2. ■ Economic appraisal is a systematic
means of analysing all the costs and
benefits of various ways in which a
project objective can be met.
ECONOMIC APPRAISAL
3. ■ In essence, economic appraisal
shows: ƒ
■ Whether the benefits of a project exceed
its costs; ƒ
■ Which among a range of options to achieve
an objective has the highest net benefit;
■ Which option is the most cost effective,
where benefits are equivalent.
ECONOMIC APPRAISAL
4. ■ Take into account costs and benefits
which may not be reflected in monetary
transactions (for example the value to
the public of travel time savings from a
new road)
ECONOMIC APPRAISAL
5. ■ assesses the real economic value of
Government assets by adopting the
"opportunity cost" principle (whether
there is an alternative use which would
yield a higher value)
ECONOMIC APPRAISAL
6. ■ Cost Benefit Analysis
CBA is the more comprehensive of these two
techniques. It quantifies in money terms all
the major costs and benefits of project
options. Thus the outcomes for a range of
options are translated into comparable terms
to facilitate evaluation and decision making.
ECONOMIC APPRAISAL
7. ■ Cost Effectiveness Analysis
Where the main benefits of a project are
not readily measurable in monetary terms
(using either actual or proxy values) such as
in certain areas of health, education, law
and order or social welfare, it may not
always be possible to apply CBA.
ECONOMIC APPRAISAL
8. ECONOMIC APPRAISAL
■ Economic appraisal is a methodology
designed to assist in defining problems and
finding solutions that offer the best value
for money (VFM).
■ This is especially important in relation to
public expenditure and is often used as a
vehicle for planning and approval of public
investment relating to policies, programmes
and projects.
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9. What Is a Cost-Benefit
Analysis?
■ A cost-benefit analysis (CBA) is a process
that’s used to estimate the costs and
benefits of projects or investments to
determine their profitability for an
organization.
■ A CBA is a versatile method that’s often
used for business administration, project
management and public policy decisions.
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10. Costs
■ Direct costs
■ Indirect costs
■ Intangible costs
■ Opportunity costs
■ Costs of potential risks
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14. The Purpose of Cost-Benefit Analysis
■ The purpose of cost-benefit analysis is to
have a systemic approach to figure out the
pluses and minuses of various business or
project proposals.
■ The cost-benefit analysis gives you options
and offers the best approach to achieve
your goal while saving on investment costs.
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15. How to Do a Cost-Benefit Analysis
■ 1. What Are the Project Goals and
Objectives?
■ 2. Review Historical Data
■ 3. Who Are the Stakeholders?
■ 4. What Are the Project Costs and Benefits?
■ 5. Define a Project Timeframe
■ 6. What Is the Rate of Return?
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17. Cost-Benefit Ratio Formula
■ If the result is less than 1: The
benefit-cost ratio is negative, therefore the
project isn’t a good investment as its
expected costs exceed the benefits.
■ If the result is greater than 1: The
cost-benefit ratio is positive, which means
the project will generate financial benefits for
the organization and it’s a good investment..
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