Evaluation of investment projects
Evaluation of investment projects
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Why is it important to carry out feasibility studies?
The main objective of this research is to precisely examine and determine whether the economic viability of a business or project is advisable, while at the same time identifying the availability of the resources necessary to establish and achieve the established objectives and goals. This research is made up of:
- Technical feasibility
- Financial feasibility
- Operational feasibility
- Financial viability
What purpose does the evaluation of investment projects have?
It helps us identify in detail the potential costs and benefits of a given project, supported by proven project delivery methods and various investments, we use it to identify the problems the project will face in any of the following situations:
- Installation of a plant that did not existÂ
- Creating a product to improve one that already existedÂ
- Installed capacity or creation of branches
- Replacement of machinery
What does an evaluation of investment projects reveal?
He Analysis of Financial Feasibility It allows understand the return of each product/service as well as of all the portfolio to improve investment decisions (or divestment) in the business, lto economic feasibility also provides an analysis comprehensive of costs of the project to conclude if the resources used should be optimized according to it expected, in the case of new projects investment, Financial viability allows us to know the break-even point to know when will amortize the investment, as well as the internal rate return for the project and the investor.
A analysis of Production feasibility provides information on the smallest unit sales, production and acquisition; you allows you to optimize the production process Through the reduction of costs, shortage or underutilization of raw Materials either teams, talso you It allows grasp in what cases is it necessary buy: rent further machines or hire more employees.
Investment Project Evaluation Stages
The evaluation of the investment project consists of the following steps: Execution of the list of projects, which takes into account all aspects included in planning, and then move on to the stage of review of the frame financial of the project, where the evaluation will examine the accounts and the allocated budget to the project, carry out market studies, analyze the project, the reaching of the request and its feasibility in it time, then the evaluator will analyze, if possible, the investment and bank loans of the project or partners, then it will analyze the budget of income and expenses and finally do Evaluation economical.
Investment project evaluation methods
- Sales projection
- Financial viability analysis
- Internal rate of return of the project VS the internal rate of return of the investor
- Breakeven
- Marginal contribution
- Initial investmentÂ
- Costs and margins
- return point
