Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

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Figure 4.6 Results of the risk analysis for ERR10.8X €182,000,000;- National Public Contribution => €1,478,000,000;The EU Grant is calculated applying a maximum rate approved by the Operational Programme (70%) tothe total eligible cost (€260,000,000). It should be noted that although the annual revenue exceeds theoperating costs in some of the years, the project does not classify as ‘revenue-generating’ because thepresent (i.e. discounted) value of operating costs over the reference period is higher than the present valueof project revenue.The financial performance indicators are:- Financial Net Present Value (investment) FNPV(C) €-1,320,810,000- Financial Rate of Return (investment) FRR(C) -2.5%- Financial Net Present Value (capital) FNPV(K) €-1,156,029,000- Financial Rate of Return (capital) FRR(K) -1.9%150
Table 4.21 Economic analysis (Millions of Euros) - Railway Option 1CF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15BENEFITSConsumer’s surplusPassengers 0.0 0.0 0.0 38.6 39.6 40.7 41.7 42.7 43.7 44.8 45.8 46.8 47.9 48.9 49.9Freight 0.0 0.0 0.0 7.6 7.9 8.3 8.6 9.0 9.3 9.7 10.0 10.3 10.7 11.0 11.4Producer’s surplusPassengers 0.0 0.0 0.0 70.8 71.7 72.7 73.6 74.6 75.6 76.5 77.5 78.4 79.4 80.4 81.3Freight 0.0 0.0 0.0 11.4 11.9 12.4 12.9 13.4 13.9 14.4 14.9 15.4 15.9 16.4 16.9Government surplusPassengers 0.0 0.0 0.0 -23.0 -23.4 -23.8 -24.2 -24.6 -25.0 -25.4 -25.8 -26.2 -26.6 -26.9 -27.3Freight 0.0 0.0 0.0 -6.5 -6.7 -6.9 -7.0 -7.2 -7.4 -7.6 -7.8 -8.0 -8.2 -8.3 -8.5ExternalitiesPassengers 0.0 0.0 0.0 12.7 13.0 13.3 13.6 13.9 14.2 14.5 14.8 15.1 15.4 15.7 16.0Freight 0.0 0.0 0.0 1.0 1.0 1.0 1.0 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.1TOTAL BENEFITS 0.0 0.0 0.0 112.6 115.0 117.7 120.2 122.8 125.3 128.0 130.5 132.9 135.6 138.3 140.8COSTSInvestment CostsWorks 0.87 143.5 149.1 141.2Equipments 0.87 36.2 37.6 35.6General Expenses 0.87 22.0 22.9 21.7Other expenses 0.87 18.7 19.5 18.4Total investments costs 220.4 229.1 216.9Maintenance 0.835 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7TOTAL COSTS 220.4 229.1 216.9 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7NET BENEFITS -220.4 -229.1 -216.9 104.9 107.3 110.0 112.5 115.1 117.6 120.3 122.8 125.2 127.9 130.6 133.1BENEFITSCF 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30Consumer’s surplusPassengers 50.9 50.9 50.9 50.9 50.9 50.9 50.9 50.9 50.9 50.9 50.9 50.9 50.9 50.9 50.9Freight 11.7 11.7 11.7 11.7 11.7 11.7 11.7 11.7 11.7 11.7 11.7 11.7 11.7 11.7 11.7Producer’s surplusPassengers 82.3 82.3 82.3 82.3 82.3 82.3 82.3 82.3 82.3 82.3 82.3 82.3 82.3 82.3 82.3Freight 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4 17.4Government surplusPassengers -27.7 -27.7 -27.7 -27.7 -27.7 -27.7 -27.7 -27.7 -27.7 -27.7 -27.7 -27.7 -27.7 -27.7 -27.7Freight -8.7 -8.7 -8.7 -8.7 -8.7 -8.7 -8.7 -8.7 -8.7 -8.7 -8.7 -8.7 -8.7 -8.7 -8.7ExternalitiesPassengers 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3Freight 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2TOTAL BENEFITS 143.4 143.4 143.4 143.4 143.4 143.4 143.4 143.4 143.4 143.4 143.4 143.4 143.4 143.4 143.4COSTSInvestment CostsWorks 0.87Equipments 0.87General Expenses 0.87Other expenses 0.87Total investments costs -330.6Maintenance 0.835 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7TOTAL COSTS 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 -322.9NET BENEFITS 135.7 135.7 135.7 135.7 135.7 135.7 135.7 135.7 135.7 135.7 135.7 135.7 135.7 135.7 466.3Discount Rate 5.5%ENPV 938.1ERR 15.1%B/C ratio 2.5151
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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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- reduction of congestion by elimin
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- the methods applied to estimate e
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- the marginal external costs: cong
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- the benefits for the existing tra
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The following tables show some refe
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3.1.1.6 Risk assessmentDue to their
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As shown in Figure 3.1, only under
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3.1.3.7 Other project evaluation ap
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- Waste Management Hierarchy rules
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The time horizon for a project anal
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3.2.1.7 Other project evaluation ap
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every user support the total costs
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Territorial reference frameworkIf t
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Cycle and phases of the projectGrea
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Page 101 and 102: projects, as in other sectors in wh
Page 103 and 104: 3.2.3.2 Project identificationBasic
Page 105 and 106: 3.2.3.7 Other project evaluation ap
Page 107 and 108: In order to evaluate the overall im
Page 109 and 110: for regassification plants, number
Page 111 and 112: Examples of objectives are:- change
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Page 115 and 116: 3.3.3.6 Risk AnalysisCritical facto
Page 117 and 118: 3.3.4.6 Risk assessmentCritical fac
Page 119 and 120: 3.4.1.5 Economic analysisThe follow
Page 121 and 122: Financial inflows• Admission fees
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Page 125 and 126: The time horizon for project analys
Page 127 and 128: A Cost-Benefit Analysis should cons
Page 129 and 130: CHAPTER FOURCASE STUDIESOverviewThi
Page 131 and 132: - finally, there is the traffic tha
Page 134 and 135: c) Road users producer’s surplus:
Page 136 and 137: 4.1.5 Scenario analysisTwo scenario
Page 138 and 139: The financial performance indicator
Page 140 and 141: Table 4.10 Economic analysis (Milli
Page 142 and 143: Table 4.12 Financial return on capi
Page 144 and 145: 4.2 Case Study: investment in a rai
Page 146 and 147: 4.2.4 Economic analysisThe benefits
Page 148 and 149: Financial investment costs have bee
Page 152 and 153: Table 4.22 Economic analysis (Milli
Page 156 and 157: 4.3 Case Study: investment in an in
Page 158 and 159: ate of 0.6% per year is assumed for
Page 160 and 161: The shadow price of the CO 2 avoide
Page 162 and 163: As a result, the probability distri
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Page 168 and 169: 4.4 Case Study: investment in a was
Page 170 and 171: 4.4.2 Financial analysisAlthough in
Page 172 and 173: THE CALCULATION OF REVENUESReferrin
Page 174 and 175: 0.15 m 3 /m 2 a depreciation of 20%
Page 176 and 177: As result, the probability distribu
Page 178 and 179: Figure 4.13 Probability distributio
Page 180 and 181: Table 4.48 Financial return on nati
Page 182 and 183: Table 4.50 Financial return on priv
Page 184 and 185: 16 17 18 19 20 21 22 23 24 25 26 27
Page 186 and 187: 4.5 Case Study: industrial investme
Page 188 and 189: 4.5.4.1 Investment costsThe total i
Page 190 and 191: Finally, a residual value was estim
Page 192 and 193: This analysis shows the need to pay
Page 194 and 195: Table 4.62 Financial return on inve
Page 196 and 197: Table 4.64 Return on private equity
Page 198 and 199: 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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