Economic Project Appraisal ECON3056

Economic Project Appraisal

Table of Contents

1. Introduction
2. Main contents of the report and appropriate sub-sections

2.1. Description of costs associated with the proposed project

2.2. Description of benefits associated with the proposed project

2.3 Calculation of financial values of costs and benefits associated with the project

3. Recommendations
4. Conclusion
5. Wordcount

References

Annexes (if any)

1.Introduction:

Here you may like to briefly describe the objective of the appraisal and a brief introduction to the proposed project. This section should not exceed one paragraph.

2. Main Contents of the Report and Appropriate Sub-sections:

The following areexamples only. You may use these as a guide, or you may wish to complete your economic appraisal using different headings.

This is the starting point for your appraisal. You are expected to identify/describe at leastone more direct cost and benefitof theassumed direct costs. You should also consider any potential indirect costs and/or benefits which may be important to the appraisal.

2.1. Description of costs associated with the proposed project.

The Department of Infrastructure and Transport (DIT) project team has identified the following direct costs, which they would like you to consider in your economic appraisal:

• Initial feasibility study ($100kover one year).
• Planning and design costs (we would like this completed over atwo-tothree-year period and have a budget of approximately$1.25M).
• Land acquisition costs (reasonably assumed).
• Add your direct costs.
• Identify/describe the rationale of one direct cost.

2.2. Description of benefits associated with the proposed project.

The DIT project team has identified the following direct benefits, which they would like you to consider in your economic appraisal:

• Time-saving for road users.
• Revenue from train tickets (assume the same cost as Adelaide Metro currently charges).
• Add your direct benefits.
• Identify/describe the rationale of one direct benefit.

Notes:

• Your identified direct costs and benefits must be feasible and might be justified by referencing other sources.
• The DIT project team would like you to assume acost of capital rate of 12.5%when completing your calculations. They are particularly interested in the Net Present Value (NPV), Internal Rate of Return (IRR), and Benefit-Cost Ratio (BCR) for this project.

2.3 Calculation of financial values of costs and benefits associated with the project.

Hint:Dont forget to calculate both the financial values along the timeline of the year/s that each cost/benefit occurs.

In this section, you would include your calculations and a brief description of what the cost-benefit analysis is hoping to achieve. You should include the following:

• Internal Rate of Return (IRR).
• Net Present Value (NPV).
• Benefit-Cost Ratio (BCR).

Notes:

• You must describe and justify the calculation methods briefly.
• If you complete some of your calculations in Excel, ensure to include tables/formulas, etc in your report also as appendices. The report should be able to be read as a stand-alone document.
• InWeek 3.2 lecture notes, you will find the process of calculating Net Present Value (NPV), including:
• Select thediscount rate and theperiod of analysis.
• Determinecash inflows ofeach yearover the selected period.
• Determinecash outflows ofeach yearover the selected period.
• Calculate thenet cashflows ofeach year(Net Cashflows = Cash Inflow - Cash outflow).
• Find thediscount factors foreach year.
• Calculate thePresent Value (PV)ofeach year.
• Calculate theNet Present Value (NPV)(NPV = PV Cash inflows - PV Cash outflows).

3. Recommendations:

Here you would include your recommendations on the projects economic feasibility that are accurate and strongly justified. You must advise the client on the project's most appropriate economic appraisal tool. This section should be concise and unambiguous.

4. Conclusion:

Here you must provide a brief conclusion summarising your report in one paragraph.

5. References:

Refer to theAPA 7 referencing guideon the course learnonline website if you are unsure of how to complete this.

Annexes (if any)