Facets of project analysis

Facets of project analysisProf.Shivashankar S.GFacets of project analysisMarket analysisTechnical analysisFinancial analysisEconomic AnalysisEcological Analysis

Market AnalysisAggregate demand in futureMarket share?For the above 2 questions we requireConsumption trend past/presentProduction possibilities and constraintsImports and exportsCost structureElasticity of demandConsumer behavior, intentions, attitudes, preferences and requirementsDistribution channels and marketing policies in useAdministrative , technical and legal constraints Technical AnalysisPreliminary tests and studies and provided for?Raw material, power and other inputs tied up?Scale of operation optimal?Chooses prodn process suitable?Equipment and machinery suitable?Treatment of affluents?Layout, plan sound?Work schedules realisitic?Technology is appropriate in societal view?Financial AnalysInvestment outlay and cost of projectMeans of financingCost of CapitalProjected profitabilityBreak-even pointCash flows of projectInvestment worthwhileness Projected financial positionLevel of risk

Economic analysisDirect economic benefit and costs ?Impact of the distribution of income in society?Impact on savings and investment in society?Contribution towards self sufficiency? Employment and social order?

Ecological AnalysisDamage caused by project to environemnt?Cost of restoration within acceptable limits?

Key Issues in Project AnalysisPotential MarketMarket Analysis Market ShareTechnical ViabilityTechnical Analysis Sensible ChoicesKey Issues in Project AnalysisRiskFinancial AnalysisReturn Benefits and cost inEconomic Analysis shadow price Other ImpactsKey Issues in Project AnalysisEnvironmental Ecological analysis Damages Restoration measuresKey IssuesMajor investment decisions:RisksDCF ValueFinancingImpact on Short term EPSOptions : DCF do not capture the value of the project and does not reflect the value options embedded.The real options are: option to delayOption to expandChange inputs or outputsOption to contract or abandonCommon Weakness in Capital BudgetingValue creation or destroying depends on quality of investment decisions.Investment decisions are often impaired due to deficiencies in capital budgeting.Common weaknesses are :Poor alignment between Strategy and Capital budgetingDeficiency in Analytical TechniqueBase case poorly identifiedRisk is treated inadequatelyOptions not properly evaluatedLack of uniformity in assumptionsSide effects ignored