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Project Appraisal

Project Appraisal. Dr.S. Sreenivasa Murthy. What is a Project ?. A Project is a proposal for Capital Investment to develop facilities to provide goods and services. UN, Manual for Evaluation of Industrial Projects, New York, 1980

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Project Appraisal

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  1. Project Appraisal Dr.S. Sreenivasa Murthy

  2. What is a Project ? • A Project is a proposal for Capital Investment to develop facilities to provide goods and services. • UN, Manual for Evaluation of Industrial Projects, New York, 1980 • A Project is a specific, finite task to be accomplished in order to generate cash flows. • A Project is unique in nature. • A Project is a multistage relay marathon race.

  3. Stages in Project Appraisal 1. Commercial / Market Appraisal 2. Technical Appraisal 3. Financial Appraisal 4. Economic Appraisal / SCBA 5. Environmental Appraisal

  4. Financial Appraisal of Projects • Capital Cost of Projects and sources of finance • Financial Projectins • Projected Profitability Statements • Projected Balance Sheets • Projected Cash Flow Statements • Ratio Analysis • Break Even Point • Discounted Cash Flow Techniques • NPV • IRR • PI

  5. Details of Capital Cost of the Project • Land and site development • Buildings • Plants and Machinery • Engineering and Consultancy fees • Miscellaneous • Preliminary and Preoperative expenses • Provision for contingencies • Margin money for working capital

  6. Sources of Finance • Issue of Ordinary / Preference Shares • Issue of Secured Debentures • Issue of Convertible Debentures and Bonds • Term Loans from Financial Institutions and Banks • Deferred credits from equipment suppliers including those under bills rediscounting scheme • Leasing Finance • Unsecured Loans and Deposits • Capital Subsidy or development loans/sales tax loans • Internal accruals for existing undertakings

  7. Details of Capital Cost of the Project and Methods of Appraisal

  8. Sources of Finance • Issue of Ordinary / Preference Shares • Issue of Secured Debentures • Issue of Convertible Debentures and Bonds • Term Loans from Financial Institutions and Banks • Deferred credits from equipment suppliers including those under bills rediscounting scheme • Leasing Finance • Unsecured Loans and Deposits • Capital Subsidy or development loans/sales tax loans • Internal accruals for existing undertakings

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