NAME : Sourav Sasmal

Registration No : 202892005010074
Course :BBA Sem: 6th
Subject : Project Management
Subject Code : BBA601
 PROJECT APPRAISAL

What is project appraisal?

The process of examining the argument for advancing with a project

or plan, or the project's feasibility, in an organised manner is known
as project appraisal. It frequently entails comparing multiple
possibilities, either through economic evaluation or another decision
analytic technique.  The entire project should be objectively appraised
for the same feasibility study in its principal dimensions, technical,
economic, financial, social, and so far to establish the justification of
the project or project appraisal is the process of judging whether the
project is profitable or not to the client or it is a process of detailed
examination of several aspects of a given project before
recommending some projects.

Importance of Project Appraisal

The significance stems from the process itself.You only know why it
is vital if you do it. As a result, the significance of project evaluation
covers the following critical points.
1 It aids in the attainment of certain, specified, and predictable
outcomes.
2 It evaluates the desirability of projects.
3 That validates the project hypothesis.
4 It lets you determine whether or not you want to be a part of the
project.
5 It assists you in understanding the project's benefits and drawbacks.
Process of Project Appraisal

Concept evaluation
The first stage in project appraisal is to properly analyse the
notion you wish to execute or engage in. This step will be
highly important in the future.
Briefing on the idea
Following idea analysis, it is necessary to brief that concept so
that everyone who is interested in it can be a part of it.
Project management
The project must have an organised framework, which is why
concept analysis and concept briefing are performed.
This is critical for your project's organisational structure and
schema.
Governance structure, team requirements and composition,
implementation approach, performance measures, and so on
are all part of project organisation.

Approval of the project

The final and most important step is project approval. After
everything has been completed, the idea must be approved.
This information is compiled into a single document called
project appraisal. Project appraisal is also an important idea in
project management.

Types of Project Appraisal

Appraisal of projects can be done by many ways, but the most
common of them are financial and economic appraisal. In
case of financial project appraisal, the company reviews the
cost of the project and the expected revenues that will be
generated by the project. This type of appraisal helps the
company to prevent overspending on a project. It also helps in
finding certain areas where alterations can be done for
generating higher revenues. Under economic appraisal, the
company mainly focuses on the total benefit of the project
and less on the costs spent on the project. Other than these
two types of appraisal, there are also other types of project
appraisal which include technical appraisal, management or
organizational appraisal and marketing and commercial
appraisal. What period of the future should be chosen for a
better project evaluation? The time period for project
appraisal depends on the project's nature, scope, and expected
Lifespan. Generally, a project's appraisal period should cover
the entire project lifecycle, including the planning,
implementation, and post-implementation stages.
For short-term projects, the appraisal period may be one to
three years. In contrast, for long-term projects, the appraisal
period may be 10 to 20 years or even longer. The appraisal
period should be

long enough to capture the project's expected benefits and

costs, including the initial investment,
ongoing operational costs, and expected benefits over the
project's lifespan. I
t's also critical to keep in mind that the length of the project
appraisal period can change based
on the goals of the project and the organization's policies and
processes. For instance, if the project's goal is to make quick
money, the appraisal time can be shorter than if the goal is to
benefit stakeholders over the long term.

In conclusion, the term for project evaluation should include

the full project lifecycle and be
extensive enough to include all of the estimated costs and
benefits, including the initial investment,
continuous operating expenses, and anticipated benefits
during the project's duration.
Specialists carry out project appraisals

Project appraisal involves a wide range of specialists from

different fields, depending on the nature, scope, and
complexity of the project. The following are some of the
specialists who may be involved in project appraisal:

1. Project manager: The project manager is responsible for

overseeing the entire project appraisal process, including the
coordination of all the specialists involved.
2. Financial analyst: A financial analyst assesses the financial
viability of the project, including the cost-benefit analysis,
cash flow projections, and other financial metrics.
3. Economist: An economist assesses the economic impact of
the project, including its contribution to economic growth,
employment, and social welfare.
4. Market analyst: A market analyst assesses the demand and
supply factors related to the project, including market trends,
customer preferences, and competition.
5. Technical specialist: A technical specialist assesses the
technical feasibility of the project, including the availability
of technology, expertise, and other resources required for the
project.
6. Environmental specialist: An environmental specialist
assesses the potential environmental impact of the project,
including its impact on air, water, and land.

7. Social specialist: A social specialist assesses the potential

social impact of the project, including its impact on the
community, culture, and social norms.

8. Legal specialist: A legal specialist assesses the legal aspects

of the project, including compliance with laws and
regulations, contractual agreements, and liability issues.

9. Risk analyst: A risk analyst assesses the potential risks

associated with the project, including market risks,
operational risks, financial risks, and other types of risks.

10. The specific specialists involved in project appraisal may

vary depending on the type and scale of the project, as well as
the organization's policies and procedures.

PROJECT APPRAISAL TECHNIQUES

Project AppraisalProject appraisal is the effort of calculating a
project's viability.Appraisal involves a careful checking of the
basic data, assumptionsand methodology used in project
preparation, an in-depth review ofthe work plan, cost
estimates and proposed financing, an assessment of the
project's organizational and management aspects,and finally
the viability of project. The project appraisal criteria can be
divided under two heads:
1) Non-Discounting Techniques
Urgency
Payback Period
Accounting Rate of Return
Debt Service Coverage Ratio
2) Discounting Criteria Techniques
Net Present Value
Benefit Cost Ratio Internal Rate of Return
Annual Capital Charge

Non-Discounting Techniques
i) Urgency
According to this criterion, the projects that are more urgent
get preference over those that are less urgent. However, one of
the problems in using this criterion is to judge the urgency of
any project. The decision taken may be subject to the personal
bias of the decision maker. In view of this limitation, it should
not be used for investment decision making.
ii) Payback Period
In simple terms, the payback period is the length of time
required to recover the initial cash outlay on the project. If the
cash inflows are constant, then the payback period is
calculated by dividing the initial outlay by the annual cash
inflow. For example, a project which has an initial cash outlay
of Rs 10,00,000 and a constant annual cash inflow of Rs
3,00,000 has a payback period of : 10,00,00013,00,000 = 3.5
years.
iii) Accounting Rate of Return The accounting rate of return
or the simple rate is the measure of profitability which relates
income to investment, both measured in accounting terms. As
there are various ways of measuring income and investment,
there are a large number of measures for accounting rate of
return.

iv) Debt Service Coverage Ratio

The debt service coverage ratio is generally used to find the
financial worthiness of the projects which need long term
financing. The formula is [net profit + interest (on long term
loan) + depreciation] 1{interest (on long term loan) +
principal loan].
Decision Making: Generally, the financial institutions regard a
debt service coverage ratio of 2 as satisfactory.

Conclusion

Project appraisal is done in a sequence. It includes concept

analysis, concept briefing, project management and project
approval. Finances also play a significant role in project
appraisal and project management.