PROJECT APPRAISALFOR PGP/SS/09-11/4TH TRIMESTER

BYCA. R.S.SIVARAMAN

M.Sc.,M.Com.,ACA.,DISA(ICAI).,PGDCA.,MIMACHARTERED ACCOUNTANT

FINANCE ELECTIVEPROJECT APPRAISAL

• COURSE DURATION: 2 HRS PER WEEK FOR 10 WEEKS

• COURSE CREDITS: 2

• Marks –Internal -30 Marks• -External -70 Marks (Closed Book examination)

SYLLABUS• 1. MANAGEMENT OF PROJECTS (2 HRS)• Definition of a project; need for project

management; project life style• Project selection and criteria of choice; project

selection models • 2. IDEATION STAGE (2 HRS)• Idea generation, environment scanning,

corporate appraisal, and profit potential• Porter model• Scouting for project ideas and their preliminary

screening• Project rating based on various criteria

SYLLABUS

• 3. MARKET AND DEMAND ANALYSIS (1 HR)• Market appraisal through secondary information• Market surveys• Demand forecasting • 4. TECHNICAL ANALYSIS (4 HRS)• Manufacturing process/technology• Project mix, plant capacity, location, and site• Machinery & equipment, civil works• Environmental considerations• Project charts and layouts

SYLLABUS

• 5. PROJECT COSTING AND FINANCE (4 HRS)

• Cost of project• Sources of finance• Production and sales estimates; cost of

production• Working capital requirement and sources• Estimates of working results, including

profitability projections• Cash flow projections and projected balance

sheet

SYLLABUS

• 6. PROJECT SELECTION (4 HRS)

• The time value of money

• Investment criteria

• Overall cost of capital

• Risk analysis: Measurement of risk; sensitivity analysis; simulation; decision tree

SYLLABUS

• 7. PROJECT SCHEDULING / NETWORK TECHNIQUES (3 HRS)

• Development of project network and time estimation

• CPM and PERT analysis; float time; crashing of activities

• Cost analysis of resource allocation

BASIC TEXT

• Project – Planning, Analysis, Financing, Implementation, and Review (by) Prasanna Chandra (TMH)

COVERAGE

1 MANAGEMENT OF PROJECTS

2 IDEATION STAGE

3 MARKET AND DEMAND ANALYSIS

4 TECHNICAL ANALYSIS

5 PROJECT COSTING AND FINANCE

6 PROJECT COSTING AND FINANCE

7 PROJECT SELECTION

8 PROJECT SELECTION

9 INTERNAL TEST

10 PROJECT SCHEDULING / NETWORK TECHNIQUES

INTRODUCTION-PROJECT• Organizations perform work continuously.

• These works include operations or projects• For the organizations, projects are important

elements of change.

• They are considered to be the leading edge of change in organizations.

• A project consists of a combination of organizational resources pulled together to create something that did not previously exist

INTRODUCTION-PROJECT

• Projects therefore support the ongoing activities of a going concern. For example,

• An R&D project bridges the gap from an existing technology to a future technology.

• A new factory adds to the manufacturing capability.• A new building contributes to the infrastructure of the city.• A new highway improves transportation systems.• A canal provides a waterway over land.• A pipeline moves oil, gas, or water.• A new house improves the living standards of a family.

DEFINITION OF PROJECT

Project Management Institute (PMI), US –it has certified over 200000 project management professional (PMP) world wide. (www.pmi.org)

• As per Project management book of Knowledge (PMBOK) of PMI

project is a temporary endeavor to create a unique product or service.

PROJECT -MEANING

– A set of well defined activities , clear cut beginning and end

– It is carried out to meet established goals, within cost, schedule and quality objectives.

– Consumption of large amounts of money– Limitations on resources– Not undertaken frequently

Characteristics of Project

• A project has specific start and end points.

• It has a well defined objectives

• A project Endeavour (attempt) is unique not repetitious

• A project bears definitive cost and financing structures

• A project generally cut across many organisational and functional boundaries.

Key Considerations in a Project

• a) How much will it cost?

• b) What is the time required?

• c) What technical performance capability will it provide?

• d) To what extent will the project results fit into the design and execution of organizational strategies?

What is project appraisal?

• – A process of analyzing the technical feasibility and economic viability of a project proposal with a view to financing their costs.

Importance of project appraisal

• – It is a capital investment decision

• – It has long term effects

• – Decision once taken is irreversible

• – Expenditures are high

Difficulties in respect of project appraisal

• – Measurement of costs and potential benefits are difficult

• – High degree of uncertainty

• – Long term spread – time value of money

Types of projects

• – Mandatory investment (to comply with statutory requirement)

• – Replacement investment• – New projects• – Expansion projects• – Diversification projects• – Research and Development projects• – Public good /social welfare projects• – Infrastructure projects

PLANNING

ANALYSIS

SELECTIONS

FINANCING

IMPLEMENTATION-Setting up of Manufacturing Facilities

MARKET ANALYSIS

TECHNICAL ANALYSIS

FINACIAL ANALYSIS

ECONOMIC ANALYSISSOCIAL COST BEBEFIT ANALYSIS

ECOLOGICAL ANALYSIS

PROJECT LIFE CYCLE1.Develop an idea something which is something new.2.Do Research by enquiring or examining into the field of knowledge

with the objective to convert idea into a practical plan.3.Design-idea and get it converted into practical plan.4.Convert Design by developing into actual product, service, or

process.5. Take the product, service, or process through Marketing to

customers. It may precede the design phase.6. Convert the resources into product, service, or process through

Production.7.Provide Post Sales service and support to customers during the

use of product or service.

PROJECT LIFE CYCLE IN SIMPLE TERMS

• a) Have an idea

• b) Have a quick look

• c) Have a closer look

• d) Do it

• e) Try it

• f) Use it

• g) Post implementation review