Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

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ANNEX D THE PROJECT’S IMPACT ON EMPLOYMENT AND THE OPPORTUNITY COSTOF LABOUR 213ANNEX E AFFORDABILITY AND EVALUATION OF DISTRIBUTIVE IMPACT 215ANNEX F EVALUATION OF HEALTH & ENVIRONMENTAL IMPACTS 220ANNEX G EVALUATION OF PPP PROJECTS 230ANNEX H RISK ASSESSMENT 234ANNEX I DETERMINATION OF THE EU GRANT 240ANNEX J TABLE OF CONTENTS OF A FEASIBILITY STUDY 241GLOSSARY 244BIBLIOGRAPHY 2486
TABLESTable 2.1 Financial analysis at a glance 34Table 2.2 Reference time horizon (years) recommended for the 2007-2013 period 35Table 2.3 Total investment costs – Millions of Euros 36Table 2.4 Operating revenues and costs – Millions of Euros 38Table 2.5 Evaluation of the financial return on investment - Millions of Euros 39Table 2.6 Sources of financing - Millions of Euros 41Table 2.7 Financial sustainability - Millions of Euros 42Table 2.8 Evaluation of the financial return on national capital - Millions of Euros 44Table 2.9 Electricity price dispersion for industry and households in the EU, year 2005 50Table 2.10 Examples of non-market impact valuation 53Table 2.11Observed ERR of a sample of investment projects sponsored by the EU during the previousprogramming periods 56Table 2.12 Review of the main analytical items 57Table 2.13 Identification of critical variables 59Table 2.14 Impact analysis of critical variables 60Table 2.15 Example of scenario analysis 61Table 2.16 Causes of optimism bias 63Table 2.17 Simple multi-criteria analysis for two projects 67Table 3.1 Estimated values of travel time savings 78Table 3.2 Recommended values for CO 2 emissions 78Table 3.3 Estimated values for casualties avoided (€ 2002 Purchasing Power Parity, factor prices) 79Table 4.1 Traffic forecast 131Table 4.2 Investment Costs 132Table 4.3 Conversion factors for each type of cost 132Table 4.4 Generalised user costs (€) 134Table 4.5 Consumer’s surplus 135Table 4.6 Gross producer’s surplus (motorway operator) and road user’s surplus 135Table 4.7 Government net revenues 135Table 4.8 Project performances in the scenario analysis 136Table 4.9 Economic analysis (Millions of Euros) - Tolled motorway 139Table 4.10 Economic analysis (Millions of Euros) – Free Motorway 140Table 4.11 Financial return on investment (Millions of Euros) 141Table 4.12 Financial return on capital (Millions of Euros) 142Table 4.13 Financial sustainability (Millions of Euros) 143Table 4.14 Traffic and service forecasts 145Table 4.15 Investment costs 145Table 4.17 Consumer’s Surplus 147Table 4.18 Producer’s surplus 147Table 4.19 Conversion factors for each type of cost 148Table 4.20 Project performances in the scenario analysis 148Table 4.21 Economic analysis (Millions of Euros) - Railway Option 1 151Table 4.22 Economic analysis (Millions of Euros) - Railway Option 2 152Table 4.23 Financial return on investment (Millions of Euros) 153Table 4.24 Financial return on capital (Millions of Euros) 154Table 4.25 Financial sustainability (Millions of Euros) 155Table 4.26 Distribution of the investment cost categories in time horizon (thousand of Euros) 157Table 4.27 Sources of finance (current prices) over the time horizon (thousand of Euros): 158Table 4.28 Conversion factors adopted in economic analysis 159Table 4.29 Hypothesis on yearly growth rate – Thousands of Euros 160Table 4.30 Financial sensitivity analysis for FNPV(C) 160Table 4.31 Economic sensitivity analysis for ENPV 161Table 4.32 Sensitivity analysis on the variable growth rates 161Table 4.33 Risk analysis: variable probability distributions 161Table 4.34 Risk analysis: characteristic probability parameters of the performance indicators 162Table 4.35 Financial return on investment (thousands of Euros) 163Table 4.36 Financial return on capital (thousands of Euros) 164Table 4.37 Financial sustainability (thousands of Euros) 165Table 4.38 Economic analysis (thousands of Euros) 167Table 4.39 Distribution of investment cost in the time horizon 170Table 4.40 Sources of finance (current prices) in the time horizon (thousand of Euros) 171Table 4.41 Conversion factors for the economic analysis 173Table 4.42 Critical variables for financial analysis 175Table 4.43 Critical variable for economic analysis 1757
Page 3: ACRONYMS AND ABBREVIATIONSBAUB/CCBA
Page 9: FIGURESFigure 1.1 Project cost spre
Page 12 and 13: Cohesion Fund, and through the leve
Page 14 and 15: or the plant will not reveal excess
Page 17 and 18: CHAPTER ONEPROJECT APPRAISAL IN THE
Page 19 and 20: Some specifications for financial t
Page 21 and 22: FOCUS: INFORMATION REQUIREDGeneral
Page 23 and 24: In particular, CBA results should p
Page 25 and 26: CHAPTER TWOAN AGENDA FOR THE PROJEC
Page 27 and 28: objectives, are, as far as possible
Page 29 and 30: considered the appropriate shadow p
Page 31 and 32: 2.3.2 Feasibility analysisFeasibili
Page 34 and 35: This approach will be presented in
Page 36 and 37: Current assets include:- receivable
Page 38 and 39: The following items are usually not
Page 40 and 41: Mainly, the examiner uses the FRR(C
Page 42 and 43: The dynamics of the incoming flows
Page 44 and 45: eturn on their own capital (Kp). Th
Page 46 and 47: While the approach presented in thi
Page 48 and 49: 2.5.1 Conversion of market to accou
Page 50 and 51: Table 2.9 Electricity price dispers
Page 52 and 53: 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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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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