Financial Appraisal

Elaborated Analysis of Major project cost Elements: Include a breakdown of the major cost elements, i.e., capital expenditure (CAPEX), operating expenses and any other major costs. Talk about the reasoning of each cost component and any special considerations.

Achievability of Projected Income: Assess the achievability of the projecting income which consists of sales revenue, pricing strategy, and volume of sales. Any factors in the market, demand projections or competitive dynamics that are corroborating these projections should be discussed.

Raw Materials: Evaluate the sources, prices and sourcing plan of raw materials. Talk about the possible effect of supply variations or price changes..

Power & Fuel Cost: Evaluate power and fuel needs of the project, and its cost. Talk about efficiency and possible savings of energy
Employee and Other Overhead Costs: Assess the estimated labor and overhead costs. Talk about recruiting plans, pay plans, and any cost cutting plans.
Fixed and Variable Costs Analysis: Learn what is meant by a fixed and variable cost and what percentage they represent of the entire cost structure. Demonstrate the impact that production volume changes can have on costs.

Viability of the Project: Review project viability on financial measurements i.e. Net Present Value (NPV), Internal Rate of Return (IRR) and Debt Service Coverage Ratio (DSCR). Write about the assumption and discount rate applied in such calculations.

Conduct sensitivity analysis to determine how the changes in the main variables will influence the project financial performance. Examples of scenarios would include the shift in the selling price, the utilization levels of the capacity, the average raw material prices, and the interest rates.

Compare the most important projected financial parameters of the project to other similar entities or projects in the industry. Compare the financial performance of the project with the industry standards and determine the areas where the project will be doing better or worse than the industry.