Paper No. T.9-1.1, pp.

1-4

The 6th PSU-UNS International Conference on Engineering and

Technology (ICET-2013), Novi Sad, Serbia, May 15-17, 2013
University of Novi Sad, Faculty of Technical Sciences

ASSESMENT METHODS FOR

INVESTMENT PROJECTS IN THE
GRAPHIC INDUSTRY SECTOR: A CASE
STUDY OF THE REPUBLIC OF SERBIA
Vladimir Dj. Djakovic1*, Goran B. Andjelic2, Jelena S. Kiurski3, Ivana B. Oros4,
Vesna S. Kecic5
1
University of Novi Sad, Faculty of Technical Sciences, Novi Sad, Serbia
2
Educons University, Faculty of Business in Service, Sremska Kamenica, Serbia
3
University of Novi Sad, Faculty of Technical Sciences, Novi Sad, Serbia
4
University of Novi Sad, Faculty of Technical Sciences, Novi Sad, Serbia
5
University of Novi Sad, Faculty of Technical Sciences, Novi Sad, Serbia
*Authors to correspondence should be addressed via email: v_djakovic@uns.ac.rs

Abstract: The main topic of the research is the
evaluation of different assessment methods for
investment projects in the graphic industry sector. In this
article, such methods are analyzed and evaluated, with
purpose to provide solid and useful information for
business decision makers and their accurate selection
and evaluation of different investment alternatives, with
special focus on the Republic of Serbia. The research
results will be significant both for companies in graphic
industry sector and also for economic policy creators.
Key Words: Company management, Investment
projects, Emerging markets, Assesment methods.
1. INTRODUCTION
Investing is a process, and it is the thought that most
authors agree with. This statement is followed by the fact
that the investment process is an inevitable market reality
and a necessary precondition for the existence of any
form of market. In market-oriented economies
investments become even more important because they
create realistic assumptions of growth and development
of any economy, both at micro and macro levels. The
philosophical treatment of this issue can lead to the
conclusion that such a process has its own economic,
social and philosophical dimensions: economic, because
it is focused on activities of business growth and
development, social, because effects of this process
significantly comprise all spheres of society, and
philosophical because the investment as a process can be
viewed through the prism of dialectics, in the sense that,
literally speaking, taking certain business activities
involves use of resources, in order to simultaneously
create optimal conditions for generating new, multiplied
revenues. Therefore, the complexity and
comprehensiveness of investments have always been
challenging for business policy makers, in terms of
assessment and evaluation of the expected impact of
investment activities, on the one hand, and their
usefulness, on the other.
The research in this paper develops a normative
concept, meaning that an investment is treated as the
"generic wisdom" of any business and therefore it is
necessary to understand all the details of flows and
effects of this process. The study is also clearly object-
oriented because it puts the focus on investment
activities in the field of graphic industry, with particular
emphasis on the Republic of Serbia. The reason for this
is the fact that the graphic industry sector is distinctively
capital-demanding, highly propulsive, yet again,
"hungry" for new technologies and achievements, and
therefore, very demanding in terms of the need to
undertake investment activities on a continuous basis.
This conclusion is particularly evident in the case of
transition economies, given that these economies, in the
degree of changes - both on micro and macro spheres -
are manifested more intensively, market fluctuations are
more significant and their effects are more obvious [1].
Also, such economies are highly volatile, low-capitalized
and liquid markets with increasingly larger and more
complex demands for market participants, over and over
again. In this sense, the paper will analyze different
assessment methods and rankings of investment projects
in the graphic industry, particularly focused on the
Serbian market, with the main aim to propose specific
mechanisms of enhancing the existing assessment

1
methods as a function of their greater and more optimal
use in the case of graphic industry sector, based on
gathered information.
The theory recognizes two clusters of methods for the
assessment and evaluation of investment projects:
dynamic, involving the time factor in the analysis, and
static, excluding it. Combining the knowledge obtained
by dynamic and static methods, business policy makers
gather and analyze a variety of information, based on
which they make business decisions whether a particular
investment alternative is acceptable or not or whether it
is more attractive compared to other options. The
objective pursued by the research is to achieve specific
knowledge about method specificities of estimating and
evaluating investment alternatives, considering
distinctive application of such methods in the case of
graphic industry sector and then proposing practical
mechanisms to make existing methods more scalable to
the companies, particularly focused on the Republic of
Serbia.
The results of the research will be valuable both to
the academic community and the real sector since it will
provide a set of high-quality information about the
particularities of current assessment and evaluation
methods of investment alternatives that must be accepted
if their greater reliabilities are to be achieved in graphic
industry companies, and will adjust the existing methods
of assessment with the real situation in the field of
Serbian graphic industry.
2. EXISTING METHODS IN PRACTICE -
THEORETICAL OVERVIEW
In today's globalized business environment, it is
essential to pay attention to the selection of appropriate
methods for investment project evaluation, as the
function of growth and business development activities.
The importance of selecting appropriate methods for
assessing and evaluating investment alternatives is
especially true in the graphic industry sector, knowing its
characteristics, i.e. its environmental impact [2]. Such
methods must incorporate current market trends and
circumstances since it is the way directly to increase the
attractiveness of the observed industrial sector.
Maric [3] states that the assessment of an investment
project is one of the last steps in its realization and its
proper implementation and evaluation provide the
necessary information for making reliable investment
decisions. Given that every investment is the specific set
of benefits and costs with dissimilar time periods
(investment today, effects in future), the evaluation of
the investment project is carried out as a two step process
for each project under consideration:
- in assumed conditions of determinism,
- in uncertain future conditions.
Regarding time-dependent effects of the investment
projects, the assessment can be static, when the project is
assessed only in one, so-called, representative year
(representative year is the one when the full production
capacity is reached and commitments to funding sources
are still ongoing), and dynamic in entire project duration
[3].
2
Drury et al. [4] conclude that the use of conservative
cash flow forecasts, combined with the incorrect
treatment of inflation and excessive discount rates
observed in the survey, suggests that many UK
organizations may be rejecting profitable investments.
Given these problems, it could be argued that DCF
procedures should be abandoned or given little weight in
long-term investment decisions, but DCF procedures
should not be ignored or relegated in importance merely
because they might be used incorrectly. Instead, decision
makers should recognize potential problems and be
careful to ensure that the financial appraisal is performed
correctly [4]. This study is particularly interesting
because the authors emphasize the importance of the
inflation rate for the assessment and evaluation of
investment projects.
Stojanovic et al. [5] point out that maximizing the
value of the company requires its managers continually
to assess investment opportunities (evaluating investment
projects). Assessment or evaluation of projects, if the
focus is on their profitability, can be carried out using the
method of project profitability evaluation. In order to
overcome the problem of limited investment resources,
authors propose the solution that involves the use of
profitability index, as the dynamic method for evaluating
the project profitability and the application of the zero-
one optimization, as the special case of linear
programming, which are used to find the optimal set of
proposed projects which initial investments would fit
into the predetermined budget limits and thereby increase
the value of the company [5].
Njegovan [6] states that as the basic methods for
decision making, in order to make any activities
accessible to related capital investment expected to result
in products which will find their market application, i.e.
new products or products with altered characteristics -
products substitutes etc, may be used:
1) Return of investment as a method of investment
evaluation (the number of years needed to get money in
the particular project equal to the money that will be
generated by the investment after its market
certification);
2) Accounting rate of return (expressed as the
percentage and the ratio of registered accounting profits
generated by the investment project).
The quoted dynamic methods are net present value
and internal rate of return, and the conclusion is that the
use of these two, as well as other performance appraisal
methods of investment-development activities, is
dominantly influenced by the possibility of market
valuation effects, methods of their measurement, and
development and implementation of marketing and
profit-making strategies used for this purpose [6].
Soldat et al. [7] analyze the choice of optimal
technological solutions for the intended investment
project and their importance for its success. Professional
and methodological basis for the investment preparation
assumes methods of investment analysis, articulation
procedure and selection of the optimal solutions for the
project implementation. The authors conclude that the
proper selection and expert evaluation during investment
preparation and implementation should necessary show
the investment efficiency and represent the approach that
methodological and theoretical foundations of
investment concept and evaluation are characterized by
correspondence of analytical instruments in the multi-
criteria evaluation of investment efficiency [7].
Ralevic et al. [8] clearly identified investment
challenges for companies from the graphic industry
sector and concluded that it possesses the potential for
significant economic growth. Further, the research
conducted in their article represents the sound basis for
the logical next step in exploration, i.e. the analyses and
evaluation of the assessment methods for investment
projects in this sector.
The above theoretical overview of existing methods
for estimation and evaluation of investment alternatives
shows the actuality of the observed area and the need for
further analysis of the application of dynamic and static
methods, in order to optimize their use in the graphic
industry specific sector of Serbia.
3. FLEXIBILITY - THE NECESSITY OF
EVERYDAY LIFE IN MODERN BUSINESS
Based on the above overview and empirical analysis
of the situation, as well as circumstances in the graphic
industry sector of Serbia, it can be asserted that the
existing models of assessment and evaluation of
investment alternatives neither fully comply with the
assigned tasks nor adequately respond to environmental
challenges. The reasons in favor of this thesis lie in
specific features distinguishable in the graphic industry
sector on one side, and characteristics of transitional
markets, on the other. The market climate which
produces circumstances where existing assessment
models cannot fully respond to the market reality arises
from the combination of these two factors.
The analysis of the existing evaluation models and
their adjustment to the characteristics of Serbian graphic
industry sector show that their modifications should be
carried out in the two directions:
a) theoretical and normative, and
b) market-oriented.
Theoretical and normative adjustments of existing
models of assessment and evaluation of investment
activities in the case of Serbian graphic industry sector
must take into consideration the fact that inflation is an
acceptable market phenomenon and thus essential in
each market, and also the reality that in recessionary and
turbulent business conditions, inflationary tendencies are
prerequisite to any growth. Also, it is necessary to accept
the fact that, at the time of investment, it is only a
disbursement for a particular company and a burden for
its business results, but in the time continuum, multiplied
positive effects of these activities are to be expected.
These conclusions impose the necessity to include
projected inflation rate for the duration of the investment
into existing models of assessment and evaluation of
investment alternatives, yet not to overburden the effects
of investment activities, but to contribute to the more
realistic perception of the cash flows from investing
activities. In this sense, the projected cash flows from
investing activities should be continuously, year after
year, adjusted for expected inflation and thus the
obtained expectations will be modified. It is necessary to
3
make existing methods more flexible and closer to
market events, and not just to implement certain
methods, make decisions and do nothing in the future, as
it happens now. It is crucial to include the correction
factor to the methods of assessment and evaluation of the
effects of investing activities. This is especially
important in the field of graphic industry because it is the
capital-demanding and highly propulsive economic
sector. Transitional conditions additionally influence the
need to include the correction factor in the existing
methods of evaluation. These statements are related both
to the dynamic, and static methods of assessment.
Market adjustment of existing assessment methods
implies the need to update them according to the actual
market situation. Optimal evaluation results cannot be
expected if the existing assessment methods are not
continually extended with new trends and expectations.
Based on these innovative approaches to the above
mentioned methods, significantly enhanced performance
assessment of the investment expectations in the Serbian
graphic industry market might be expected. Change
dynamics both at micro and the macro levels, constantly
faces all the market participants with new and
significant tasks; keeping in mind the importance of
investing activities as initiators of any development, after
application of specific modifications, it is realistic to
expect generating of real conditions for accelerated
development of entire Serbian graphics industry.
4. CONCLUSION
The conclusions drawn from the research only
confirm the necessity of constant adjustment to changing
environmental conditions and the demand to create
preconditions for further growth and development. This
paper is focused on the graphic industry sector of the
Republic of Serbia, which is the very specific and
demanding sector. The ambition of the research, based
on the analyses of existing methods of assessment and
evaluation of investment activities, is to create conditions
for their improvement and access to current market
trends and conditions in Serbian graphic industry.
The research results indicate the existence of
objective circumstances that may contribute to further
development and improvement of existing methods of
assessment and evaluation of investment activities in the
sector of graphic industry, making the sector even more
attractive for potential investors. In this way,
preconceived market conditions move the graphic
industry sector of Serbia closer towards global markets
for goods and services, set the stage for foreign direct
investment inflow and allow the enterprises to compete
in the global market. Directions for further research
include continual application monitoring of both
dynamic and static methods of investment evaluation and
ranking in the graphic industry of the Republic of Serbia,
with the aim to innovate the given methods even further.
Acknowledgment: The authors acknowledge the
financial support of the Ministry of Education, Science
and Technological Development of the Republic of
Serbia, within the Project No. TR34014.
5. REFERENCES
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