Project Planning Design and Appraisal

Describe the three discounted measures of project worth that are most commonly used in project analysis , showing the relationship between them . Illustrate your answer with numerical examples where appropriate

The three main discounted techniques used for the project analysis are the Net Present Value , the Internal Rate of Return and the Benefit-Cost Ratio

Net Present Value : This is the easiest method of discounted measure available for project analysis . The method calculates the NPV as the value after deducting the Present Value of the Project costs (PVC ) from the surplus gained from

the project benefit stream (PVB . So when the Present value of costs for a project are 40 ,204 .0 and the Present Value of Benefits are showing 40516 .0 , the Net Present Value of the project can be , 312 . NPV is a measure of an absolute value

Internal rate of return (IRR : This method can be said as the other side of the NPV method , as in Internal rate of return the discount rate is calculated to make the NPV value Zero . In a capital intensive project , IRR calculates the break-even rate of the investment for return . The Positive NPV in the IRR method indicates the favour to issue discounts and the negative NPV indicates the avoidance of discount as the capital cannot produce surplus to distribute

Benefit-Cost Ratio : These method asses the discounted value through a ratio obtained from by comparing the Present value of benefits with the present value of costs . When the discounted benefits are divided...