PROJECT APPRAISAL Project Appraisal 1 Concept 2 Methods

PROJECT APPRAISAL

Project Appraisal 1. Concept 2. Methods (i) Economic Analysis (ii) Financial Feasibility (iii) Market Analysis (iv) Technical Feasibility Analysis (v)Management Competence

1. Concept • Project appraisal means assessment of a project • For proposed project it is known as ex-ante analysis • For executed projects known as post-ante analysis • Here it relates to proposed project • Cost benefit analysis of different aspects of the project • Objective is to judge viability of the project • Helps in the selection of best project from the available alternative projects

Concept cont • Its economic, financial, technical, managerial and social aspects have to analysed for project appraisal • Financial institutions do independant and objective project appraisal to find the credit worthiness of the project • Determine viability of project • To modify scope and content to make it viable •

1. Economic analysis • Requirements for raw material, capacity utilization, anticipated sales expenses, revenue and probable profit • Sales, purchases, expenses • Demand forecasting- great attention • Location of the industry • Govt policies- incentives tax concessions-notified backward region

2. Financial Analysis • important for any project- • Can mobilise resources and coordinate • Assessment financial requirement- fixed capital and working capital • Fixed capital- to create fixed assets –land, building, machines • Working or operational capital- raw material, labour, electricity, transport, repair and maitaintenace

Cont. • Source of finance and cost of finance • Capacity utilization • Break even analysis-cost and revenue and sales

3. Market Analysis • anticipate the market – local, state level , country, foreign for the product or service • potential customers and time of sales marketing • 1. Opinion polling method- getting opinion from customer, salesman, retailers, wholesaler and experts • Two methods to collect opinion • A. complete enumeration method or census • B. sample survey method • c. Sale experience

Cont. . • 2, Life cycle segmentation method • Introduction • Growth • Maturity • Saturation • Decline

Technical feasibility • • • The adequacy of plant machinery and equipment Technical know how available Collaboration- terms and condition Foreign collaboration- legal provisions Availability of i. land site other inputs- water, power, transport Servicing facilities-repairing Work force- skill, training in plant or outside Raw materials- quantity and quality Coping with anti-pollution laws

Management competence • Talent of the promoter • mismanagement

Project Identification- Meaning • Concerned with collection, compilation for and analysis of economic data for the eventual purpose of locating possible opportunities for investment. • Drucker-three kinds of opportunities • Additive – better utilisation of existing resources , complementary and breakthrough