This document provides an overview of key concepts in project formulation, evaluation, and monitoring. It discusses the characteristics and lifecycle of projects, techniques for risk analysis like break even analysis and sensitive analysis, and methods for project evaluation and selection including net present value, internal rate of return, and benefit-cost ratio. It also covers network-based scheduling using critical path methodology and concepts like floats, forward/backward pass computations, and errors to avoid in network drawings.

1. Presentation on
“Project formulation,evaluation
& monitoring”
By Avinash kumar

2. PROJECT

3. Characteristics of project
1. Objectives-Every project has aimed to achieve
certain objective.
Once the objective is achieved the project is
said to be completed .

4. 2.Life cycle- stages of Life cycle are as follows:
a.conception
b.Design
c.Implementation
d.Commissoning

5. 3. Definite time limit
4. Uniqueness
5. Change
6. Optimality
7. Control mechanism

6. Classification of projects

9. Phases in project cycle
1.Identification
2.Formulation
3.Appraisal
4.Implementation
5.Monitoring
6.Evaluation

10. project cycle

11. TIME VALUE OF MONEY
 It involves two types of cost-
1. Compounding cost:- Future value of present
sum is known as compounding.
 Formula: A=C(1+r)n
2. Discounting cost:- Present value of future
sum is called discounting.
 Formula:Present worth=R(A)/(1+r)n

12. Techniques of risk analysis
Following are the popular techniques :
1. Break even analysis
2. Sensitive analysis
3. Decision tree analysis
4. Monto carlo
5. Game theory

13. Break even analysis
Here we can find out break even point (BEP).
* BEP refers to the level of production at which
farmer neither incurred profit nor incurred
losses .
* Its also known as no-profit no loss situation.
Break even production = fixed cost
selling price per unit - variable cost per unit

14. Estimation of break Even point
Costs&returns(inRs)
Q
B
K
L
M
O
X
Y
S
Quantity
Where,
SM= Total fixed cost
SL= Total cost curve
OK= Total revenue curve
B= Break Even Point
OQ=Break-Even Quantity
Zoneof loss
Zoneof profit

15. SENSITIVE ANALYSIS
It’s a technique that measures change in
profitability level of the project caused by a
change in factors affecting the profitability
level.
Sensitive Analysis provides answer to the
folloeing questions –
what happens to the profitability level if……
1. Demand of the product fall down.
2. If selling price of the product fall down.
3. If the level of production is declined.

16. Evaluation techniques for
selection of profitable
project It is nothing but benefit cost analysis of
various aspects of a project.
 These techniques are divided into two
groups:
1.Non –discounted techniques
2.Discounted techniques

17. Non- discounted techniques
1. Payback period (PBP)
2. Average rate of return (ARR)
3. Urgency

18. Payback Period (PBP)
 It is the length of period required to get back
or recover orignal investment incurred on a
project through cash inflow or income.
 Payback period=Orignal investment/Annual
cash inflow.
 Thumb rule:Project which have minimum
PBP is selected.

19. Average rate of return
(ARR)
 This method is obtained by the formula :
AVERAGE INFLOW
AVERAGE OUTFLOW
 Thumb rule: A project having highest ARR
value is selected

20. Urgency
 Urgency : In this method no formula or
method is used. Only those projects are
selected which are urgently required.

21. Discounted techniques
It includes :
1. Net present worth (NPW)
2. Profitability index
3. Internal rate of return (IRR)
4. Discounted benefit cost ratio

22. Net Present Worth (NPW)
 This is the present worth of cash flow stream.
 It is referred as Net Present Value(NPV).
 NPW=P1/(1+i)t
+P2/(1+i)t
+....+Pn/(1+i)t
-C.
 P1=Net cash flow in first year,
 i=Discount rate,
 t=Time period,
 C=Initial cost of the investment.
 Thumb rule:A Project having +ve & max
value of NPW is selected.

23. Profitability Index (PI)
 It is ratio of net present values of cash flows
to the initial capital expenditure.
 PI = Present value of cash inflow/Present
value of cash outflow.
 Thumb rule: A Project with highest value of
Profitability index is selected

24. Internal Rate of Return (IRR)
 IRR is the discounted rate which makes NPV
equal to ZERO.
 IRR is calculated by TRIAL and ERROR
method.
 IRR=(Lower discount rate)+(Diff b/w the two
discont rates)*[(Present worth of the cash
flow at the lower discount rate)/(Absolute diff
b/w the present worths of the the cash flow at
two discount rates)]

25. Benefit Cost Ratio
 We compare the present worth of costs with
present worth of benefits.
 B-C Ratio =Present value of cash
inflow/Present value of cash outflow.
 Thumb rule: A project with highest B-C
Ratio is selected.

26. NETWORK BASED SCHEDULING
 It is a technique used for planning , scheduling
and controlling of a project.
 It is represented by graphical plan which consist
of activity and event.
 ACTIVITY: Any operation which consume
resources( man, material, time),has start point
and end point.
 Activity is represented by straight arrow with
circle at two points.


27. TYPES OF ACTIVITIES
1. PRECEEDING ACTIVITY: Activity which
occur immediately before the succeeding
activity.
2. SUCCEEDING ACTIVITY: Activity which
cannot be started until one or more activities
are completed.
3. DUMMY ACTIVITY: Activity which does not
consume resources. It is represented by
dotted arrow.

28. EVENT
 They are called nodes.
 It does not consume resources and time.
 Event is the beginning and end of an activity
and is represented by a circle at specific point
of time.

29. TYPES OF EVENTS
1. Merge event: It represent joint completion of
more than one activity.
2. Burst event: Event which represent the
beginning of more than one activity.
3. Merge and Burst event : It is for sometime
nerge and sometime burst.

30. ERRORS IN DRAWING A NETWORK
1. Looping: Drawing an endless loop in a
network .
2. Dangling: to disconnect an activity before
the completion of all the activities in a
network.
3. Redundancy: inserting the dummy activity in
a network diagram.

31. NETWOK SCHEDULING TECHNIQUE
 CPM: (Critical path method) represent a
logical sequence of an activity and events in a
project. The duration of all these paths are
added in the total duration of the path.
 The path that has a longer duration duration
is called critical path and activities drawn in
that path are critical activities.

32. FORWARD PATH COMPUTATION
In this method earliest start time of all the
events is is computed which begin from initial
event and move toward the final event.
BACKWARD PATH COMPUTATION
Here we calculate the latest time. This
method is start from last event and move
toward initial event.
Slack time: It is the diff b/w latest finish time
and earliest start time.

33. Activity float analysis
 A study of non- critical path with regard to free
time is necessary because it help in better
control of project implementation and better
allocation of resources.
 In critical path latest finish time and earliest start
time both are equal.
 The slack of the event is given by diff b/w the TL
and TE.
 The free time available for an activity is called
“float”.

34. TYPES OF FLOAT
1. Total float: It represents the max time by
whhich completion of an activity can be
delayed w/o affecting the project completion
time.
Total float=[Tl of head event-Te of tail event-
Duration of activity]

35. 2. FREE
FLOAT
 Delay that can be permitted in an activity so
that succeeding activity in the path are not
affected.

36. 3.INDEPENDENT FLOAT
 IT is the spare time available for an activity .