Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

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A.4. Technological Alternatives and Production Plan.4.1. Description of Significant Technological Alternatives4.2. Selection of Appropriate Technology4.3. Buildings and Plants4.4. Physical Inputs for Production4.5. Personnel Requirements4.6. Energy Requirements4.7. Technology Providers4.8. Investment Costs4.8.1. Planning and Know-how4.8.2. Buildings4.8.3. Machinery4.9. Production Plan over the Project Time Horizon4.10. Combined Output Supply4.11. Production OrganisationA.5. Human Resources5.1. Organisational Diagram5.2. List of Personnel and Salary Parameters5.2.1. Managers5.2.2. Office Workers5.2.3. Technicians5.2.4. Manual Workers5.3. External Services5.3.1. Administrative Staff5.3.2. Technicians5.3.3. Other5.4. Hiring Procedures5.5. Training Procedures5.6. Annual Costs (before and after project start-up)A.6. Location6.1. Ideal Requirements for the Location6.2. Alternative Options6.3. Choice of Site and its Characteristics6.3.1. Climatic Conditions, Environmental Aspects (if relevant)6.3.2. Site or Territory6.3.3. Transport and Communications6.3.4. Water and Electricity Provisioning6.3.5. Waste Disposal6.3.6. Government Regulations6.3.7. Policies of the Local Authorities6.3.8. Description of the Pre-chosen Site (details in the Appendix)6.4. Cost of Land and Site Preparation6.5. Site Availability6.6. Infrastructure RequirementsA.7. Implementation7.1. Analysis of Construction/Start-up Times (project cycle)7.1.1. Selection of Management Group for the Project7.1.2. Definition of Information System7.1.3. Negotiations for the Purchase of Know-how and Machinery7.1.4. Building Planning and Contract Scheduling7.1.5. Financing Negotiations7.1.6. Acquisition of Land and Licences7.1.7. Organisational Structure7.1.8. Staff Hiring7.1.9. Personnel Hiring and Training7.1.10. Supply Agreements7.1.11. Distribution Agreements7.2. Bar Graph (or PERT chart) of the main phases7.3. Main Information on Execution Times to consider in the Financial Analysis242
A.8. Financial Analysis8.1. Basic Assumptions of the Financial Analysis8.1.1. Time Horizon8.1.2. Prices of Productive Factors and Project Outputs8.1.3. Real Financial Discount Rate8.2. Fixed Investments8.3. Expenses before Production (Goodwill)8.4. Working Capital8.5. Total Investment8.6. Operating Revenue and Costs8.7. Sources of Financing8.8. Financial Plan (a table showing cash flow for each year)8.9. Balance Sheet (assets and liabilities)8.10. Profit and Loss Account8.11. Determining the Net Cash Flow8.11.1. Net Flow to Calculate the Total Return on the Investment (investments in the total project)8.11.2. Net Flow to Calculate the Return on Shareholders’ Equity or Funded Capital (public/private)8.12. Net Present Value/Internal Rate of ReturnA.9. Socio-economic Cost-Benefit Analysis9.1. Accounting and Discount Unit for the Cost-Benefit Analysis9.2. Social Cost Analysis9.2.1. Output Price Distortions9.2.2. Salary Distortions9.2.3. Fiscal Aspects9.2.4. External Costs9.2.5. Non-monetary Costs, including Environmental Aspects9.3. Analysis of social benefits9.3.1. Output Price Distortions9.3.2. Social Benefits from Increased Employment9.3.3. Fiscal Aspects9.3.4. External Benefits9.3.5. Non-monetary Benefits, including Environmental Aspects9.4. Economic Rate of Return or Net Present Value of the Project in Monetary Terms9.5. Additional Appraisal Criteria9.5.1. Presentation of Results in terms of General Objectives of European Union Policies9.5.2. Increase in EU Social Income9.5.3. Reduction in the Disparities with regard to per capita GDP between EU regions9.5.4. Increase in Employment9.5.5. Improvement in the Quality of the Environment9.5.6. Other Objectives of the Commission, Regional and National AuthoritiesA.10. Risk Analysis10.1. Defining the Critical Variables with the help of the Sensitivity Analysis10.1.1. Supply/Demand Variables10.1.2. Output Variables10.1.3. Human Resources10.1.4. Time and Implementation Variables10.1.5. Financial Variables10.1.6. Economic Variables10.2. Best and Worst Case Scenario Simulation243
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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
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Examples of objectives are:- change
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decontamination if any;- the techni
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3.3.3.6 Risk AnalysisCritical facto
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3.3.4.6 Risk assessmentCritical fac
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3.4.1.5 Economic analysisThe follow
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Financial inflows• Admission fees
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expectancy suitably adjusted by the
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The time horizon for project analys
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A Cost-Benefit Analysis should cons
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CHAPTER FOURCASE STUDIESOverviewThi
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- finally, there is the traffic tha
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c) Road users producer’s surplus:
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4.1.5 Scenario analysisTwo scenario
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The financial performance indicator
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Table 4.10 Economic analysis (Milli
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Table 4.12 Financial return on capi
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4.2 Case Study: investment in a rai
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4.2.4 Economic analysisThe benefits
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Financial investment costs have bee
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Figure 4.6 Results of the risk anal
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Table 4.22 Economic analysis (Milli
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4.3 Case Study: investment in an in
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ate of 0.6% per year is assumed for
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The shadow price of the CO 2 avoide
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As a result, the probability distri
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16 17 18 19 20 21 22 23 24 25 26 27
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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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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
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
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Page 210 and 211: Figure C.1 Project ranking by NPV v
Page 212 and 213: The main problems with this indicat
Page 214 and 215: EXAMPLE OF SHADOW WAGE IN DUAL MARK
Page 216 and 217: Another exhaustive way to include d
Page 218 and 219: Figure E.2 Percentage of low income
Page 220 and 221: ANNEX FEVALUATION OF HEALTH &ENVIRO
Page 222 and 223: Figure F.1 Main evaluation methodsS
Page 224 and 225: - expenditure on capital equipment
Page 226 and 227: due to air pollution or water conta
Page 228 and 229: BENEFIT TRANSFER - SELECTED REFEREN
Page 230 and 231: ANNEX GEVALUATION OF PPP PROJECTSIt
Page 232 and 233: adjustments for Competitive Neutral
Page 234 and 235: ANNEX HRISK ASSESSMENTIn ex-ante pr
Page 236 and 237: Reference ForecastingThe question o
Page 238 and 239: Figure H.5 Levels of risks in diffe
Page 240 and 241: ANNEX IDETERMINATION OF THE EU GRAN
Page 244 and 245: GLOSSARYAccounting period: the inte
Page 246 and 247: Market price: the price at which a
Page 248 and 249: BIBLIOGRAPHY1. ReferencesBelli, P.,
Page 250 and 251: Ray, A. 1984, Cost-benefit analysis
Page 252 and 253: EnvironmentGeneralAtkinson, G., 200
Page 254 and 255: European Commission, DG Tren, 2003,
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Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

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