Project economics analysis tool

• US 8,892,409 B2
• Filed: 12/18/2012
• Issued: 11/18/2014
• Est. Priority Date: 02/11/2009
• Status: Active Grant

• Current Assignee: Johnathan Mun
• Original Assignee: Johnathan Mun
• Inventors: Mun, Johnathan
• Primary Examiner(s): JONES, HUGH M
• Application Number:
  US13/719,203
• Publication Number:
  US 20130103615A1
• Time in Patent Office: 700 Days
• Field of Search: 703/2
• US Class Current: 703/2
• CPC Class Codes: G06Q 10/04 Forecasting or optimisation specially adapted for administrative or management purposes, e.g. linear programming or "cutting stock problem" market predictions or forecasting for commercial activities G06Q30/0202
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

The present invention is applicable in the field of corporate finance, corporate capital investments, economics, math, risk analysis, simulation, decision analysis, and business statistics, and relates to the modeling and valuation of investment decisions under uncertainty and risk within all companies, allowing these firms to properly identify, assess, quantify, value, diversify, and hedge their corporate capital investment decisions and their associated risks.

Claims

1. A computer-implemented system comprising:

a project economics analysis tool (PEAT) module comprising physical memory storing instructions that cause the PEAT module to;

provide a user, via said PEAT module, a user interface for integrated risk management and evaluating options;

present said user with a plurality of integrated risk management methodologies comprising Monte Carlo risk simulation, strategic real options, stochastic and predictive forecasting, business analytics, business statistics, business intelligence, decision analysis, and portfolio optimization, wherein said integrated risk management methodologies are applied to project and portfolio economics and financial analysis, wherein said financial analysis comprises analysis of one or more options,

wherein said PEAT module comprises three rows of functions, the first row comprising a plurality of user selectable functions, including;

discounted cash flow, applied analytics, risk simulation, options strategies, options valuations, forecast prediction, portfolio optimization, and knowledge center,

the second row comprising functions for selecting one or more different options or a portfolio of options for analysis,

and the third row comprising sub-functions associated with said first row of functions and said one or more options,

wherein said discounted cash flow function receives inputted assumption data, including start and end years, a discount rate, and a marginal tax rate, and calculates discounted cash flow for said one or more options based on said inputted assumption data,

wherein said applied analytics function is configured to run a tornado analysis and a scenario analysis on said one or more options,

wherein the risk simulation function is configured to allow a user to set up and run Monte Carlo risk simulations on said one or more options based on said inputted assumption data,

wherein said risk simulation function comprises a dynamic sensitivity analysis sub-function, wherein said dynamic sensitivity analysis ranks the input variables according to their relationship with a selected output of said risk simulation,

wherein the options strategies function is configured to allow a user to draw their own custom strategic maps, wherein each map can have multiple option outcome pathways,

wherein the options valuation function is configured to calculate options valuations for said one or more options,

wherein the portfolio optimization function is configured to determine the best combination of said one or more options for said portfolio of options.

2. The computer-implemented system of claim 1, wherein said user interface of said PEAT module is organized in a tri-level tabular format.

3. The computer-implemented system of claim 1, wherein said PEAT module further comprise an industry-specific module.

4. The industry-specific module of claim 2, wherein said industry-specific module is programmed for oil and gas project economics.

5. The computer-implemented system of claim 1, wherein said PEAT module further comprises an application-specific module.

6. The application-specific module of claim 5, wherein said application-specific module is programmed for discounted cash flow modeling.

7. The computer-implemented system of claim 1, wherein said sub-functions comprise:

cash flow ratios, economic results, and information and details.

8. The computer-implemented system of claim 7, wherein said cash flow ratios sub-function receives balance sheet data and computes financial ratios based on said data, said ratios selected from the group comprising:

EBIT, Net Income, Net Cash Flow, Operating Cash Flow, Economic Value Added, Return on Invested Capital, Net Profit Margin, or any combination thereof.

9. The computer-implemented system of claim 8, wherein said economic results sub-function displays results for said one or more options, wherein said results include:

Net Present Value (NPV), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), Profitability Index (PI), Return on Investment (ROI), Payback Period (PP), Discounted Payback Period (DPP), or any combination thereof.

10. The computer-implemented system of claim 9, wherein said information and details sub-function allows a user to enter justifications for said inputted assumption data and any notes related to said one or more options.

11. The computer-implemented system of claim 1, wherein said second row comprises a global settings function configured to allow a user to enter global inputs that apply to all options to be analyzed.

12. The computer-implemented system of claim 1, wherein said third row comprises a beta sub-function, said beta sub-function is configured to receive historical stock data and compute a beta risk coefficient based on said stock data.

13. The computer-implemented system of claim 1, wherein said third row comprises a weighted average cost of capital (WACC) sub-function that computes a company'"'"'s WACC to use as said discount rate.

14. The computer-implemented system of claim 1, wherein said tornado analysis provides a static sensitivity analysis of a selected option output based on each of said input assumptions, performed one at a time, and ranked from most impactful to the least, wherein a user can select an output variable from a drop-down list,

wherein a user can change default sensitivity settings of each input assumption to test.

15. The computer-implemented system of claim 1, wherein said dynamic sensitivity analysis sub-function is configured to generate a rank correlation chart, wherein red bars indicate negative correlations between the input variables and the selected output and green bars indicate positive correlations between the input variables and the selected output.

16. The computer-implemented system of claim 1, wherein said options valuation function includes:

a sensitivity analysis sub-function, a tornado analysis sub-function, and a scenario analysis sub-function.

17. A computer-implemented method for providing integrated risk management integration via a project economics analysis tool (PEAT) module, the method comprising the steps of:

providing a user, via said PEAT module, a user interface for integrated risk management integration and evaluating options;

presenting said user with a plurality of integrated risk management methodologies comprising Monte Carlo risk simulation, strategic real options, stochastic and predictive forecasting, business analytics, business statistics, business intelligence, decision analysis, and portfolio optimization, wherein said integrated risk management methodologies are applied to project and portfolio economics and financial analysis, wherein said financial analysis comprises analysis of one or more options,

wherein said PEAT module comprises three rows of functions, the first row comprising a plurality of user selectable functions, including;

discounted cash flow, applied analytics, risk simulation, options strategies, options valuations, forecast prediction, portfolio optimization, and knowledge center,

the second row comprising functions for selecting one or more different options or a portfolio of options for analysis,

and the third row comprising sub-functions associated with said first row of functions and said one or more options,

wherein said discounted cash flow function receives inputted assumption data, including start and end years, a discount rate, and a marginal tax rate, and calculates discounted cash flow for said one or more options based on said inputted assumption data,

wherein said applied analytics function allows users to run a Tornado Analysis and Scenario Analysis on said one or more options,

wherein the risk simulation function is configured to allow a user to set up and run Monte Carlo risk simulations on said one or more options based on said inputted assumption data,

wherein said risk simulation function comprises a dynamic sensitivity analysis sub-function, wherein said dynamic sensitivity analysis ranks the input variables according to their relationship with a selected output of said risk simulation,

wherein said options strategies function is configured to allow a user to draw their own custom strategic maps, wherein each map can have multiple option outcome pathways,

wherein the options valuation function is configured to calculate options valuations for said one or more options,

wherein said portfolio optimization function is configured to determine the best combination of said one or more options for said portfolio of options.