Presented by :- MURALI

It is a process of detailed examination of several

aspects of a given project before recommending the same.

 Technical Appraisal

Commercial Appraisal
Economic Appraisal Financial Appraisal Management Appraisal

This involves a critical study of the following aspects: Selection of process/technology Raw materials Technical know-how Collaboration agreements Product mix Selection and procurement of plant and machinery Plant lay out Location of the project Project scheduling and implementation

 The very idea of promoting a project is to produce

some product or service and to market the to the consumers and earning a profit thereby. The commercial appraisal occupies a prime place in project appraisal. The commercial appraisal (market appraisal) is concerned with market for the product or service.

 Commercial appraisal of a project is done for studying

the commercial successful of the product or service offered by the project.

Such an appraisal is made from the following

angles:
Demand for the product
Supply position for the product Distribution channels

Pricing of the product

Government policies

 It measures the effect of the project on the whole

economy. The project should be capable of generating an economic rate of return.

 It is an appraisal of investment and capital structure

decisions.
It consists of two major areas. They are given below: Arriving at the total cost of the project . arriving at the appropriate means of financing the

project. (By means of financing we mean equity and debt)

 Financial appraisal (analysis) broadly falls under two

categories:
1. Non-Discounted Cash flow techniques: Pay back period method:-

cash outlay of the project/annual cash in flow Accounting rate of return (ARR) method:average annual profit/net investment in the project*100

2. Discounted cash flow techniques: Net present value (NPV) method

Internal rate of return (IRR) method

Profitability index(PI) method:

PV of cash inflows Initial cash outflow Benefit Cost Ratio(BCR) method: PV of cash inflows PV of cash outflows

 Management is the most important factor that can either make a project

a success or failure. A good project at the hands of a poor management may fail , while a not-so-good project at the hands of an effective management may succeed. Banks and financial institutions that lend money for financing projects lay more emphasis on management appraisal.

Matters to be appraised:Integrity Foresightedness Leadership qualities Interpersonal relationship, Technical and financial skills, Commitment