Project appraisal is the process of evaluation of any project or project proposal. All those who have to invest their money in the project must assess different aspects of project They will check whether same project will give refund their invested money at minimum time and whether it will give good return or not.
Except this, they will also check whether same project can be completed without any legal or technical problem. For example, you go to bank for getting loan. You have shown your project through your project report. Now, bank's duty to appraise the project before investing their money in same project like a blind person.
Not just bank but other sponsors who will invest their money in the given project will evaluate through their standards of investments. With this, all the investors can save their money from risk.
Following are its main steps
1. Assessment
Company make some standard. On this basis they will assess the project. For example, it is the rule of bank. If a person or company has to invest their own capital of total will be 60%, then same bank will give loan. If any project shows only 30% own capital, bank can reject same project through initial assessment stage.
2. Better Alternatives
If investor sees other better alternative, he or she can reject the project. It is the part of project appraisal to check the other alternative for safeguard from any type of risk.
Types of Project Appraisal
1. Techincal appraisal
In their area of construction, design or manufacturing of any product like any vehicle, there is so important to do technical appraisal. All are not expert. So, engineer of specific area will do technical appraisal and write the report what he see in the given project. Whether it is technically sound or not.
2. Investment Appraisal
Investment Analysis is very important for taking investment decisions. Investment analysis is the process to study about the price and value of investment in shares, debentures, bonds,debts, properties, assets and other investment projects. For completing investment analysis, we need technical knowledge of stock trends, capital budgeting and capital market.
3. Cost benefit analysis
Social Cost Benefits Analysis means to analyze the social cost and total social benefits if we accept any project. We all know that for completing the big project, we need big investment. In social cost benefit analysis (SCBA), we see whetherreturn or benefits on this investment are more than its cost from point of view of society in which we are living.
4. Through Capital budgeting Methods
In capital budgeting, we evaluate project through pay back period, IRR and NPV.
Related : Financial Evaluation
Except this, they will also check whether same project can be completed without any legal or technical problem. For example, you go to bank for getting loan. You have shown your project through your project report. Now, bank's duty to appraise the project before investing their money in same project like a blind person.
Not just bank but other sponsors who will invest their money in the given project will evaluate through their standards of investments. With this, all the investors can save their money from risk.
Following are its main steps
1. Assessment
Company make some standard. On this basis they will assess the project. For example, it is the rule of bank. If a person or company has to invest their own capital of total will be 60%, then same bank will give loan. If any project shows only 30% own capital, bank can reject same project through initial assessment stage.
2. Better Alternatives
If investor sees other better alternative, he or she can reject the project. It is the part of project appraisal to check the other alternative for safeguard from any type of risk.
Types of Project Appraisal
1. Techincal appraisal
In their area of construction, design or manufacturing of any product like any vehicle, there is so important to do technical appraisal. All are not expert. So, engineer of specific area will do technical appraisal and write the report what he see in the given project. Whether it is technically sound or not.
2. Investment Appraisal
Investment Analysis is very important for taking investment decisions. Investment analysis is the process to study about the price and value of investment in shares, debentures, bonds,debts, properties, assets and other investment projects. For completing investment analysis, we need technical knowledge of stock trends, capital budgeting and capital market.
3. Cost benefit analysis
Social Cost Benefits Analysis means to analyze the social cost and total social benefits if we accept any project. We all know that for completing the big project, we need big investment. In social cost benefit analysis (SCBA), we see whetherreturn or benefits on this investment are more than its cost from point of view of society in which we are living.
4. Through Capital budgeting Methods
In capital budgeting, we evaluate project through pay back period, IRR and NPV.
Related : Financial Evaluation
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