Advertisement

© 2020

Investment Decisions and the Logic of Valuation

Linking Finance, Accounting, and Engineering

  • Provides a new approach to the financial modeling of capital asset investments

  • Introduces a novel way of linking finance and accounting with engineering decision-making

  • Includes a unified theory of investment decision-making and shareholder value creation

  • Presents a toolkit of techniques for measuring economic efficiency and making rational decisions

  • Contains more than 180 worked examples and 160 illustrative tables

Book

Table of contents

  1. Front Matter
    Pages i-xxii
  2. Accounting-and-Finance Engineering System: The Mechanics

    1. Front Matter
      Pages 1-1
    2. Carlo Alberto Magni
      Pages 3-42
    3. Carlo Alberto Magni
      Pages 43-79
  3. Accounting-and-Finance Engineering System: The Matrix

    1. Front Matter
      Pages 81-81
    2. Carlo Alberto Magni
      Pages 83-158
    3. Carlo Alberto Magni
      Pages 159-245
  4. Valuation and Decision-making: The Absolute Approaches

    1. Front Matter
      Pages 247-247
    2. Carlo Alberto Magni
      Pages 249-288
    3. Carlo Alberto Magni
      Pages 289-396
  5. Valuation and Decision-Making: The Relative Approaches

    1. Front Matter
      Pages 397-397
    2. Carlo Alberto Magni
      Pages 399-414
    3. Carlo Alberto Magni
      Pages 415-486
    4. Carlo Alberto Magni
      Pages 487-554
  6. Project Selection and Some Final Examples

    1. Front Matter
      Pages 613-613
    2. Carlo Alberto Magni
      Pages 615-643
    3. Carlo Alberto Magni
      Pages 645-689
  7. Back Matter
    Pages 691-742

About this book

Introduction

This book presents a new approach to the valuation of capital asset investments and investment decision-making. Starting from simple premises and working logically through three basic elements (capital, income, and cash flow), it guides readers on an interdisciplinary journey through the subtleties of accounting and finance, explaining how to correctly measure a project’s economic profitability and efficiency, how to assess the impact of investment policy and financing policy on shareholder value creation, and how to design reliable, transparent, and logically consistent financial models.

The book adopts an innovative pedagogical approach, based on a newly developed accounting-and-finance-engineering system, to help readers gain a deeper understanding of the accounting and financial magnitudes, learn about new analytical tools, and develop the necessary skills to practically implement them. This diverse approach to capital budgeting allows a sophisticated economic analysis in both absolute terms (values) and relative terms  (rates of return), and is applicable to a wide range of economic entities, including real assets and financial assets, engineering designs and manufacturing schemes, corporate-financed and project-financed transactions, privately-owned projects and public investments, individual projects and firms. 

As such, this book is a valuable resource for a broad audience, including scholars and researchers, industry practitioners, executives, and managers, as well as students of corporate finance, managerial finance, engineering economics, financial management, management accounting, operations research, and financial mathematics. 

It features more than 180 guided examples, 50 charts and figures and over 160 explanatory tables that help readers grasp the new concepts and tools. Each chapter starts with an abstract and a list of the skills readers can expect to gain, and concludes with a list of key points summarizing the content.

Keywords

Investment project Value creation Net Present Value Average Internal Rate of Return (AIRR) Engineering economics Asset value

Authors and affiliations

  1. 1.Department of Economics “Marco Biagi”University of Modena and Reggio EmiliaModenaItaly

About the authors

Carlo Alberto Magni is an Associate Professor at the Department of Economics “Marco Biagi” and at the School of Doctorate E4E (Engineering for Economics – Economics for Engineering) of the University of Modena and Reggio Emilia. He has received the national qualification as full professor in Financial Markets and Institution in 2014 and in Mathematical Methods for Economics, Finance, and Actuarial Sciences in 2017. 

Graduated in Economics and Business in 1989, he received his Ph.D. in Mathematics for Economic Decisions from the University of Trieste in 1996. He holds a Master in Business Administration from the University of Turin, received in 1991.

His teaching activities include engineering economics and financial management, principles and models for managerial decisions, mathematics for investment and credit, and calculus. His research areas are engineering economics, corporate finance, managerial finance, financial management, management accounting, financial mathematics. He has written more than 100 papers and published in more than 25 different journals, including European Journal of Operational Research, International Journal of Production Economics, Quantitative Finance, Journal of Mathematical Economics, The Engineering Economist, European Accounting Review, Theory and Decision, Managerial Finance, Economic Modelling, Insurance: Mathematics and Economics.

In 2011, he won the “Eugene L. Grant Award”, granted by the Engineering Economy Division of the American Society for Engineering Education (ASEE). Since 2013, he serves as an area editor for The Engineering Economist, a joint publication of the Engineering Economy Division of ASEE and the Institute of Industrial Engineers (IIE).

Bibliographic information

Industry Sectors
Finance, Business & Banking

Reviews

“The text does a marvelous job at not only developing the integrated theory, but explaining its relevance in decision- making, making the text more accessible than the underlying research literature. This contribution to the literature – namely reconciling the use of absolute and relative measures of worth in an accessible manner – cannot be understated.” (Joseph C. Hartman, The Engineering Economist, June 25, 2020)