PROJECT APPRAISAL
MEANING: Project appraisal means “the assessment of a project”.
A project appraisal report is a document that examines a given project before its execution.
PURPOSE: To determine whether the project will be worth doing in terms of the company’s budget, its potential presence on the market and with its target costumers. The content and data in the project appraisal report must be well- researched, so the company can make an informed decision.
Methods of Project Appraisal
Appraisal of a proposed project includes;
1.Economic Analysis
2.Financial Analysis
3.Market Analysis
4.Technical Feasibility
ECONOMIC ANALYSIS:
Requirement of raw materials, level of capacity utilization, anticipated sales, anticipated expenses and the probable profits, location of the enterprise.
FINANCIAL ANALYSIS:
Assessment of the financial requirements both-fixed and working capital. Working Capital means excess of current assets over current liabilities.
These methods check the appropriateness of a project considering things such as available funds and the economic climate. A good project will service debt and maximize shareholders 'wealth.
- Cost of project
- Means of financing
- Project Revenue and cost
- Payback Period
- Net Present Value
- Rate of Return
MARKET ANALYSIS:
1.What is the size of the total market for proposed product or service?
- What is the product’s share of total market?Past and present trendPresent and prospective supply position
Levels of imports and exports
Structure of Competition
Price and cross elasticity of demand
Consumer Requirements
Production Constraints
The methods to estimate the demand for a product are;
Complete Environmental Method: All probable costumers of the product are approached and their probable demands for the product are estimated and then summed.
Sample Survey: Some number of consumers out of their total population is approached and data on their probable demands for the product during the forecast period are collected
- Sales Experience Method: Sample market is surveyed before the new product is offered for sale. The result of the market surveyed are then projected to the universe in order to anticipate the total demand for the product.
- Vicarious Method: the consumer of the product are not approached directly but indirectly through some dealers who have a feel of their customers.
TECHNICAL ANALYSIS
While assessing the technical feasibility of the project, the following inputs covered in the projects should also be taken into consideration;
a. Availability of land and siteb. Availability of water, power, transport, communication facilities
c. Availability of servicing facilities like machine shops, electric repair shops
d. Coping with anti-pollution law
e. Availability of required raw material as per quality and quantity.
Conclusion:
It is seen from the previous discussion that the Project Appraisal can be structured to cover the full range of functionality of the project management process. It is a powerful tool which should not be overlooked but which must be judiciously applied.
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