Investment project analysis

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Chiba Univ N Suzuki

Investment Project Analysis

The Investment Project Analysis Course consists of 4 modules covering (1) Overview, (2) Market Analysis, (3)

Technical Analysis, and (4) Financial Analysis, which are divided into 15 Sessions These slide materials are

prepared on the basis of the lecture’s working experience with UNIDO and teaching materials used in the technical

cooperation projects and in the process of assisting in preparation of UNIDO Investment Project Preparation and

Appraisal teaching materials The lecture’s appreciation thus goes to UNIDO for having provided the lecture with

extended experience in the field of investment project preparation and appraisal

The Outline and

Acknowledgement

Chiba Univ N Suzuki

Module 1, Session 1: Overview

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Development Process

Identification

Appraisal

Implementation

Preparation of

pre-investment

studies

Investment opportunities

Problem solving

Government Policy

Key elements: Market, Technical, Financial and Economic Analysis

Commercial Profitability National Economic Viability

Detailed Engineering Implementation

Who are we?

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Project Development Cycle

Support studies

Identification Opportunity

Studies

yes No

Pre-feasibility Studies

No

Feasibility Studies

Appraisal &

Decision No

Yes Engineering

Construction/

Supervision Management

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Who does the work?

Consultants

Government officials

Plant engineers

Bankers

Foreign JV companies

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Any Risks of Failure in pre-investment

studies –examples

A Steel Plant – miscalculates impurity of

cokes

A macadamia nuts plantation and roasting

plant overestimated the international market

demand

A traditional monumental building that

neglect the authenticity of the cultural

heritage

A Bridge with an unnecessary shape

Cokes Plant Macadamia Nuts

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A Monumental A Bridge between

Why do these project happen?

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Pre-investment Studies

Opportunity studies

Pre-feasibility studies

Feasibility studies

Support studies:

•Sub-sector studies

•Technology studies

•Location

•Raw materials

Market analysis Technical analysis Financial and economic analysis

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Characteristics of Opportunity study

Refinement of project ideas

Preliminary evaluation of alternative approaches

Preliminary assessment of strength and weakness of

the project idea.

Sketchy,

Forecasting and analyzing readily available information,

Quick decision-making requirement

Characteristics of Feasibility Study

Clear project concept

Comprehensive project design

Reliable Information on markets and

technology

Quantified prediction of performance

Defined capital structure

Selection Criteria

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Target Precision of Pre-investment

Studies

+ 10%

-+20

-+30

- Opportunity Study

Pre-feasibility Study Feasibility Study

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Cost Range of Pre-investment Studies

An example of a cost range for a large scale

project: a proportion of the total investment costs

– Opportunity studies: 0.1-0.3 %

– Pre-feasibility studies: 0.5-0.7 %

– Feasibility studies: 0.5 -1.0%

No rules exist: See the examples of feasibility studies

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See you in the next class

Module 1, Session 2: Project

Identification and Preparation