Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

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MAIN FEATURES TO BE CHECKED AND ANALYSEDEngineering data:- covered area and uncovered equipped area,- typical construction designs for buildings intended for pedagogical purposes (classrooms) and for related activities(laboratories, libraries, etc.),- internal viability systems and links with local communication routes,- significant technical elements, such as particularly important architectonic constructions, laboratory or complex calculatingequipment, etc.Other data:- level and type of educational activity,- number of pupils and geographic catchments area,- associated services (libraries, sports-recreational activities, canteens, etc.),- the proposed training plan over a number of years:- number and type of courses,- length of courses,- number and type of subjects taught,- duration and timing of pedagogical and related activities,- didactic methods,- diplomas and other qualifications obtainable.3.4.1.3 Feasibility and option analysisThis kind of analysis must focus on evaluating the demographic and labour market trends, whichdetermine the potential number of pupils and the opportunities available to them.The description should include:- demographic trends, disaggregated by age range and by geographical area,- the rates of enrolment, attendance and completion of studies; this information will be even moreuseful if broken down by sex and geographical area.- employment forecasts for various sectors, including forecasts of the organisational changes within thevarious productive segments; it is important to forecast the growth of new professions and the declineof others.The alternative feasible options for the project can be differentiated by the following aspects:- target (unemployed, young people, disabled etc.),- economic sectors involved in the training programmes,- connections with the local economic environment.3.4.1.4 Financial analysisThe financial inflows and outflows are:Financial inflowsFinancial outflows• School fees • Investment costs• Annual subscriptions - land acquisition• Prices of possible paid auxiliary services - buildings• Transfers from the central government - recreational facilities- equipment and materials• Costs of personnel and maintenance- full time staff- other personnel- materials (text, pc etc.)- maintenanceThe time horizon is usually around 15-20 years118
3.4.1.5 Economic analysisThe following variables may provide a starting point for the identification of the benefits:- effective enrolment rates compared to potential ones,- the proportion of students repeating the year,- the percentage of pupils who complete the whole training course (drop-out rates),- the average attendance rate per pupil,- the achievement of pre-established, measurable learning standards,- the quality of pedagogic material,- the suitability of equipment and its rate of use,- the levels of preparation and commitment of the teaching staff, based on objective examination,- the fungibility of the pedagogical content in as many and varied contexts as possible.These projects are expected to have relevant social impacts on the labour market. The main benefits/costsand externalities could be as follows:BenefitsCosts- The number (or percentage) of pupils who have found (or who are expected to find) productiveemployment and who, without this specific training, would have been unemployed or under-employed.Forecasts for this variable can be based on the long term studies carried out in other countries or regions- If the priority is to improve the opportunities of potential students in the labour market, the benefits maybe quantified and valorised by the expected increased income of the students due to the training received(avoided under-employment, better positioning on the market)- An alternative method, is to refer to the willingness-to-pay, valuable as the average fees students wouldhave to pay to take similar private courses. Great care should be taken when following this method due topossible estimation bias: e.g. there may be a difference in quality between the training offered by theinvestment and what is already available privately, or there may be differing degrees of risk aversionaccording to income levels, and so forth- Apart from the costs listed in the financial analysis as converted in economic prices, the only costs thatmight be considered are the ones due to increased transport flows in a congested urban area3.4.1.6 Risk assessmentCritical factors- Investment and operating costs- The demographic dynamics in the catchment’s area- The success of the educational programmesMainvariablesto consider- The rate of growth of the population in the catchment’s area- The future composition of the population in the catchment’s area- The current enrolment rate- Effective enrolment rates compared to potential ones- The percentage of pupils who complete the whole training3.4.1.7 Other project evaluation approachesSometimes it is helpful to have an independent evaluation, from a panel of qualified experts, of the ability ofthe educational investment to meet the proposed objectives and social needs, along with an assessment ofthe suitability of the types of training programmes.119
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ACRONYMS AND ABBREVIATIONSBAUB/CCBA
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TABLESTable 2.1 Financial analysis
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FIGURESFigure 1.1 Project cost spre
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Cohesion Fund, and through the leve
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or the plant will not reveal excess
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CHAPTER ONEPROJECT APPRAISAL IN THE
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Some specifications for financial t
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FOCUS: INFORMATION REQUIREDGeneral
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In particular, CBA results should p
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CHAPTER TWOAN AGENDA FOR THE PROJEC
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objectives, are, as far as possible
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considered the appropriate shadow p
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2.3.2 Feasibility analysisFeasibili
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This approach will be presented in
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Current assets include:- receivable
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The following items are usually not
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Mainly, the examiner uses the FRR(C
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The dynamics of the incoming flows
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eturn on their own capital (Kp). Th
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While the approach presented in thi
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2.5.1 Conversion of market to accou
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Table 2.9 Electricity price dispers
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2.5.1.2 Fiscal correctionsSome item
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previously estimated in projects wi
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FOCUS: ENPV VS. FNPVThe difference
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2.6 Risk assessmentProject appraisa
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Table 2.14 Impact analysis of criti
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Figure 2.6 Probability distribution
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eneficiary. The project proposer sh
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There are many ways to design an MC
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Page 95 and 96: Territorial reference frameworkIf t
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Page 101 and 102: projects, as in other sectors in wh
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Page 111 and 112: Examples of objectives are:- change
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Page 115 and 116: 3.3.3.6 Risk AnalysisCritical facto
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Page 121 and 122: Financial inflows• Admission fees
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Page 125 and 126: The time horizon for project analys
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Page 129 and 130: CHAPTER FOURCASE STUDIESOverviewThi
Page 131 and 132: - finally, there is the traffic tha
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Page 136 and 137: 4.1.5 Scenario analysisTwo scenario
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Page 146 and 147: 4.2.4 Economic analysisThe benefits
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Page 158 and 159: ate of 0.6% per year is assumed for
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4.4 Case Study: investment in a was
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4.4.2 Financial analysisAlthough in
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THE CALCULATION OF REVENUESReferrin
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0.15 m 3 /m 2 a depreciation of 20%
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As result, the probability distribu
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Figure 4.13 Probability distributio
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Table 4.48 Financial return on nati
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Table 4.50 Financial return on priv
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16 17 18 19 20 21 22 23 24 25 26 27
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4.5 Case Study: industrial investme
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4.5.4.1 Investment costsThe total i
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Finally, a residual value was estim
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This analysis shows the need to pay
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Table 4.62 Financial return on inve
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Table 4.64 Return on private equity
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Table 4.66 Economic analysis (thous
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ANNEX ADEMAND ANALYSISDemand foreca
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The method applied for the forecast
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Furthermore, travel demand depends
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This Guide supports a unique refere
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A higher discount rate for countrie
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Figure C.1 Project ranking by NPV v
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The main problems with this indicat
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EXAMPLE OF SHADOW WAGE IN DUAL MARK
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Another exhaustive way to include d
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Figure E.2 Percentage of low income
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ANNEX FEVALUATION OF HEALTH &ENVIRO
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Figure F.1 Main evaluation methodsS
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- expenditure on capital equipment
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due to air pollution or water conta
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BENEFIT TRANSFER - SELECTED REFEREN
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ANNEX GEVALUATION OF PPP PROJECTSIt
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adjustments for Competitive Neutral
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ANNEX HRISK ASSESSMENTIn ex-ante pr
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Reference ForecastingThe question o
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Figure H.5 Levels of risks in diffe
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ANNEX IDETERMINATION OF THE EU GRAN
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A.4. Technological Alternatives and
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GLOSSARYAccounting period: the inte
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Market price: the price at which a
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BIBLIOGRAPHY1. ReferencesBelli, P.,
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Ray, A. 1984, Cost-benefit analysis
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EnvironmentGeneralAtkinson, G., 200
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European Commission, DG Tren, 2003,
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Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

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