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Project Finance and Appraisal

Are you interested in finance and project appraisal? This assignment tackles some of the most pressing challenges in evaluating the effectiveness and sustainability of investment projects. How can we measure the cost-effectiveness of health or education projects? What are the best approaches to include environmental impacts in project appraisals? How can we calculate NPV and IRR, and determine project acceptability? If your curiosity is piqued, join us in exploring these questions and more in this comprehensive project finance and appraisal assignment. Don't miss out on insights from relevant literature and an opportunity to apply your critical thinking skills to a real-life investment project.

Assignment Questions

  1. Cost Effectiveness Analysis in Health or Education Projects (30% of marks)

    • Critically assess the benefits and limitations of using cost-effectiveness analysis in the appraisal of health or education projects.

  2. Environmental Impacts in Project Appraisal (30% of marks)

    • Explain approaches to include environmental impacts in project appraisals.

    • Critically assess the strengths and limitations of these approaches.

  3. Investment Project Financial Analysis (40% of marks)

    • Given Financial Information:

      • Investment Costs: Total £53.5M (Land & Buildings: £40M, Construction Labour: £4.5M, Machinery & Equipment: £3M, Vehicles: £3M, Furniture & Fittings: £3M). Assume land clearance, construction, machinery installation, and commissioning take 12 months. Machinery & Equipment lifespan: 7 years, replacement cost: £3M. Vehicles lifespan: 5 years, replacement cost: £3M. Make assumptions for residual values, justify methodology.

      • Production: 600,000 units in the first year, 10% growth for the next two years, no growth thereafter.

      • Sales Price: £30 per unit.

      • Operating Costs: Direct labour: 30% of unit price, Direct materials: 20% of unit price.

      • Fixed Costs: £6,000 annually.

      • Physical Working Capital Costs: Materials (2.5 months’ supply), Final goods (2 months’ stock).

      • Financial Working Capital: Accounts receivable (3.5 months), Accounts payable (2 months).

    • Tasks:

      • (a) Annual Statement of Costs and Benefits (Pre-financing), NPV, and IRR Calculation (20% of marks):

        • Calculate NPV and IRR using a discount rate of 10%. Provide a step-by-step approach and interpret the results referencing relevant literature. Determine project acceptability.

      • (b) Trading and Profit and Loss Account Calculation (Income Statement) (20% of marks):

        • Profits taxable at 20%. Determine profit acceptability using appropriate ratios and discuss additional information needed for a critical assessment of project profitability.

Note: Tables and calculations must be supported by credible literature. Failure to engage with literature may result in low marks or a failed attempt. Appendices are not allowed for any element of this work.

Assessment Criteria

  • Part One: Cost Effectiveness Analysis (30%)

  • Part Two: Environmental Impacts in Project Appraisal (30%)

  • Part Three: Investment Project Calculations (40%)

Word Count

The word count is 2000 words. Exceeding this limit by 10% or more will result in a 10% deduction. State the number of words used on the front cover.