Pre Investment Analysis

[Former Member]

Dear experts,

I am trying to do Pre investment analysis in appropriation request for IM implementation.

Please help me out in configuring the Pre Investment Analysis and process steps and advise me which type of data is required for Pre-investment Analysis calculation, and for calculating Net present Value and IRR and Payback period and cash disc. flow.

Thanks,

Sanju.

[Former Member · Accepted solution]

First u have configure the "Specify Yield Curve for Determining Net Present Value".

SPRO->IM->Investment Programs->Appropriation Requests->Planning->Specify Yield Curve for Determining Net Present Value

Specify Yield Curve for Determining Net Present Value

In this step, you define the yield curves for determining net present value from the cash flow values of appropriation requests. You call the function manually for determining net present value, from master data maintenance for the appropriation request.

For each currency, you can define one yield curve, with one bid yield curve type, and one ask yield curve type.

Standard settings

SAP provides two yield curves as examples: 9990 (bid) and 9991 (ask).

Remember that SAP supplies these yield curves in client 000. You have to copy them into your working clients (Table view -> Transport).

Recommendation

When determining the net present value of appropriation requests, it is often sufficient to work with a constant interest rate. In this case, you only need to enter the following for bid and ask: the term (life) and a reference interest rate. Both of these should be valid for a long period of time, such as starting on January 1, 1900.

Activities

1. Enter a yield curve for the currency, with a bid yield curve type (yield curve type 9990) and an ask yield curve type (yield curve type 9991).

Yield curve types 9990 and 9991 are predefined in the system and cannot be changed.

2. For each yield curve, enter any number of terms (lives), as points for helping to generate the curve.

These terms, along with their assigned reference interest rates, determine the course of the interest curve. The system extrapolates the curve between the defined terms. After the last defined term, the system continues a constant calculation using the last reference interest rate (linear curve parallel to the time axis).

The time period is not allowed to exceed 80 years.

3. For each term, enter at least one reference interest rate.

You can define the reference interest rates with a valid-from date. This means you can make the curve time-dependent. If you do not want to make the curve time-dependent, just enter a reference interest rate with a valid-from date in the distant past (such as January 1, 1900).

Edited by: rahul K on Dec 10, 2008 8:16 AM

[Former Member · Accepted solution]

Hi Rahul,

Thanks for your valuable reply(points awarded).

When I have calculated ..Its prompting the message like (not error message)

Internal rate of return cannot be calculated due to the order of data

Message no. AO298

Diagnosis

The system could not calculate an internal rate of return, because the data for the cash flow does not allow the calculation. This situation could arise, for example, if all cash flows are positive (meaning that more revenue than costs are planned in each year).

System Response

The internal rate of return is not calculated.

Pls do the needful.

Thanks,

Edited by: Sanjana on Dec 10, 2008 10:19 AM