thankful to the staff at Maritime Bank for their supports when I interned there Once again, thank you all! Supervisor:Nguyễn Thanh Hà Vũ Thùy Trang – Class:Finance A2 PREFACE Nowadays, with the fast growing emerging economy, Viet Nam, one of the developing countries in Asia area, becomes a potential market for project lending In recent years, the rate of investment in our country’s economy has strong growth to promote economic development and improve social life However, under the impact of global economic crisis in 2011, this market has been risker Therefore, investment project appraisal activity, especially financial appraisal, is one of the primary concern most commercial banks This research concentrates on analyzing the investment project of Maritime Bank in Hanoi City, points out the drawbacks and recommends the solution to enhance the project It met its aims through a study of basic relevant literature frameworks and a study of specific application at Maritime Bank “Financial appraisal of investment project in the Exchange of Maritime Bank” Topic includes main contents following: Chapter 1: Theoretical framework of investment projects and financial appraisal of investment projects Chapter 2: Financial appraisal of investment project in Maritime Bank Chapter 3: Solutions to improve and completing the financial appraisal of investment projects in Maritime Bank Because the time is limited and I have not very much practical knowledge, I look forward to receiving the help of supervisor to achieve better results I sincerely thank! Supervisor:Nguyễn Thanh Hà Vũ Thùy Trang – Class:Finance A2 CHAPTER 1: THEORETICAL FRAMEWORK OF INVESTMENT PROJECTS AND FINANCIAL APPRAISAL OF INVESTMENT PROJECTS 1.1 The appraisal of investment projects in the commercial banks 1.1.1 Investment projects a Definition of investment project An investment project (or project) is a proposal for an investment, in which, an investment project is the expenditure of resources in the present, in order to benefits in the future Each country or organization, based on its development strategy, might have different point of view about investment projects The following are some of various definitions of investment projects: In The Portable MBA in Project Management by Eric Verzuh, a project is a temporary venture, with a finite beginning and end, whose goal is to create a unique product or service United Nations Industrial Development Organization (UNIDO) defines a project as a proposal for an investment to create and or develop certain facilities in order to increase the production of goods/services in a community certain period of time In Viet Nam, according to Decree 52/1999 NC-CP, an investment project is defined as a set of proposals on making initial investments to build, expand, or renovate certain objects in order to increase quantity; maintain or improve the quantity of the product or certain services in a period of time b Characteristics of investment projects A type project has the following key characteristics: Each project must have clear objective(s) The objective(s) answers the question: what will the investors and society get from IPs? Generally, an objective is quantified into specific performance indicators Supervisor:Nguyễn Thanh Hà Vũ Thùy Trang – Class:Finance A2 10 Each project uses various types of resources such as human resources, etc However, all those resources are scarce, thus a project must be carried out within the constraint of resources Each project must have a fixed time frame, meaning that it must have a specific beginning date and an end date The beginning date is when the project cycle starts, and the end date is when the project cycle completes Most of projects are medium-term and long-term projects As a result, projects are considered risky for investors due to the uncertainties in the long run The uncertainties might be change in social-economic conditions, interest rates, government policies, and unexpected cash flows, etc c Project cycle The precise formulation of a project and its phases vary from one agency to another, but a typical project normally includes the three main stages: project preparation, project implementation and monitoring, and valuation Programming Identification Preparation and analysis Appraisal and investment decision The first stage is project preparation Programming: the establishment of general guidelines and principles for corporations, outlining of broad ideas for projects and programs Identification: within the program framework, problems, needs and interest of possible stakeholders are analyzed; ideas for projects and other actions are identified and screened The outcome of this phase is the decision of whether or not the project is worth going ahead with the designing and detailed project document Recently, investors place much emphasis on project identification as an important element in the overall success of the project Preparation and analysis: this stage is formally a borrower responsibility It involves creating a detailed plan Through careful and detailed analysis, projects are likely to be shaped and redefined to take them a step closer to realistic conditions under which they may be implemented Supervisor:Nguyễn Thanh Hà Vũ Thùy Trang – Class:Finance A2