Carlo Alberto Magni
Investment Decisions and the Logic of Valuation.
Linking Finance, Accounting, and Engineering

Springer Nature 2020
References, Symbols and Abbreviations, Index
Advance Praise, Contents, Preface, Acknowledgments
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
About this book
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.
About the author
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).

Advance Praise for Investment Decisions and the Logic of Valuation

  • “Put in a room a manager (possibly an engineer), an accountant and a financial mathematician. Close the room and throw away the key until they reach an agreement about how to evaluate investments. If the financial mathematician is Carlo Alberto Magni and if the agenda is the index of this book, well, try to recover quickly the key.”
    —Lorenzo Peccati, Emeritus Professor of Applied Mathematics, Bocconi University; co-editor-in-chief of the European Journal of Operational Research (2005–2014)
  • “Engineers, economists and accountants have all had a hand in the development of the tools needed for making rational investment decisions. But the results have been scattered across the three disciplines, with each tending to focus on the aspects that most bear on their concerns. Carlo Alberto Magni is a leading authority on how to use rate of return measures properly, measures treated by most economic texts as misguided and therefore quickly dismissed, even though they are used widely in practice. His magnificent book guides the reader through a very difficult area, one that not only provides the necessary tools for the job, but which shows how to tie together the cash flow and accounting forecast inputs in a coherent and systematic fashion when doing so. All three groups will learn much from this novel and important text.”
    —Ken Peasnell, Distinguished Professor of Accounting Emeritus, Lancaster University Management School
  • “The subject of valuation and project selection has a long history originating in multiple disciplines including financial economics, accounting, and engineering. Historically these literatures evolved along three different paths that were sometimes overlapping but often not such that they appear disjointed. This makes it difficult for students and business professionals to take advantages of the unique contributions of each. Carlo Alberto Magni has simplified this problem for us in his book titled Investment Decisions and the Logic of Valuation. He has done a masterful job of melding the contributions of each of these disciplines in a single volume. Carlo Alberto has the rare gift of analytical sophistication and superb communication skills. This is a book that every student of finance will want to have on their book shelf.”
    —John Martin, Carr P. Collins Chairholder and Professor of Finance, Baylor University, co-author of Valuation. The Art and Science of Corporate Investment Decisions
  • “This textbook takes a refreshing approach to engineering economics by integrating traditional engineering topics such as statics and dynamics. As a leading authority on determining the economic value of projects, this book affords Dr. Magni the opportunity to cohesively tie together the various aspects of investment appraisal. It is only a matter of time before his rate of return analysis is the mainstream approach in corporate finance.”
    —Joseph Hartman, Provost and Vice Chancellor for Academic Affair, University of Massachusetts Lowell, editor-in-chief of The Engineering Economist (2004–2012), author of Engineering Economy and the Decision-Making Process
  • “Professor Magni has created a very unique pedagogical framework for describing the complex interrelationships between finance, accounting and economic decision-making using engineering analogies that will appeal to engineering students and to professionals involved in the justification of project investments.”
    —Thomas Boucher, Professor of Industrial and Systems Engineering Emeritus, Rutgers University, editor-in-chief of The Engineering Economist (2013–2016)
  • “Measurements of capital, income, cash flow, and rates of return are regularly employed in decision-making as well as in analyzing and appraising capital investments. For decades, the relationship between these concepts remained obscure if not largely misunderstood. In this novel book, Carlo Alberto Magni, a virtuous scholar and a leading authority on the correct measurement of rates of return, eloquently presents the golden link that relates them all in a simple, logical, comprehensive and intuitive manner. This important book is an eye-opener, rich with examples and is highly recommended to all who wish to analyze investments and use these basic concepts properly, whether they are economists, accountants, engineers or finance people. The book provides an enormous benefit even to experienced professionals in assessing investment profitability.”
    —Moshe Ben-Horin, Professor of Finance and President of Ono Academic College

Advance Praise, Contents, Preface, Acknowledgment