Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

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CHECKLISTThrough the identification of the unemployment rate in the area it should be possible to estimate the potential demand formore specific educationEmployment forecasts for various sectors should be made; it is important to forecast the growth of new professions andthe decline of othersThe main economic effect to be considered for these projects is the creation of job opportunities for students that, in theabsence of the educational programme, would have been unemployed or under-employed. This benefit can be evaluated:- through the benefits transfer method- through the expected increase in income of the students due to the training received (avoided under-employment,better positioning on the job market).3.4.2 Museums and cultural sites3.4.2.1 Project objectivesInvestments in museums and cultural sites, e.g. archaeological parks, mostly have local objectives but mayalso have a more general value of a cultural nature. These kind of projects could support the touristindustry in some specific areas or simply improve the quality of life.3.4.2.2 Project identificationIn general, the projects are one of three types: building of new structures, renovation, or extension ofexisting ones.MAIN FEATURES TO BE CHECKED AND ANALYSEDEngineering data (for example):- the number of expected visitors (per day, season, year, etc.) and the maximum capacity of the structure,- covered and showroom areas (square metres) for museums and historical monuments or buildings, total area of parks orarchaeological areas (square metres), number of seats, usable area (square metres) for theatres,- viability and access systems and links with the local networks,- significant technical elements, such as particularly exacting architectural features, experimental restoration technologies,communication systems, safety equipment.Other basic data (for example):- type of infrastructure affected by the action (creation, renovation or extension): museums, historical monuments orbuildings, archaeological parks, industrial archaeology, theatres, etc.,- the services offered (research centres, information and catering services, internal transport. etc.).3.4.2.3 Feasibility and option analysisThe potential flow of visitors, broken down according to type (for example: youngsters or adults, residentsor tourists, etc.) is the main variable to be analysed in the feasibility analysis, along with the constructionor restoration costs.The comparisons in the options analysis should consider:- variations in structural arrangement or lay-out of the infrastructure,- possible alternative technology and methods of restoration/recovery for existing buildings,- alternative choices of infrastructure (e.g. one could consider establishing a museum of technology on anew site instead of recovering a historical industrial structure, etc.).3.4.2.4 Financial analysisThe financial inflows and outflows are:120
Financial inflows• Admission fees • Investment costs• Sales of collateral services - works• Sales of commercial activities - general expensesFinancial outflows• Operating costs- maintenance costs- electricity- technical and administrative personnel costsThe time horizon is usually around 10-15 years3.4.2.5 Economic analysisBenefitsCostswillingness-to-pay for the service on the part of the public, for museums, archaeological parks etc.induced increases in incomes in the tourism sector (increased flow and longer average length of stay).apart from the costs listed in the financial analysis as converted to economic prices, the costs related toincreased transport flows might be considered3.4.2.6 Risk assessmentCritical factors- Operating costs- The rate of growth of effective demand (number of visitors per year)Mainvariablesto consider- Personnel costs- Maintenance cots- The costs related to possible damage, regardless of the cause- The long-term dynamics of admission fees,- Different typologies of visitors with specific willingness-to-pay for cultural sites3.4.2.7 Other project evaluation approachesThey should give a clear cultural and artistic profile of at least the medium-term programmes. Theopinions of independent experts are especially important.CHECKLISTIt is necessary to estimate the potential flow of visitors in the futureIt would be very useful to have a break-down of the future demand according to the type of visitors, because each has adifferent willingness-to-pay for cultural sitesTry to forecast accurately the costs for personnel and for maintenance, including contingencies for possible damages tothe site3.4.3 Hospitals and other health infrastructures3.4.3.1 Project objectivesThese types of investment projects are correlated with the prevention and/or treatment of pathologiesand refer to different categories of the population. The overarching goals are increasing life expectancyand life quality.121
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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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PROJECT APPRAISAL CHECK-LISTCONTEXT
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Page 95 and 96: Territorial reference frameworkIf t
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Page 111 and 112: Examples of objectives are:- change
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Page 119: 3.4.1.5 Economic analysisThe follow
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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
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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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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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