Investment Project Design: A Guide to Financial and Economic Analysis with Constraints

Praise For Investment Project Design

"The subtitle of this comprehensive guide could be ′How to Avoid White Elephants′. It is a complete guide for how to develop a proposal for a successful project including case studies and detailed notes and references to additional information." Robert Youker, instructor (retired), World Bank Institute

"This book is a comprehensive treatise on most aspects of project design, analysis, and implementation. Using numeric formulations to explain basic concepts is its unique feature. And as a teacher of ′project finance,′ I find the bullet point format, which can easily be transformed into a slide presentation format, a very interesting approach." Gopi N. Puri, former senior technical manager, International Finance Corporation, World Bank; retired project finance teacher; freelance consultant

"Limited investment resources constitute the key issue in development. Unfortunately, history has shown that a considerable part of them is wasted; one of the reasons is faulty design of individual projects. This book sets out to correct all the common mistakes, and it succeeds admirably. This concise and thorough guide is the best treatment of the subject available today both beginners and experienced practitioners will profit especially from case studies drawn from the authors′ long careers in the field." Kazimierz Laski, Emeritus Professor of Economics, Johannes Kepler University of Linz

Your road map to a successful project plan and a sound investment decision

Investment Project Design charts a path for navigating through the hazardous road to success faced by private and public investors and their collaborators in formulating and deciding whether or not to go ahead with their investment projects. The expert authors alert investors and other stakeholders to precipitous changes in the investment milieu as a result of resource constraints (mainly fossil energy), political turmoil (such as international terrorism), and demographic change, and provide guidelines for designing their projects accordingly, taking into account uncertainties and risks in the business environment.

Symbols and Most Frequently Used Acronyms.

Introduction.

Chapter 1: Investment Environment.

Systematic Project Analysis.

Project Environment and Strategy.

Project Development Process (PDP).

Planning Horizon and Project Life.

Project Scope.

Pre–Investment Studies.

Investment Planning Infrastructure.

Appendix 1.1: Elements of Commercial and Wider Domains.

Appendix 1.2: Outline of Business Plan for a Manufacturing Enterprise.

Appendix 1.3: Outline of Design/Study Report.

Appendix 1.4: Information flow details.

Notes.

References.

Chapter 2: Preparing Pro–Forma Financial Statements.

Accounting System.

Process of Financial Analysis.

Financial Costs and Benefits.

Investment Costs.

Production Cost.

Operating, Factory Cost and Cost of Product Sold.

Financial Statements.

Appendix 2.1: Depreciation methods.

Appendix 2.2: Starting Inventory Balance.

Notes.

Chapter 3: Financial Indicators and Criteria.

Static Indicators.

Types of Static Indicators.

Financial Criteria for Investment Decisions.

Analysis of Joint Ventures.

Project of an Ongoing Enterprise.

Notes.

References.

Chapter 4: Financing the Project.

Capital structure.

Cost of Capital.

Notes.

References.

Chapter 5: the Economic Perspective.

Private sector.

Public sector.

General rationale for economic evaluation who needs it?

Macroeconomic View Impact on the National Economy.

Price Distortions.

Applicability and Scope.

Economic Pricing Principles20.

Shadow Prices of Primary Resources (National Parameters).

Conversion and Adjustment Factors.

Appendix 5.1: Costs and Benefits of ′Revenue Projects′.

Appendix 5.2: Global Pricing Framework Importable Input Foregone.

Notes.

References.

Chapter 6: Economic Cost – Benefit Analysis.

Adjustments for the wider domain.

Valuation at market prices.

Define the accounting unit (AU).

Value Added (VA).

Supplementary Indicators.

Notes.

References.

Chapter 7: Investment Decision under Uncertainty and Risk.

Forecasting.

Risk Dealing with Uncertainty.

Quantitative Risk Assessment.

Qualitative Risk Assessment.

Risk Management.

Risk Immunization for Financiers.

International Investors and Risk.

Appendix 7.1: Discrete probability analysis multivariate.

Notes.

References.

Chapter 8: Project Appraisal.

Macro–Micro Appraisal.

SWOT Analysis.

Stakeholder Perspectives.

Appraisal Report.

Caveats for the Appraiser.

Notes.

References.

Chapter 9: Implementation Planning and Budgeting.

Implementation Planning.

Project Management.

Conducting the Implementation Project.

Implementation Budget.

Appendix 9.1 Sample responsibility matrix for portion of project.

Appendix 9.2 Checklist of project implementation costs.

Notes.

About the Authors.

Index.

Lech Kurowski is an economist with over twenty–five years of experience in investment projects analysis. Currently a professor of economic analysis at the Wroc aw University of Economics in Wroc aw, Poland, he has performed investment studies and has served as analyst for investment proposals prepared by consulting companies for governments and private investors in over forty countries in Europe, Asia, and Africa.

David Sussman is an industrial engineer who has served as consultant to medium and small–scale enterprises and has conducted workshops and seminars throughout the world, particularly in Latin America. He was responsible for most of the important systems design and developed many of the concepts used in the investment project analysis program of the U.N. Industrial Development Organization. He has designed financial management systems in both the public and private sectors.