Project Appraisal - Case of Financial Cost-Benefit Analysis
Project management is the evaluation of the project through which project effectiveness is determined. The project is compared with the current state and the state provided for the planning, i.e. it attempt to know how much project has achieved its objectives or how much capacity needs to meet the possession.
As it is known that Seychelles is one of the best places where people want to spend their most of the holidays is an island of Seychelles. Investing in this inland would be profitable for any company, but for that, it would be beneficial to evaluation the investment in order to avoid any losses and seek for opportunities that would enhance the project financial viability and feasibility.
This paper will focuses on the financial viability of the Long island project which is one of the inner islands of Seychelles.
In order to do project appraisal of Long island project will required a Forecast the costs and benefit, Select appraisal criteria, Assess risk, Estimate the cost of capital, Value the options and lastly considering the overall corporate perspective (www.cefims.ac.uk).
The following tables represent the calculation for the selling and renting out the villas and which option is more appropriate and in favour for the company. In the 14th year, NPV of renting out the villas exceed that of selling outright. As in the year 14th year the amount from renting will be 336.10 which is more than 292.189.
The purpose of the cost benefit analysis is to finds, quantifies and includes the entire optimistic factor. Then it recognized, quantifies and eradicates all the depressing factors that are termed as cost. The difference among these indicators suggests whether the plan is acceptable or not. For this purpose, the investor has to look for demographic, geographic, income level and other factors which has a direct link with the project. Leasing in this county is much high as the interest rate has been rising due to the banking crisis.
Investing your amount in the Long island project requires initially required 80 pound in the 1st year. Before making the list of cost, list of benefit should be listed which has been considered by the Atlantis before making their initial research. Hence, the reason for selecting renting option is due to the higher value and benefitd in terms of Net present value.
The key to the formula and its interpretation is in the interest rate considered, is usually used the average cost of capital after-tax, but experts recommend using higher values ??to have an appropriate margin for risk - the higher the risk , the larger setting of” I”. It should be noted that the forecast cash flows is the basis of the next 5 years. Due to the fact that the probability of deviation from the forecast is high enough, the spectrum is composed of forecasts - pessimistic, most likely and optimistic. Each forecast is given a certain weight and calculated ...