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Project Planning & Evaluation

Project planning involves outlining how to complete a project within a set timeframe and resources, while project evaluation assesses the achievement of project objectives and effectiveness. Financial feasibility studies analyze the capital needed, sources, and returns on investment, employing methods like net present value and benefit-cost ratio. The time value of money concept highlights that present money is worth more than future money due to its earning potential.

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0 views8 pages

Project Planning & Evaluation

Project planning involves outlining how to complete a project within a set timeframe and resources, while project evaluation assesses the achievement of project objectives and effectiveness. Financial feasibility studies analyze the capital needed, sources, and returns on investment, employing methods like net present value and benefit-cost ratio. The time value of money concept highlights that present money is worth more than future money due to its earning potential.

Uploaded by

enjoy.chakma
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Project Planning & Evaluation

Project planning is a discipline for stating how to complete a project within a certain timeframe, usually with defined
stages, and with designated resources. Project evaluation is a systematic and objective assessment of an ongoing or
completed project. The aim is to determine the relevance and level of achievement of project objectives, development
effectiveness, efficiency, impact and sustainability.
A financial feasibility study projects how much start-up capital is needed, sources of capital, returns on investment, and
other financial considerations. The study considers how much cash is needed, where it will come from, and how it will be
spent. The study is an assessment of the financial aspects of something.
The methods for economic analysis-

 Net present value


 Benefit cost ratio
 Internal rate of return
 Payback period
 First Year rate of return
Present value- Refers to a future amount of money that has been discounted to reflect its current value, as it existed today.

Net present value - Net present value (NPV) is the difference between the present value of cash inflows and the present
value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze the
profitability of a projected investment or project.

Benefit-Cost Ratio (BCR) - A benefit-cost ratio (BCR) is a ratio used in a cost-benefit analysis to summarize the overall
relationship between the relative costs and benefits of a proposed project. BCR can be expressed in monetary or qualitative
terms. If a project has a BCR greater than 1.0, the project is expected to deliver a positive net present value to a firm and its
investors.
Internal rate of return-The internal rate of return is a measure of an investment’s expected future rate of return. The IRR
is an estimate of a future annual rate of return. The internal rate of return is a discount rate that makes the net present value
(NPV) of all cash flows from a particular project equal to zero.
Payback Period - The payback period refers to the amount of time it takes to recover the cost of an investment. For
example, a $1000 investment made at the start of year 1 which returned $500 at the end of year 1 and year 2 respectively
would have a two-year payback period.
The first year rate of return - The first year rate of return (FYRR) is a term that is often used to describe the amount of
return that is generated during the first year of a specific business initiative, project, or contract. The term is often used to
refer to the return after all expenses have been settled that occurs during the first year of the project.
Cash flow diagram- A diagram that shows the value of future money. Upward arrows resemble gains or profit, whereas
downward arrows indicate expense or cost.

Annual Worth- It is the cost per year of owning and operating an asset over its entire lifespan. Annual worth of all estimated
receipts (income) and disbursements (costs) during the life cycle of a project.
Sinking Fund- A fund formed by periodically setting aside money for the gradual repayment of a debt or replacement of a
wasting asset.
Salvage Value- It is the amount that someone expects to get at end of useful life of asset.
Recurring payments- Occurring again periodically or repeatedly. Recurring Payments are automatic payments where you
authorize your service provider to collect the total charges from your credit card or bank account.
Time value of money (TVM)
The time value of money (TVM) is the concept that money available at the present time is worth more than
the identical sum in the future due to its potential earning capacity.
Time Value of Money Examples ......If you invest $100 (the present value) for 1 year at a 5% interest rate (the
discount rate), then at the end of the year, you would have $105 (the future value). So, according to this example,
$100 today is worth $105 a year from today.

 n=given consideration year/life


 i=interest rate/discount rate/opportunity cost
 P=present worth
 F=future worth
 A=yearly/annual income

PRESENT VALUE (PV)


Current worth of a future sum of money.

Annual worth (AW)


Cost per year of owning and operating an asset over its lifetime. It’s also call capital recovery
factor (CRF)

Compound Amount

Sinking Fund

PMT- Payment (annually)

The SF is reciprocal of CA.


(2500+125)
Example-3

Compound amount
Example-4

Example-5
Example-6
Solution:
Example-7

(-)

(+)

(-)

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