Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

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As a result, the probability distributions for the financial and economic performance indicators arecalculated using the Monte-Carlo method and specialist software. Figure 4.8 shows, as an example, theprobability distribution obtained for the ENPV. In Table 4.34, other characteristic probability parametersare given (in thousands of Euros and percentages).Table 4.34 Risk analysis: characteristic probability parameters of the performance indicatorsFNPV(C)ENPVReference value (base case) -71,877 259,680Mean -74,353 259,842Median -71,920 260,595Standard deviation 26,339 29,640Minimum value -159,475 163,406Maximum value -82,188 360,235Probability of the parameters being not higher than the reference value -71,877 259,680Figure 4.7 Probability distribution assumed for the investment costPr. distr.Ref. value0,50,450,40,350,30,250,20,150,10,050140 150 160 170 180 190 200 210 220 230 240Incenerator investment cost (M€)Figure 4.8 Calculated probability distribution of ENPVPunctual probabilityReference valueCentralMeanSD uppCumulated probabilityMi nimumMaximumSD lowMedian1,000,900,800,700,600,500,400,300,200,100,00150.000 170.000 190.000 210.000 230.000 250.000 270.000 290.000 310.000 330.000 350.000ENPV162
Table 4.35 Financial return on investment (thousands of Euros)1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Municipal waste 0 0 0 1,719 3,489 3,541 3,593 3,647 3,701 3,756 3,812 3,869 3,927 3,985 4,045Other waste 0 0 0 129 262 266 270 274 278 282 286 290 295 299 303Electricity 0 0 0 3,716 7,625 7,824 8,029 8,238 8,454 8,674 8,901 9,134 9,372 9,617 9,868Heat 0 0 0 2,132 4,379 4,498 4,620 4,745 4,874 5,006 5,142 5,282 5,425 5,572 5,724SALES 0 0 0 7,695 15,755 16,128 16,511 16,904 17,307 17,719 18,142 18,575 19,019 19,473 19,940Labour cost 0 0 0 1,859 1,905 1,952 2,001 2,051 2,102 2,154 2,208 2,263 2,319 2,377 2,436Gas 0 0 0 105 216 223 229 237 244 252 259 268 276 285 293Eectrical energy 0 0 0 241 495 510 525 540 556 572 589 606 624 642 660Water services 0 0 0 3 7 7 7 7 8 8 8 8 8 9 9Raw material 0 0 0 141 287 293 299 305 311 317 323 330 336 343 350Intermediate services and goods 0 0 0 703 1,434 1,463 1,492 1,522 1,552 1,584 1,615 1,647 1,680 1,714 1,748Elimination of ash and slag waste 0 0 0 1,460 2,978 3,037 3,098 3,160 3,223 3,288 3,353 3,420 3,489 3,559 3,630TOTAL OPERATING COSTS 0 0 0 4,511 7,322 7,485 7,651 7,821 7,995 8,173 8,355 8,541 8,732 8,927 9,126Feasibility study, tender costs etc. 6,980 0 1,816 0 0 0 0 0 0 0 0 0 0 0 0Land expropriation 1,485 757 0 0 0 0 0 0 0 0 0 0 0 0 0Buildings 0 57,342 17,801 0 0 0 0 0 0 0 0 0 0 0 0Equipments 0 41,355 63,273 0 0 0 0 0 0 0 0 0 0 0 0Investments costs 8,465 99,454 82,889 0 0 0 0 0 0 0 0 0 0 0 0Replacement costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Remediation and decontamination costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Residual value 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Other investment items 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0TOTAL INVESTMENT COSTS 8,465 99,454 82,889 0 0 0 0 0 0 0 0 0 0 0 0TOTAL OUTFLOWS 8,465 99,454 82,889 4,511 7,322 7,485 7,651 7,821 7,995 8,173 8,355 8,541 8,732 8,927 9,126NET CASH FLOW -8,465 -99,454 -82,889 3,184 8,433 8,644 8,861 9,083 9,311 9,546 9,786 10,033 10,286 10,547 10,81416 17 18 19 20 21 22 23 24 25 26 27 28 29 30Municipal waste 4,105 4,166 4,228 4,291 4,355 4,420 4,486 4,553 4,621 4,690 4,759 4,830 4,902 4,975 5,049Other waste 308 313 317 322 327 332 336 342 347 352 357 362 368 373 379Electricity 10,126 10,390 10,662 10,940 11,226 11,519 11,820 12,129 12,446 12,771 13,104 13,447 13,798 14,158 14,528Heat 5,879 6,038 6,202 6,371 6,544 6,721 6,904 7,091 7,283 7,481 7,684 7,893 8,107 8,327 8,553SALES 20,418 20,907 21,409 21,924 22,451 22,992 23,546 24,114 24,696 25,293 25,905 26,532 27,175 27,833 28,509Labour cost 2,496 2,559 2,622 2,687 2,754 2,823 2,893 2,965 3,039 3,115 3,192 3,272 3,354 3,436 3,523Gas 303 312 322 332 342 353 364 375 387 399 411 424 438 451 465Eectrical energy 680 700 720 741 763 785 808 831 856 881 906 933 960 988 1,017Water services 9 9 9 10 10 10 10 11 11 11 11 12 12 12 13Raw material 357 364 371 379 386 394 402 410 418 427 435 444 453 462 471Intermediate services and goods 1,783 1,819 1,855 1,892 1,930 1,969 2,008 2,048 2,089 2,131 2,174 2,217 2,262 2,307 2,353Elimination of ash and slag waste 3,702 3,777 3,852 3,929 4,008 4,088 4,170 4,253 4,338 4,425 4,513 4,604 4,696 4,790 4,885TOTAL OPERATING COSTS 9,330 9,539 9,752 9,970 10,193 10,421 10,655 10,894 11,138 11,388 11,644 11,905 12,173 12,446 12,727Feasibility study, tender costs etc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Land expropriation 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Buildings 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Equipments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Investments costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Replacement costs 0 0 0 72,383 0 0 0 0 0 0 0 0 0 0 0Remediation and decontamination costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 32,967Residual value 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -8,990Other investment items 0 0 0 72,383 0 0 0 0 0 0 0 0 0 0 23,977TOTAL INVESTMENT COSTS 0 0 0 72,383 0 0 0 0 0 0 0 0 0 0 23,977TOTAL OUTFLOWS 9,330 9,539 9,752 82,353 10,193 10,421 10,655 10,894 11,138 11,388 11,644 11,905 12,173 12,446 36,704NET CASH FLOW 11,088 11,369 11,658 -60,429 12,258 12,570 12,891 13,220 13,558 13,905 14,261 14,627 15,002 15,388 -8,195Discount Rate 5.0%FNPV (C) -71,877.4FRR (C) 0.7%Funding Gap Ratio 0.42163
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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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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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One of the most important aims of t
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projects, as in other sectors in wh
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3.2.3.2 Project identificationBasic
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In order to evaluate the overall im
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for regassification plants, number
Page 111 and 112: Examples of objectives are:- change
Page 113 and 114: decontamination if any;- the techni
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
Page 123 and 124: expectancy suitably adjusted by the
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 150 and 151: Figure 4.6 Results of the risk anal
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
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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
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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
Page 200 and 201: ANNEX ADEMAND ANALYSISDemand foreca
Page 202 and 203: The method applied for the forecast
Page 204 and 205: Furthermore, travel demand depends
Page 206 and 207: This Guide supports a unique refere
Page 208 and 209: A higher discount rate for countrie
Page 210 and 211: 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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