This document discusses project appraisal through economic analysis. It outlines the key phases and issues in project appraisal, including need identification, options analysis, and risk assessment. It also describes various types of economic analyses used in appraisal, such as cost-benefit analysis, cost-effectiveness analysis, and multi-criteria analysis. Finally, it discusses techniques for project appraisal like net present value, internal rate of return, benefit-cost ratio, and their formulas.

1. An Presentation ON
Project Appraisal by Economic Analysis
Submitted To:-
Thanushree Hegde
Asst Professor
NMAM Institute of
Technology
Submitted By:-
Adarsh P
Mtech (CCT)
NMAM Institute
of technology

2. PROJECT
Project is an investment activitywhere
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 ISSUESIN 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 feasibilitystudy:
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 OFAPPRAISAL
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 economicappraisal
are:
Cost-benefit analysis
Cost-effectiveness analysis
Multi-criteria analysis

9. Financial Analysis
Financial analysis involvesassessment
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. TECHNIQUES OF PROJECTAPPRAISAL
 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 i1, a project will be profitable if and
only if
NPV(i1) > 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 InvestmentRatio
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

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