Project Appraisal

PROJECT APPRAISAL
FOR PGP/SS/09-11/4TH TRIMESTER
BY
CA. R.S.SIVARAMAN
M.Sc.,M.Com.,ACA.,DISA(ICAI).,PGDCA.,MIMA
CHARTERED ACCOUNTANT
FINANCE ELECTIVE
PROJECT APPRAISAL
• COURSE DURATION: 2 HRS PER
WEEK FOR 10 WEEKS
• COURSE CREDITS: 2
• Marks –Internal -30 Marks

• -External -70 Marks
(Closed Book examination)
SYLLABUS
• 1. MANAGEMENT OF PROJECTS (2 HRS)
• Definition of a project; need for project
management; project life style
• Project selection and criteria of choice; project
selection models
• 2. IDEATION STAGE (2 HRS)
• Idea generation, environment scanning,
corporate appraisal, and profit potential
• Porter model
• Scouting for project ideas and their preliminary
screening
• Project rating based on various criteria
SYLLABUS
• 3. MARKET AND DEMAND ANALYSIS (1 HR)
• Market appraisal through secondary information
• Market surveys
• Demand forecasting
• 4. TECHNICAL ANALYSIS (4 HRS)
• Manufacturing process/technology
• Project mix, plant capacity, location, and site
• Machinery & equipment, civil works
• Environmental considerations
• Project charts and layouts
SYLLABUS
• 5. PROJECT COSTING AND FINANCE (4
HRS)
• Cost of project
• Sources of finance
• Production and sales estimates; cost of
production
• Working capital requirement and sources
• Estimates of working results, including
profitability projections
• Cash flow projections and projected balance
sheet
SYLLABUS
• 6. PROJECT SELECTION (4 HRS)
• The time value of money
• Investment criteria
• Overall cost of capital
• Risk analysis: Measurement of risk;
sensitivity analysis; simulation;
decision tree
SYLLABUS
• 7. PROJECT SCHEDULING /
NETWORK TECHNIQUES (3 HRS)
• Development of project network and
time estimation
• CPM and PERT analysis; float time;
crashing of activities
• Cost analysis of resource allocation
BASIC TEXT
• Project – Planning, Analysis,

Financing, Implementation, and
Review (by) Prasanna Chandra
(TMH)
COVERAGE
1 MANAGEMENT OF PROJECTS
2 IDEATION STAGE
3 MARKET AND DEMAND ANALYSIS
4 TECHNICAL ANALYSIS
5 PROJECT COSTING AND FINANCE
6 PROJECT COSTING AND FINANCE
7 PROJECT SELECTION
8 PROJECT SELECTION
9 INTERNAL TEST
10 PROJECT SCHEDULING / NETWORK
TECHNIQUES
INTRODUCTION-PROJECT
• Organizations perform work continuously.
• These works include operations or projects

• For the organizations, projects are important
elements of change.
• They are considered to be the leading edge of

change in organizations.
• A project consists of a combination of

organizational resources pulled together to
create something that did not previously exist
INTRODUCTION-PROJECT
• Projects therefore support the ongoing activities of a going

concern.
For example,
• An R&D project bridges the gap from an existing technology to a

future technology.
• A new factory adds to the manufacturing capability.
• A new building contributes to the infrastructure of the city.
• A new highway improves transportation systems.
• A canal provides a waterway over land.
• A pipeline moves oil, gas, or water.
• A new house improves the living standards of a family.
DEFINITION OF PROJECT
Project Management Institute (PMI), US –it
has certified over 200000 project
management professional (PMP) world
wide. (www.pmi.org)
• As per Project management book of
Knowledge (PMBOK) of PMI
project is a temporary endeavor to create
a unique product or service.
PROJECT -MEANING
– A set of well defined activities , clear cut
beginning and end
– It is carried out to meet established goals,

within cost, schedule and quality
objectives.
– Consumption of large amounts of money
– Limitations on resources
– Not undertaken frequently
Characteristics of Project
• A project has specific start and end points.
• It has a well defined objectives
• A project Endeavour (attempt) is unique
not repetitious
• A project bears definitive cost and
financing structures
• A project generally cut across many
organisational and functional boundaries.
Key Considerations in a Project
• a) How much will it cost?

• b) What is the time required?
• c) What technical performance capability
will it provide?
• d) To what extent will the project results fit
into the design and execution of
organizational strategies?
What is project appraisal?
• – A process of analyzing the technical

feasibility and economic viability of a
project proposal with a view to financing
their costs.
Importance of project appraisal
• – It is a capital investment decision

• – It has long term effects
• – Decision once taken is irreversible
• – Expenditures are high
Difficulties in respect of project
appraisal
• – Measurement of costs and potential

benefits are difficult
• – High degree of uncertainty
• – Long term spread – time value of money
Types of projects
• – Mandatory investment (to comply with

statutory requirement)
• – Replacement investment
• – New projects
• – Expansion projects
• – Diversification projects
• – Research and Development projects
• – Public good /social welfare projects
• – Infrastructure projects
PLANNING
ANALYSIS
SELECTIONS
FINANCING
IMPLEMENTATION-Setting up of
Manufacturing Facilities
MARKET ANALYSIS
TECHNICAL ANALYSIS
FINACIAL ANALYSIS
ECONOMIC ANALYSIS
SOCIAL COST BEBEFIT ANALYSIS
ECOLOGICAL ANALYSIS
PROJECT LIFE CYCLE
1.Develop an idea something which is something new.
2.Do Research by enquiring or examining into the field of knowledge
with the objective to convert idea into a practical plan.
3.Design-idea and get it converted into practical plan.
4.Convert Design by developing into actual product, service, or
process.
5. Take the product, service, or process through Marketing to
customers. It may precede the design phase.
6. Convert the resources into product, service, or process through
Production.
7.Provide Post Sales service and support to customers during the
use of product or service.
PROJECT LIFE CYCLE
IN SIMPLE TERMS
• a) Have an idea
• b) Have a quick look
• c) Have a closer look
• d) Do it
• e) Try it
• f) Use it
• g) Post implementation review

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PROJECT APPRAISAL

FOR PGP/SS/09-11/4TH TRIMESTER

• Marks –Internal -30 Marks

• Project – Planning, Analysis,

• These works include operations or projects

• They are considered to be the leading edge of

• A project consists of a combination of

• Projects therefore support the ongoing activities of a going

• An R&D project bridges the gap from an existing technology to a

– It is carried out to meet established goals,

• a) How much will it cost?

• – A process of analyzing the technical

• – It is a capital investment decision

• – Measurement of costs and potential

• – Mandatory investment (to comply with

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