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Lecture 2

The document discusses different facets of project analysis that are important when evaluating a proposed project. It outlines the key considerations for market analysis, technical analysis, financial analysis, economic analysis, and ecological analysis. Market analysis examines demand and market share. Technical analysis evaluates engineering aspects. Financial analysis assesses costs, financing, and profitability. Economic analysis considers broader social costs and benefits. Ecological analysis examines environmental impacts and restoration needs. Conducting thorough analyses across these facets is essential for properly assessing the viability of a new project.

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Hujjat Ullah
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55 views13 pages

Lecture 2

The document discusses different facets of project analysis that are important when evaluating a proposed project. It outlines the key considerations for market analysis, technical analysis, financial analysis, economic analysis, and ecological analysis. Market analysis examines demand and market share. Technical analysis evaluates engineering aspects. Financial analysis assesses costs, financing, and profitability. Economic analysis considers broader social costs and benefits. Ecological analysis examines environmental impacts and restoration needs. Conducting thorough analyses across these facets is essential for properly assessing the viability of a new project.

Uploaded by

Hujjat Ullah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Project Financing and

Evaluation
Project Analysis

Saba Raja
Institute of Management Sciences,
University of Balochistan
Why Projects analysis is important?
It involves resources.
Capital Investment: (also refers as capital expenditure) it involves a current outlay
of funds and future benefits.
• Capital expenditure decision represent the most important decision by a firm as
it will have (long term effect, irreversibility, Substantial outlay)
• Capital Expenditure also posses difficulties such as measurement problems and
uncertainty.
Facets of Project Analysis
The important facets of project analysis are
 Market Analysis
 Technical Analysis
 Financial Analysis
 Economic Analysis
 Ecological Analysis
Market Analysis
Market analysis is concerned primarily with two questions.
• What would be the aggregate demand for the proposed product/services in the
future?
• What would be the market share of project under appraisal.
Market Analysis
To answer the questions mentioned in previous slide, the Market analyst requires
a wide variety of information and appropriate forecasting methods.
The information required are:
• Consumption trend
• Past and present supply position
• Production possibilities and constraints
• Import and exports
• Structure of competition
• Cost structure
• Elasticity of Demand
• Distribution channels
• Administrative, technical and legal constraints.
Technical Analysis

Analysis of the technical and engineering aspects of a project need to be done


continually when a project is formulated.
Technical analysis seeks to determine whether the prerequisites for the successful
commissioning of the project have been considered and reasonably good choices
have been made with respect to location size, process, etc.
Technical Analysis
The important question raised in technical analysis are:
Whether the preliminary test and studies have been done.
Whether the availability of raw material, power and other inputs has been
established.
Whether the selected scale of operation is optimal.
Whether the production process chosen is suitable
Whether the equipment and machines chosen are appropriate
Whether the proposed layout of the site, building, and plants is sound.
Whether the work schedules have been realistically drawn up
Whether the technology proposed to be employed is appropriate from the social
point of view?
Financial Analysis
Financial analysis seeks to ascertain whether the proposed project will financially
viable in the sense of being able to meet the burden of servicing debt and whether
the proposed project will satisfy the return expectation of those who provide the
capital..
Financial Analysis
The aspect which have to be looked into while conducting financial analysis are:
Investment outlay and cost of project
Means of finance
Cost of capital
Projected profitability
Breakeven point
Cash flows of the project
Projected financial position
Level of risk
Economic Analysis
Economic analysis also referred to as social cost benefit analysis.
Which is concerned with judging a project from the larger social point of view.
The focus of social cost and benefit of a project which may often different from
monetary cost and benefits.
What would be the impact of the project on the distribution of income in the
society
What would be the impact of the project on the level of saving and investment in
the society
What would be the contribution towards the employment opportunities.
Ecological Analysis
Ecological analysis should be done particularly for major project which have
significant ecological implications like power plants and irrigation schemes and)
and environment polluting industries like bulk drugs, chemical and leather
processing.
The key questions raised in ecological analysis are:
• What is likely damage caused by the project to the environment.
• What is the cost of restoration measure requires to ensure that the damage to
the environment is constrained with acceptable limits
• Potential Market
Market Analysis • Market Share

• Technical Viability
Technical Analysis • Sensible Choices

• Risk
Financial Analysis
• Return

• Benefits
Economic Analysis • Other impact

• Environmental Damages
Ecological Analysis • Restoration measure

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