PROJECT MANAGEMENT

UNIT 1
• Meaning & concept
• Project characteristics
• Project classification
• Project management concept and scope
• Importance & difficulties in project planning
 Project
• It is a temporary endeavour undertaken to create a unique product or service or
result. – American National standard
• It is a unique process, consists of a set of coordinated and controlled activities
with start and finish dates, undertaken to achieve an objective conforming to
specific requirements, including the constraint of time, cost and resources. – ISO
10006
Some other definition:-
• A project is defined as a specific, finite activity that produces an observable and
measurable result under certain pre-set requirements.
• A Project is a temporary, unique and progressive attempt made to produce some
kind of a tangible or intangible result (a unique product, service, benefit,
competitive advantage, etc.).
• It usually includes a series of interrelated tasks that are planned for execution
over a fixed period of time and within certain requirements and limitations such
as cost, quality, performance, others.
• Project is a series of tasks that need to be completed in order to reach a specific
outcome. A project can also be defined as a set of inputs and outputs required to
achieve a particular goal.
• A project is a planned set of interrelated and sometimes dependant tasks that
must be executed over a certain period of time taking into consideration certain
costs, resources and other limitations. The task must be completed in order
to reach a specific goal.
• It can also be defined as a set of inputs and outputs needed to reach a specific
outcome.
 PROJECT KICKOFF – A CHECKLIST
1. Establish vision and deliverables – share project objectives to set a common
goal for your team.
2. Identify team and set roles
3. Develop initial project involve your project team in finalizing details and get
their inputs.
4. Define how you will measure success – the whole team must know what's
expected.
5. Review plan & identify potential risks and bottlenecks. – prepare your team for
critical stages
6. Establish logistics of team communication- how will you update each other?
Who will communicate with the stake holders, and how often/ schedule a
regular standup
7. Choose your PM methodology, or outline your preferred work process.
8. Decide which tools your team will use.
9. Schedule your kick off meeting
10. Set your agenda and prepare handouts and presentation slides.
 Key Characteristics
• Temporary. Every project has a finite start and a finite end. The start
is the time when the project is initiated and its concept is developed.
The end is reached when all objectives of the project have been met
• Unique Deliverable(s). Any project aims to produce some
deliverable(s) which can be a product, service, or some another
result.
• Progressive Elaboration. With the progress of a project, continuous
investigation and improvement become available, and all this allows
producing more accurate and comprehensive plans.
 Project Performance Objectives
1. Scope defines the deliverables:- Specified unique & verifiable product that must be produced
2. Quality:- to be achieved in terms of design & specifications.
3. Resources :- Manpower, materials and machinery necessary to perform the task.
4. Completion time:- speed with which the project is to be executed.
5. Cost:- budgeted expenditure which is agreed for the creation of desired facility.

The planning, scheduling, monitoring and

controlling methodology employed in terms of
time, resources, and cost to produce the
defined scope and quality of work within
changing environment is called PROJECT
MANAGEMENT TECHNIQUE.
 Examples of Projects
• Constructing a new facility
• Expanding a new facility
• Creating new information systems and software's
• Building a ship
• Constructing bridges
• Developing a new product or services
• Conducting a unique one time event like Olympics
• Implementing a new business procedures(ERP)
PROJECT CLASSIFICATION

Type of Work
Nature of work
Mode of execution
Project Completion time
Project budgeted cost
Maturity Level or level of risk
Mode of procurement
CLASSIFICATION
Building, Infrastructure, Industrial, Specific purpose
Repetitive, Non-repetitive, Combination
Department, Contract, Combination
Short duration:- (less than 1 year)
Normal duration:- (1 to 3 years)
Long duration:- (3 to 10 years)
Long duration:- (over 10 years)
Mega Value Projects (over 1000 million)
Large Value Projects (100 to 1000 million)
Medium value Projects (10 to 100 million)
Small Value Projects (less than 10 million)
No risk Projects
Low risk Projects
Medium Risk Projects
High Risk Projects
Build only Projects
Design & build Projects
Build-Operate-Transfer (BOT) Projects
Departmentally executed Projects
 CHARACTERISTICS FEATURES OF A PROJECT
Objectives It has a fixed set of objectives. Once the objectives have been achieved the
project cease to exist.
Life Span A project cannot continue endlessly. It has to come to an end.
Single Entity A project is one single entity while participants are many.
Team Work The team is constituted of members belonging to different discipline.
Life Cycle It has a life cycle reflected by introduction, growth, maturity, decline.
Uniqueness No two projects are exactly similar.
Change It witnesses many changes throughout its life.
Successive Principle What is going to happen during the life cycle of a project is not fully known
at any stage. The details get finalized successively with passage of time.
Made to order The customer stipulates various requirements and puts constraints within
which project must be executed.
Unity in Diversity A project is complex of varieties. In term to technology, equipment,
material, machinery, people, work culture, ethics. But they remain
interrelated.
High level of Subcontracting Normally 80% of the work in a project is subcontracted.
Risk and Uncertainty
 Project Management
• It is the art of managing all the aspects of a project from inception
to closure using a scientific and structured methodology
• Project management involves planning and organization of a
company's resources to move a specific task, event, or duty towards
completion. It typically involves a one-time project rather than an
ongoing activity, and resources managed include personnel, finances,
technology, and intellectual property.
• The planning, scheduling, monitoring and controlling methodology
employed in terms of time, resources, and cost to produce the
defined scope and quality of work within changing environment is
called PROJECT MANAGEMENT TECHNIQUE.
 Steps in Project Management

1. Grouping work into packages, bound by definite time, cost &

performance targets.
2. Entrusting the whole project to a single responsibility center knows
as project manager, for coordinating, directing and controlling the
project.
3. Supporting & servicing the project internally within the organization
and externally through vendors and contractors
4. Building up commitments through negotiations, coordinating &
directing towards goals through schedules, budgets and contracts.
5. Ensuring adherence to goals through continuous monitoring and
control using schedules, budgets and contracts as the basis.
 Elements Of Project Management
• Identification of the project.
• Technical and Financial appraisal of the project.
• Economic and Socio Economic appraisal of the project along with resource constraints.
• Review Business justification- Prepare cost benefit analysis.
• Proper formulation of project.
• Plan for implementation of the project.
• Actual Implementation of the project.
• Monitoring the implementation, Check deviation from pre defined targets, budgeted resources and time.
• Feedback and revision of objectives.
• Control Action
• Policy Restriction
• Government Regulations.
• Manage Staff – Select and train, lead and manage.
• Manage client relationship- plan client involvement, report progress, resolves problem.
• Evaluation
 PROJECT LIFE CYCLE PHASES
1. Conception Phase
2. Definition Phase
3. Planning and organizing phase
4. Implementation Phase
5. Project cleanup Phase
 Conception Phase
• The phase during which the project idea germinates.
• This phase is marked by acceptance of need & identification of objectives which is bound by time,
cost and performance targets.
• Project cannot be identified unless the organization identifies its position vis-à-vis prevailing or
anticipated environment.
• It is followed by examination of set of ideas – physical realis ability, technical soundness, market
compatibility, financial availability, socio-economic impact.
• The ideas need to be examined in light of objectives & constraints.
• A well conceived project will go long way for successful implementation & operation of a project.
• If this phase is avoided or shortened, the project will have innate defects & may actually become
liability for the investors.
• E.g. a plant may be having low capacity utilization, high power consumption and consequently
higher cost of production. In such a situation it might be a good idea to introduce new technology,
replace or scrap some critical items selectively.
 Definition Phase
• It is marked by feasibility report, its appraisal & investment decision.
• To produce documentation of details of project.
• The details cover al aspects necessary for customers and financial institution to make up
their mind on project idea.
• Government agencies give more emphasis on SCBA – Social cost benefit analysis, while
financial institutions examine techno-financial viability along with managerial
competence.
• Project Appraisal include:-
1. Market Appraisal – surveys and projection
2. Technical Appraisal
3. Financial Appraisal – estimate of capital cost, rate of return, return on investment,
source of finance, financing pattern, financial viability.
4. Economic appraisal – economic rate of return, domestic resource cost, SCBA, risk &
sensitivity analysis.
5. Managerial Appraisal :- resourcefulness, sound understanding of project, implementation
schedule, ambiguities.
6. Environmental Appraisal:- safeguard against damage, restoration measures.

• It will develop the idea generated during conception phase & produce a document describing
the project in sufficient details covering all aspects. The areas to be examined:-
1. Raw material:- Qualitative & Quantitative
2. Plant size & capacity
3. location & site
4. Technology & process selection
5. Project layout
6. Plant & Machinery
7. Manpower & organizational patterns
8. Financial analyses
9. Implementation schedule
This phase clears some of the ambiguities & uncertainties associated with formation made during
conception phase.
 Planning and organizing Phase
• Project infrastructure & enabling services.
• System design & engineering
• Schedules & budgets
• Licensing & government clearances
• Finance
• Systems & procedures
• Identification of project manager
• Design Basis, general condition for purchase and contracts
• Site preparation and investigations
• Construction resources and material
• Work packaging
 Implementation Phase
This phase is marked by execution of projects along with its controlling
and monitoring. 85% of project work is done in this phase.
Some of the activities involved are
• Preparation of specifications for equipment's & machinery
• Ordering of equipment
• Lining up construction contractors
• Issue of construction drawings
• Equipment & machinery erection, plant electricals, instrumentation
• Testing, checking, trial run and commissioning take place during this
phase.
 Project clean-up Phase
• This is transition phase in which the hardware built with the active involvement
of various agencies is physically handed over.
• Drawings, documents, files, operation and maintenance manuals are handed over
to the customer.
• The customer has to be satisfied with guarantee test runs.
• Any change required at the last minute for fulfillment of contractual obligations in
respect of performance has to be completed during this phase to the satisfaction
of the customer.
• Project accounts are closed, material reconciliation carried out, outstanding
payments made and dues collected during this phase.
• The most important issue during this phase is planning of staff & workers
involved in execution of the project.
Project Management As A Conversion Process
 Phases in Project Management
. PHASE STAGE OBJECTIVES
Preparation or 1. Identification of a project idea Project goals are identified & analyzed
Initiation
2. Preliminary Selection Project objectives, schedules, cost
estimates are determined.
3. Feasibility Studies Desirable solutions are classified
4. Evaluation & decision making Feasibility concepts, relevant
alternatives. Decision on most
promising alternative solution, funding
Implementation 5. Initial project planning, scheduling, Drawings, specification, material,
or Construction designing & engineering. schedule, plan documents checked
6. Contracting and Procurement Manpower, machinery, utilities,
relevant infrastructure are mobilized.
Operation 7. Facility construction & pre- Complete, tested, debugged &
operations accepted facility or system.
8. Operations Optimum performance, time, cost
 Roles and Attributes of Project Manager
1. Projectising and problem solving.
2. Defining & maintaining integrity of project.
3. Development of project execution plan
4. Setting of cost and time targets for each projects.
5. Development of system & procedures for accomplishment of project objectives.
6. Line up vendors and contractors for supply of material
7. Negotiations and HR management
8. Directing and coordination
9. Monitor and control – schedules, budgets & contracts.
10. Satisfaction of customer, government and public.
 Attributes of Project Manager
11. Ability to develop alternate course of action
12. Knowledge of PM methods, tools & technology
13. Ability to make self evaluation
14. Effective time management
15. Capacity to relate to current events
16. Initiating & risk taking ability
17. Tolerance for difference of opinion, delay and ambiguity.
18. Holistic foresight
19. Proactive
 Attributes of Project Manager
1. Planning &organizing skills
2. Conflict resolving skills
3. Ambition for achievement
4. Personnel management skills
5. Communication skills
6. Change orientation
7. Problem solving skills
8. High energy levels
9. Ability to take suggestions
10. Understanding the views of team members, having sympathetic attitude
towards them
 Roles of Project Manager
1. Figurehead role
2. Leadership role
3. Liaison role
4. Monitoring role
5. Disseminator role
6. Representative role
7. Entrepreneurial role
8. Disturbance handling role
9. Resource allocating role
10. Negotiating role
 Causes of Project Failure
1. Inadequate project Formulation:-
• poor field investigation,
• inadequate project information,
• bad cost estimates,
• lack of experience,
• inadequate project formulation & feasibility analysis,
• incorrect investment decision.
2. Poor planning for Implementation:-
• unrealistic time plan,
• unsatisfactory resource plan,
• inadequate supply plan
3. Lack of proper contract planning & management
4. Lack of PM during execution:-
• inefficient & ineffective working,
• delays,
• changes in scope of work & location,
• inadequate law &order.
 Project Selection Criteria
PRELIMINARY CONSIDERATION
1. Match with the entrepreneur profile:- it should match with the interest, resources, abilities, proclivities.
Should offer opportunity for rapid growth & high ROI
2. Fit with national priorities:- should fit with government regulatory framework, no environmental effects
3. Availability of inputs:- capital requirement, technical know-how, raw material, power supply.
4. Market size:-
• Total existing domestic market
• Extent of export market
• Competitors and their market share
• Existing sales and distribution system
• Expected change in consumption
• Entry barriers for new products
• Economic, social, environmental trends
• Protection of patent
 Project Selection Criteria
5. Cost:- the cost of proposed products should realize a reasonable profit with competitive price.
• Cost of input material
• Labour cost
• Overhead expenses
• Service charges
• Economies of scale
6. Risk:-
• Business cycle
• Change in technology
• Extent of competition from substitutes
• Government control & restrictions
 Criteria for Selection of Project
• Get out of your comfort zone, competency or expertise
Business Priority • Should be decided after scanning the internal/external environment

Customer Impact • Quantify the impact on customer

Availability of Resources • In terms of manpower, money and time

Apt Time • To be strictly followed

• Should not be primal purpose

Savings Potential • Black belt project should not compensate for quality

• Saves time, cost, effort

Availability of Data • Vanilla project should not be the criteria

• Play safe
Probability of Success • Consider contingencies
 Project Identification
1. Identify potential Problems
Another way for generating ideas may be to identify potential problems.
• New technology: unproven processes
• Site conditions: Unusual climate
• Limited resources: shortage of skilled technicians, limitation of space, restriction on spending.
• Delay in obtaining permits
• Process control systems, complication in design, procurement & installation.
• Difficult access
• Economic conditions uncertain market
2. Tapping of project ideas – SWOT ANAKYSIS
• One has to think in the lines of rearrangements, modifications, reversal, magnification, reduction,
substitution, adaptation, and combination.
• Analyze performance of existing industries
• Review imports & export statistics
• Data from various financial institutions
 Project Identification
• Draw clues from consumption abroad
• Trade seminars – national, international
• Explore possibility of reviving sick units

3, Preliminary Screening – it is required to eliminate ideas which are not promising:

The following aspects are considered for screening
• Image of the promoter (compatibility, offer prospects)
• Consistency with governmental priorities
• Availability of inputs
• Adequacy of market
• Reasonableness of cost
• Acceptability of risk (technological changes, competition from imports, vulnerability, substitutes, govt control
over price & distribution)
 Importance of Project Identification
1. It has long term consequences (make or break)
2. Involves commitment which can not be easily reversed
3. Ideas are put into action
4. Projects are catalytic agents for economic development
5. Involves creative use of resources- manpower, capital, raw materials etc.
6. Generates value addition and build-up national capital
7. Brings socio-cultural development
8. Leads to development of infra-structure and environment
 SCORING MODEL-Selection Technique
1. A committee is formed that lists the relevant criteria to select a project
2. The committee weighs the list according to the importance and priorities of each project under
consideration
3. The weights can be chosen on a 1 to 5 or 1 to 10 scale to distinguish between the more important and
the less important criteria
4. The committee then adds the weighted values and selects a project with highest score.
Some typical criteria are:
1. Entry in anew market
2. Similarity to present business line
3. Addition to market share
4. Level of existing and future competition
5. Environmental stipulations
6. Impact on plant safety
 Project Appraisal
• It is carried out by financing agencies to ensure the viability of the project.

S.No Criterion Accept

1 Payback Period PBP< target period
2 Accounting rate of return ARR > target Period
3 Net present value NPV > 0
4 Internal rate of return IRR . Cost of capital
5 Benefit cost ratio BCR>1
 FEASIBILITY REPORT
It is prepared to present an in depth techno-commercial analysis carried out on the
project idea for consideration of the financial institutions and other authorities
empowered to take investment decision.
According to the guidelines published by the planning commission a feasibility report
includes:- FRAMEWORK
1. Need of project
2. Executive summary
3. Major inputs of projects (men, machine, money, material, methods)
4. Raw material survey
5. Demand and market study
6. Technical study – product pattern, process selection, plant size, raw material
requirement.
7. Location study
8. Economic study
9. Ecological study
10. Project capital cost estimates & source of finance
11. Profitability and cash flow analysis
12. Cost benefit analysis

RAW MATERIAL SURVEY – adequacy of material available to support the project.

1. Natural resources :- the study would take into consideration the quantity of material
already committed for different plants in operation.
2. Available as finished products or by product from some operating plant. Availability of
raw material as per grade and quantity required.
 DEMAND & MARKET ANALYSIS
1. Demand:- covering uses of the product proposed to be manufactured, the prospective
customers, present consumption, expected consumption in future.
2. Supply:- covering assessment of existing capacity, present level of production, capacity
utilization, extent of import & projected supply.
3. Distribution:- covering channels of distribution, mode of transport, mode of packing,
cost of distribution.
4. Prices:- covering both domestic and international price trends, control on prices as
imposed by government, prevailing duties and taxes.
MARKET MAY BE DISTINGUISHED ON THE BASIS OF
• Area covered:- local, national, international
• Presence of competition:- monopoly, oligopoly, pure competition
• Quantity involved:- wholesale, retail
• Period of transaction:- ready, future
• Demographic variable:- age, gender, income, occupation, education.
 DEMAND & MARKET ANALYSIS
Aspects to be included:-
1. Potential and prospective buyers
2. Current and projected demand
3. Demand distribution with respect to sales and geography
4. Break up demand
5. Estimated price and warranty
6. Channels of distribution
7. Prospects for immediate sales
 DEMAND & SUPPLY ANALYSIS
Most of the information is available from published literature, some of the documents that’s are
usually referred to:-
• Plan documents:- issued by planning commission, provides information on plan proposals &
growth targets that are both physical & fiscal.
• Guidelines to industries:- published by the department of industrial development,
ministry. It provides information about licensed and installed capacity, present
production, import export, know-how, design, fabrication, future scope.
• Economic Survey:- published by ministry of finance, data on industrial production.
• Annual survey of industries – published by central statistical organsation, it provides
data on industrial production, number of units installed, capacity.
• import & export statistics – published by ministry of commerce.
• RBI monthly bulletin
• Survey reports of various institutions
 LOCATION ANALYSIS
1. Availability of land, soil characteristics, cost of land
2. Approach to site
3. Sources of raw material and transportation requirements
4. Transportation and marketing of finished goods
5. Sources and availability of water
6. Availability of power
7. Availability of skilled manpower
8. Availability of tax incentives
9. Availability of engineering and maintenance facility
10. Social amenities in the area
11. Facilities of drainage and effluent disposal
12. Acceptance of the project by local bodies
 SOCIAL COST BENEFIT ANALYSIS (Social analysis)
• The main objective of an project is to earn the maximum possible returns for an
investment or commercial profitability of a project.
• But some projects are undertake for social cause, which have social implication but may
not have commercial benefit.
• SCBA considers the total impact the a project will have on an economy.
The main objectives of SCBA:-
1. Contribution of the project to the GDP of the economy
2. Contribution of the project to improve the benefits to the poorer section of the
society.
3. Reduce regional imbalance in growth and development
4. Contribution of the project in protecting /improving the environmental conditions
5. Justification of the use of scare resources of the economy by project.
 SOCIAL COST BENEFIT ANALYSIS (Social Analysis)
• It deals with the impact of the investment project on people and their lives by bringing
change in social behavior and attitude.
• Projects related to rural development, education, health, power, communication,
infrastructure etc.
• The four principal areas of this analysis:-
1. The sociocultural and demographic characteristics of the project population
2. Organization of project population to carry out productive activities.
3. The projects cultural acceptability, its capacity to adapt to peoples behavior, needs and
bring about changes in them.
4. The strategy to ensure commitments and sustained participant of the project
population throughout the project cycle.
 TECHNICAL ANALYSIS
• Technical analysis provides an opportunity to consider how a nation can take advantage
of its investment plan, policy, framework & development projects to the fullest extent
and best possible manner, to build a capacity for effective use of science and technology
in the economy
• Technical process, design, size, layout, capacity, to ensure that the chosen technology is
appropriate.
• Basic design data, process description and specification
• Process flow diagram
• Equipment list
• Process data sheets for all equipment's
• Process piping and instrumentation diagram
 TECHNICAL ANALYSIS
• Utility summary
• Indicative plot plan
• Operating instruction
• Indigenous and foreign know how
• Success of the process in the country of origin and in othe countries where it has been
licensed.
 FINANCIAL ANALYSIS
• The purpose of financial analysis is to ensure the adequate funds are made available for
the investment as well as for operation and maintenance after investment is made.
• Will the enterprise have sufficient revenue to earn a reasonable return on its invested
capital?
• Will it be bake to generate enough funds internally from its operations to make a
reasonable contribution to its future capital requirements?
• Will the capital structure of the company enable it to meet the financial obligations in a
timely manner?
• Will there be adequate liquidity or working capital to cover all operational requirements?
 FINANCIAL ANALYSIS

1. Cost of project
2. Means of financing – sources (shares, debentures, bonds, term loans, lease and hire
purchase finance)
3. Estimates of sales and production
4. Cost of production
5. Working capital requirement and its financing
6. Estimates of working result
7. Break even point
8. Projected cash flow statements
9. Projected balance sheets
 FINANCIAL ANALYSIS
FINANCIAL INSTITUTION – NATIONAL
1. IDBI – industrial development bank of India
2. IFCI – Industrial finance corporation of India
3. IRCI – Industrial reconstruction corporation of India
4. SFC – State financial corporation
5. UTI – Unit trust of India
6. EXIM BANK – Export-import bank
7. SIDC – State industrial development corporations
8. LIC – Life insurance corporation
 FINANCIAL ANALYSIS
FINANCIAL INSTITUTION – INTERNATIONAL
1. World Bank
2. IFC – International Finance Corporation
3. IDA – international Development Association
4. UNDP – United nation Development Programme
5. IMF – International Monetary Fund
6. ADB – Asian Development Bank
7. NRI – Non resident Indian
 FINANCIAL ANALYSIS
EVALUATION OF THE PROJECT PROFITABILITY
1. Pay back period
2. Return on investment
3. Net present value
4. Internal rate of return
5. Benefit cost ratio
PAY BACK PERIOD (PBP) :- It is the time required to recover original investment through
income from the project.
PBP = ORIGINAL INVESTMENT / ANNUAL INCOME = NUMBER OF YEARS
RETURN ON INVESTMENT (ROI):- The ratio relates earning to investment. ROI must not
only be higher than bank borrowing rate, but also above the minimum acceptable
profitability rate of the company.
ROI = AVERAGE ANNUAL EARNING AFTER TAX / AVERAGE BOOK NVESTMENT AFETR
DEPRICIATION
 CRITICALITY OF FEASIBILITY STUDY
• Embarking on a major new business investment
• Investing in a new market or product segment
• Changing strategic or market focus of an existing business
• Opening a new facility, chain of offices or stores
• Moving from small/start-up phase to expansion
• Any greenfield development that does not duplicate existing business functions
• Investing significant part of personal wealth in own business
• Investing in new technology or operating approaches
• Expanding into an unfamiliar market or territory (overseas)
• Entering an already crowded or highly competitive market segment
 PROJECT FORMULATION
It is the process whereby the entrepreneurs makes an OBJECTIVE and INDEPENDENT
assessment of various aspects of an investment proposition of a project idea for
determining its total impact and also its liability.
Phases of project formulation
1. Conception of an idea
2. Analysis of related aspects
3. Formulation of a project
4. Design of a project
 STAGES OF PROJECT FORMULATION
The process of project development has been categorized into seven stages.
1. Feasibility analysis
2. Techno-economic analysis
3. Project Design and Network analysis
4. Input analysis
5. Financial analysis
6. Social cost benefit analysis
7. Pre – investment analysis
 PROJECT FORMULATION
1. Feasibility analysis:- at this stage, project idea is examined from point of view whether
to go in for detailed investment proposal or not. It is examined in the context of
internal and external constraints.
2. Techno-economic analysis:- estimation of project demand potential of optimal
technology is made. It gives a project the project a unique individuality.
3. Project design and network analysis:- individual activities which constitute the project
and their inter-relationship with each other. The sequence of events of the project is
presented. A detailed work plan of the project is prepared with time allocation for each
activity is presented in the network drawings.
4. Input analysis:- assesses input requirement during the construction and operation of
the project. It will aid in assessing the project cost which is necessary for financial
analysis and cost benefit analysis.
5. Financial analysis:- estimating the project cost, operating cost, fund requirements. It
helps in comparing various project proposals on a common scale. Analytical tools used
in financial analysis are discounted cash flow, cost volume, ratio analysis.
 PROJECT FORMULATION
6. Cost benefit analysis:- overall worth of the project is main consideration, it considers
the project from national point of view. Not only direct cost and direct benefits but
also the costs which all entities connected with project have to bear & the benefits
which will be enjoyed by all.
7. Pre-investment analysis:- the project proposal gets a formal & final shape at this stage.
All the results obtained in the above steps are consolidated and various conclusions are
arrived at to present a clear picture. The sum total of pre-investment appraisal is to
present the project idea in a form in which the project sponsoring body, implementing
body can take investment decision.
PROJECT IMPLEMENTATION