PED guidebook main sxn rev6. FINAL.pdf - LGRC DILG 10

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Project Evaluation and DevelopmentA dialog box appears and you will be asked to indicate the data range corresponding tothe “values”.Year Costs BenefitsBenefits lessCost0 150,000.00 (150,000.00)1 -2 100,000.00 100,000.003 100,000.00 100,000.004 100,000.00 100,000.005 100,000.00 100,000.00IRR = 34%Note that the dialog box also asks another information, that is, “guess”. This is becausein some cases, the IRR may not exist or there may be multiple values of the IRR.RGEdillon January 200612
Project Evaluation and Development17. Cost-effectiveness ratio (CER). Sometimes, it is difficult to quantify project outcomes, asin the case of health, sanitation and education projects. In cases like these, the projectunder evaluation is compared against other projects that will yield the same outcomes.The appropriate indicator to compare is the cost per unit outcome, e.g., cost per childimmunized or cost per cases found and treated, etc.The decision rule is to reject a project that yields thehighest CER, or cost per unit outcome, among allpossible strategies that produce the same outcome.18. Financial and economic viability.18.1 If the project yields a positive NPV where the costs and benefits are expressed inmarket prices, the project is said to be financially viable. We also say that a projectis financially viable if the project yields an internal rate of return (financial internalrate of return) that is higher than the financial rate of discount.18.2 If the project yields a NPV where the costs and benefits are expressed in economicprices, the project is said to be economically viable. We also say that a project iseconomically viable if the project yields an internal rate of return (economic internalrate of return) that is higher than the social rate of discount.C. OVERVIEW OF PROJECT DEVELOPMENT1. As the phrase implies, project development is a process, wherein the project undergoestransition from inception to completion. It covers the following sub-processes:Pre-investmentProject identificationProject preparationProject appraisal and financingInvestmentDetailed engineering and designProject implementationPost-investmentProject operationEx-post evaluation2. Note that the project identification is undertaken beginning with the planning stage (PDP)and refined during the investment programming stage (PDIP and AIP). During projectpreparation stage, the project is evaluated and is subjected to further screening and/orfine-tuning. Projects that passed the finer screening are then appraised. It is the funder,or any party acting on behalf of the funder, that conducts the appraisal. As mentionedbefore, the interest is to verify the assumptions used and methodologies employed in thefeasibility study. There may also be other criteria for approval, aside from economicviability. Approved projects are then provided the necessary financing.3. Detailed engineering and/or design are usually undertaken only for approved projects.This is because this phase requires substantial resources, which are, in turn, built intoRGEdillon January 200613
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PED guidebook main sxn rev6. FINAL.pdf - LGRC DILG 10

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