project appraisal

project appraisal

1. An Presentation ON Techniques of Project Appraisal Submitted To:- Dr A.K. GAURAHA Dept. of Agril.Economics Submitted By :- Mohamed A rshad A yub Dept. of Agril.ECONOMICS M.SC. Ag. (PREVIOUS)

2. Project Project is an investment activity where spend capital resource to create a productive asset for realizing benefits over time Phases in Project Identification Formulation Appraisal Implementation Monitoring Evaluation

3. Appraisal Appraisal involves a careful checking of the basic data, assumptions and methodology used in project preparation. Project appraisal is the process of assessing and questioning proposals before resources are committed.

4. Key issues in Appraising Projects Need, targeting and objectives Context and connections Consultation Options Inputs Value for money Implementation Risk and uncertainty Forward strategies Sustainability

5. Feasibility Study A Feasibility study may be undertaken during appraisal to establish the technical, economic and financial viability, environmental compliance and social acceptability of a project. Aim of a feasibility study : Development objectives Policy framework and detailed project objectives Technical soundness of the project

6. The economic and financial viability of the project proposal The status of demand for the project beneficiaries Considerations of customs and traditions of project benefactors and issues of compatibility Other important policy and cross cutting issues (gender, environment,) Administrative feasibility of the project

7. Various Aspects/Analysis of Appraisal Technical analysis Economic Analysis Financial Analysis Environmental Analysis, and Social Analysis

8. Economic Analysis It is a systematic process for examining alternative uses of resources, focusing on assessment of needs, objectives, options, costs, benefits, risks, funding, affordability and other factors relevant to decisions. The main types of economic appraisal are: Cost-benefit analysis Cost-effectiveness analysis Multi-criteria analysis

9. Financial Analysis Financial analysis involves assessment of financial impact, judgment of efficient resource use, assessment of incentives, provision of a sound financing plan, coordination of financial contribution and assessment of financial management competence. The main objective of financial analysis is to determine the requirements of funds/timing and the expected returns on.

10. T echniques of Project Appraisal The can be discussed under two heads viz ( i ) Undiscounted (a ) Pay back period, ( b) Rank by inspection, ( c) Proceeds per unit of outlay, and (d) Average annual proceeds per unit of outlay.

11. (ii) Discounted. Discounting techniques take into account the time-value of money. NPV(net present value) It is present worth of cash flow stream. The net present value at interest rate i is denoted NPV( i ) NPV= ∑ P/(1+i) ᶤ If an investor can lend and borrow money at rate i 1 , a project will be profitable if and only if NPV(i 1 ) > 0

12. IRR(Internal Rate of Returns) It is the discount rate at which the present value of net cash flow are just equal to zero The preferred option is that with the IRR greatest in excess of a specified rate of return. IRR=l( i )+d( i ) NPV @l/ad2NPV

13. BCR(Benefit Cost Ratio) The BCR is the discounted net revenues divided by the initial investment. The preferred option is that with the ratio greatest in excess of 1 Present worth of returns BCR= Present worth of total cost

14. Net Investment Ratio Present worth of positive increment net cash flow NIR= Present worth of negative increment net cash flow It is accepted when ratio is more than 1

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16. technical analysis The analysis for determining the technical viability of the development project is based on the technical data and information given in the form as well as the earlier experience of carrying out similar projects. The technical analysis concerns the project's input (supplies) and output (production) of real goods and services . For example, in an agricultural project, technical analysis will determine the potential Knowledge about farmers in the project area, their current farming practices, and their social values to ensure realistic choices about technology is also examined in technical analysis.

17. The general principle of cost benefit analysis is to assess whether or not the social and economic benefits associated with a project are greater than its social and economic costs . Evaluating options in CEA is best done by applying the principles of the NPV method to the stream of cash outflows or costs. The recurring costs of using facilities as well as the capital costs of creating them should be taken into account

18. Multi-criteria analysis (MCA) establishes preferences between project options by reference to an explicit set of criteria and objectives. These would normally reflect policy/programme objectives and project objectives and other considerations as appropriate, such as value for money, costs, social, environmental, equality, etc.

19. Financial analysis Financial analysis involves assessment of financial impact, judgment of efficient resource use, assessment of incentives, provision of a sound financing plan, coordination of financial contribution and assessment of financial management competence . The main objective of financial analysis is to determine the requirements of funds/timing and the expected returns on. Under this analysis, judgment is framed about the project's financial efficiency, incentives, credit-worthiness and liquidity.

20. In financial analysis, cost and benefits are calculated using current market prices. Interest payments on borrowed capital and repayment of loans are not included. Taxes in the form of excise duties, customs duties, sales taxes are considered cost, while subsidies and loan receipts are considered benefits and are fully accounted for in the analysis. The BCR is the discounted net revenues divided by the initial investment. The preferred option is that with the ratio greatest in excess of 1. In any event, a project with a benefit cost ratio of less than one should generally not proceed. The advantage of this method is its simplicity.