Provides real-life case studies, adapted for pr
Table of ContentsAcknowledgments xi
Symbols and Most Frequently Used Acronyms xiii
Introduction 1
CHAPTER 1 Investment Environment 9
Systematic Project Analysis 10
Project Environment and Strategy 11
Project Development Process 33
Planning Horizon and Project Life 43
Project Scope 44
Preinvestment Studies 46
Investment Planning Infrastructure 58
Appendix 1.1: Elements of Commercial and Wider Domains 60
Appendix 1.2: Outline of Business Plan for a Manufacturing Enterprise 62
Appendix 1.3: Outline of Design/Study Report 63
Appendix 1.4: Information Flow Details 67
Notes 69
References 74
CHAPTER 2 Preparing Pro-Forma Financial Statements 75
Accounting System 77
Process of Financial Analysis 81
Financial Costs and Benefits 84
Investment Costs 87
Production Cost 116
Operating Cost, Factory Cost, and Cost of Product Sold 122
Financial Statements 127
Appendix 2.1: Depreciation Methods 142
Appendix 2.2: Starting Inventory Balance 148
Notes 150
CHAPTER 3 Financial Indicators and Criteria 155
Static Indicators 155
Types of Static Indicators 156
Dynamic Indicators 169
Financial Criteria for Investment Decisions 188
Analysis of Joint Ventures 203
Project of an Ongoing Enterprise 206
Appendix 3.1: Example of Cost of Capital Calculations 219
Notes 225
References 228
CHAPTER 4 Financing the Project 231
Capital Structure 232
Cost of Capital 249
Notes 255
References 256
CHAPTER 5 The Economic Perspective 257
Private Sector 259
Public Sector 259
General Rationale for Economic Evaluation—Who Needs It? 260
Macroeconomic View—Impact on the National Economy 262
Price Distortions 266
Applicability and Scope 272
Economic Pricing Principles 278
Shadow Prices of Primary Resources (National Parameters) 292
Conversion and Adjustment Factors 297
Appendix 5.1: Costs and Benefits of Revenue Projects 299
Appendix 5.2: Global Pricing Framework—Importable Input Forgone 301
Notes 303
References 307
CHAPTER 6 Economic Cost/Benefit Analysis 309
Adjustments for the Wider Domain 311
Valuation at Market Prices 311
Define the Accounting Unit 317
Value-Added 343
Notes 354
References 358
CHAPTER 7 Investment Decisions under Uncertainty and Risk 359
Forecasting 359
Risk—Dealing with Uncertainty 364
Quantitative Risk Assessment 369
Qualitative Risk Assessment 380
Risk Management 380
Risk Immunization for Financiers 383
International Investors and Risk 385
Appendix 7.1: Discrete Probability Analysis—Multivariate 386
Notes 387
References 390
CHAPTER 8 Project Appraisal 391
Macro-Micro Appraisal 392
SWOT Analysis 393
Stakeholder Perspectives 396
Appraisal Report 399
Caveats for the Appraiser 406
Notes 407
References 408
CHAPTER 9 Implementation Planning and Budgeting 409
Implementation Planning 410
Project Management 412
Conducting the Implementation Project 416
Implementation Budget 437
Appendix 9.1: Sample Responsibility Matrix for a Portion of a Project 438
Appendix 9.2: Checklist of Project Implementation Costs 438
Notes 442
References 443
About the Authors 445
Index 447
