Project Appraisal

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ContentsContents Project appraisal Project appraisal DefinitionDefinition Aspects of project appraisalAspects of project appraisal Market appraisalMarket appraisal Technical appraisalTechnical appraisal Financial appraisalFinancial appraisal Socio economic appraisalSocio economic appraisal Ecological appraisalEcological appraisal Limitations of project appraisalLimitations of project appraisal ConclusionConclusion 2

DefinitionDefinition

Pre investment analysis of a project with a view to determining the overall feasibility and measures its investment worth which provides a comprehensive review /assessment of all aspects of project that lays the foundation for implementation and evaluation when it is completed.

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ASPECTS OF PROJECT APPRAISAL

Project appraisal

Market appraisal

Technical appraisal

Economic appraisal

Ecological appraisal

Financial appraisal

Market appraisalMarket appraisal It is one of the major areas of It is one of the major areas of

introducing of any products in introducing of any products in market . In that case , must be market . In that case , must be considered this things before considered this things before launching in a market.launching in a market.

What would be the aggregate What would be the aggregate demand of the proposed product or demand of the proposed product or service?service?

What would be the market share of What would be the market share of the project under appraisal?the project under appraisal?

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Market appraisal (Issues)

Past and current demand trends Past and current supply position Production possibilities and constraints Imports and exports Nature of competition Cost structure Elasticity of demand

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Market appraisal (Issues contd.)

Consumer behavior motivation, attitudes, preferences, requirements Distribution channels marketing policies

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Technical appraisalTechnical appraisal

Whether prerequisites for the success of project considered ?

Good choices with regard to location , size, process, machines etc.

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Technical appraisalTechnical appraisal(Issues)(Issues)

Preliminary tests and studies Availability of raw materials, power and other

inputs Optimal scale of operations Choice of suitable production process Choice of appropriate machines and equipment Effluents and waste disposal

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Technical appraisalTechnical appraisal(Issues contd.)(Issues contd.)

Proper layout of plant and buildingsProper layout of plant and buildings Realistic work schedulesRealistic work schedules Socially acceptable technologySocially acceptable technology

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Economic appraisalEconomic appraisal Social cost –benefit analysisSocial cost –benefit analysis Impact on level of savings and Impact on level of savings and

investments in societyinvestments in society Impact on fulfilment of national goalsImpact on fulfilment of national goals Self sufficiencySelf sufficiency EmploymentEmployment Social orderSocial order

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Ecological appraisalEcological appraisal

Impact of project on quality of Impact of project on quality of AirAir WaterWater NoiseNoise VegetationVegetation Human lifeHuman life

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Ecological appraisalEcological appraisal(contd)(contd)

Major projects such as these cause Major projects such as these cause environmental damageenvironmental damage

Power plantsPower plants Irrigation schemesIrrigation schemes Industries like leather processing, Industries like leather processing,

chemicals etc.chemicals etc. Likely damage & the cost of Likely damage & the cost of

restorationrestoration13

Financial appraisalFinancial appraisal

Whether the project is financially viable ?Whether the project is financially viable ? Servicing debtServicing debt Meeting return expectationsMeeting return expectations Investment and phasing of the total costInvestment and phasing of the total cost Means of financingMeans of financing Break even pointBreak even point Cash flows in the projectCash flows in the project

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Financial appraisalFinancial appraisal(contd)(contd)

Investment worthwhile ?Investment worthwhile ? Net present valueNet present value Internal rate of returnInternal rate of return Pay back periodPay back period Level of riskLevel of risk

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LIMITATIONS OF THE PROJECT APPRAISAL

- Quality of project analysis depends on the quality of data and forecast made about costs and benefits. Over-estimation of benefits and underestimation of costs is quite common to get the project approved.

- In view of the uncertainty about the future it is impossible to quantify completely the risks.

- It is a useful device where benefits can be quantified.

- Project analysis is useful when there is a definite starting and finishing points.

ConclusionConclusion

A project feasibility report includesA project feasibility report includes Market and demand analysisMarket and demand analysis Technical analysisTechnical analysis Financial analysisFinancial analysis Socio economic analysisSocio economic analysis Ecological analysisEcological analysis This analysis helps the decision maker in This analysis helps the decision maker in

making the right choice of the project.making the right choice of the project.

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