Project Evaluation

Project Evaluation
Introduction
Why evaluate?
To decide a project feasibility
To assess the level of risk
What is evaluated
Strategic issues
technical issues
economic issues
environmental issues
Project Types
Type 2 Projects
Product
development
Water
Type 4 Projects
Research and
Organisational
change
Air
Type 1 Projects
Engineering
Earth
Type 3 Projects
Systems
Development
Fire
Yes No
Project goals well defined
No
Yes
Works
methods
well defined
Greater chance
of success
Greater chance
of failure
Developed by
Turner and Cochrane
Project Types

In small groups discuss
How would you the project management style
vary for the different project types
Project Types
(elements)
Yes No
Project goals well defined
No
Yes
Works
methods
well defined
Top-down
approach
Bottom-up
approach
Type 2 Projects
Multi-disciplinary
teams
Brainstorm
Define techniques
Coach
Type 4 Projects
Inspirational/
creative
negotiation
Strategy definition
Communication
Eagle
Type 1 Projects
Specialist
implementers
Known techniques
Defined
organisation
Conductor
Type 3 Projects
Facilitator
Informed
negotiation
Agree goals
Sculptor
Developed by
Turner and Cochrane
Project Types

In small groups discuss
How would you vary the project selection criteria
for the different project types
Strategic Issues
Some typical strategic issues
some or all of which may apply

Objectives
What will the project contribute to the
organisations objectives
for example - may it contribute to increasing market
share

Strategic Issues
Business plan
Does the proposed project fit into the
organisations Business plan
if yes then in which way
How and will the proposed project fit with
existing systems
will it replace any
How will it fit with proposed future developments

Strategic Issues
Organisation structure (internal projects)
Will the project affect the current organisation
structure
Management information system {MIS}
(internal projects)
Will it complement or enhance an existing MIS
Personnel
Skill base, manning, availability, development

Technical Issues

Is it really understood what is required
technically
If no can this be resolved before the start of the
project.

Will any lack of understanding cause changes to
the project as it progress

Technical Issues


What functionality is require
Can the design/build accommodate this

Is it within the bounds of current available,
knowledge and skills and technology

Technical Issues

Do organisation/company strategic issues
place limitations on technical solutions that
can be considered

Cost constraints on technical solutions

Economic Issues

Cost-benefit analysis
Cash flow forecasting
Cost-benefit evaluation techniques
Risk analysis

Cost-Benefit Analysis
The comparison of estimated costs and
benefits

The general question is
will income and other benefits exceed costs
how do the various project options compare

Cost-Benefit Analysis
Analysis is in two stages
Identify and estimate all costs and benefits
Convert costs and benefits into common units
normally monetary units
Costs to be estimated
Development costs
Set-up costs
Operational costs

Cost-Benefit Analysis
Benefits to be estimated
direct benefits
e.g. reduction in staffing levels
Assessable indirect benefits
e.g. reduction in operator errors
Intangible benefits
e.g. improved working conditions

Cash Flow Forecasting
Provides an estimate of the expenditure
incurred and the income generated
throughout the life of the product.
It is time related
It will provide an indication of when positive
and negative cash flow will occur

Cash Flow Forecasting

Cash Flow Forecasting
It is not easy to get things right due to the
number of uncertainties
The longer the whole life of the product the
more uncertain is the forecast
The increase in aliancing contracts and PPFI
have increase the need for improving the
accuracy of cash flow forecasting

Project Selection

In small groups discuss

What are the sort of things would have been
considered when deciding to expand the Jomo
Kenyatta International Airport to include a
second Runway, an expanded international
arrivals terminal, two extra departure terminals
and an extra cargo terminal, as a means of
increasing capacity.

Project Selection
JKIA Expansion - things to consider
Capital costs
Operational costs
Direct benefits
Other benefits
Feasibility
Associated risks
Social and political issues
All the above could feed into a whole life analysis
Cost-Benefit Evaluation
Techniques

Five techniques will be explored, they are:
Net profit
Payback period
Return on investment (ROI)
Net present value
Internal rate of return
Cost-Benefit Evaluation
Techniques
Net Profit

NP = total income - total cost

A very simple technique
Does not consider time element
Of limited use when used in isolation

Cost-Benefit Evaluation
Techniques
Net Profit

Year Project 1 Project 2 Project 3 Project 4
0 -100,000 -1,000,000 -100,000 -120,000
1 10,000 200.000 30,000 30,000
2 10,000 200.000 30,000 30,000
3 10,000 200.000 30,000 30,000
4 20,000 200.000 30,000 30,000
5 100,000 300.000 30,000 75,000
Net Profit 50,000 100,000 50,000 75,000

Cost-Benefit Evaluation
Techniques
Payback period
Time taken to break even
i.e. payback initial investment
Projects with short payback periods are
preferred nowadays
Does not consider income or expenditure after
break even point is reached

Cost-Benefit Evaluation
Techniques
Net profit + payback period
Year Project 1 Project 2 Project 3 Project 4
0 -100,000 -1,000,000 -100,000 -120,000
1 10,000 200.000 30,000 30,000
2 10,000 200.000 30,000 30,000
3 10,000 200.000 30,000 30,000
4 20,000 200.000 30,000 30,000
5 100,000 300.000 30,000 75,000
Net Profit 50,000 100,000 50,000 75,000

Cost-Benefit Evaluation
Techniques
Return on investment (ROI)
or Accounting rate of return (ARR)

Compares investment required with net
profitability

ROI= average annual profit / total investment x 100

ROI for project 1 = 10,000 / 100,000 x 100 = 10%

Cost-Benefit Evaluation
Techniques
Net profit + payback period + ROI
Year Project 1 Project 2 Project 3 Project 4
0 -100,000 -1,000,000 -100,000 -120,000
1 10,000 200.000 30,000 30,000
2 10,000 200.000 30,000 30,000
3 10,000 200.000 30,000 30,000
4 20,000 200.000 30,000 30,000
5 100,000 300.000 30,000 75,000
Net Profit 50,000 100,000 50,000 75,000

Cost-Benefit Evaluation
Techniques
Net profit + payback period + ROI
ROI is Project 1 = 10% Project 2 = 2%
Project 3 = 10% Project 4 = 12.5%
Year Project 1 Project 2 Project 3 Project 4
0 -100,000 -1,000,000 -100,000 -120,000
1 10,000 200.000 30,000 30,000
2 10,000 200.000 30,000 30,000
3 10,000 200.000 30,000 30,000
4 20,000 200.000 30,000 30,000
5 100,000 300.000 30,000 75,000
Net Profit 50,000 100,000 50,000 75,000

Cost-Benefit Evaluation
Techniques

ROI is simple to calculate
this makes it a popular method
But, it has two major problems
It does not consider the time element
The ROI gets compared to bank interest rates
this is not a valid measure as timing and compounding
of interest are no considered
This can lead to very misleading conclusions

Cost-Benefit Evaluation
Techniques

Net present value (NPV)
considers profitability
takes account of the time element
NPV discounts future cash flows
to current money values
it does this using a percentage rate called the discount
rate

Cost-Benefit Evaluation
Techniques
NPV a simple example using inflation

100 today = 100
100 today will be worth less in a 12 months time if
inflation is 5%
with 5% inflation 100 today = 95 in a years time
todays present value of 100 gained in 12 months
time would be worth only 95 if inflation is 5%
100 gained in 5 years = 78 today if 5% inflation

Cost-Benefit Evaluation
Techniques
NPV a simple example (cont.)
Another way of considering NPV is that it is the
reverse of looking at the value of money from the past.

i.e. with 5% inflation to have the same purchase value
of 100 5 years ago you would need to spend 128
today

NPV considers the value of money in the future with
today as the baseline

Cost-Benefit Evaluation
Techniques
The formula for net present values of future
cash flows is
present value = value in year t / (1+r)
t

where r is the discount expressed as a decimal value
and t is the number of years in the future
A simpler method is to use discount tables
present value = value in year t x discount factor


Cost-Benefit Evaluation
Techniques
Now calculate the NPV for each of the four
projects.
Year Project 1 Project 2 Project 3 Project 4
0 -100,000 -1,000,000 -100,000 -120,000
1 10,000 200.000 30,000 30,000
2 10,000 200.000 30,000 30,000
3 10,000 200.000 30,000 30,000
4 20,000 200.000 30,000 30,000
5 100,000 300.000 30,000 75,000
Net Profit 50,000 100,000 50,000 75,000

Cost-Benefit Evaluation
Techniques
Assuming a 10% discount rate, below is the NPV for
project 1. Calculate the NPV for projects 2, 3 & 4.

Year Project 1
cash flow
()
Discount
factor @
10%
Discounted
cash flow
()
0 -100,000 1.0000 -100,000
1 10,000 0.9091 9,091
2 10,000 0.8264 8,264
3 10,000 0.7513 7,513
4 20,000 0.6830 13,660
5 100,000 0.6209 62,090
Net Profit 50,000 NPV: 618
Cost-Benefit Evaluation
Techniques
The NPV for all four projects.

Year Discount
factor @
10%


Project 1
Discounted

Project 2
Cash flo

Project 3
w ()

Project 4
0 1.0000 -100,000 -1,000,000 -100,000 -120,000
1 0.9091 9,091 181,820 27,273 27,273
2 0.8264 8,264 165,280 24,792 24,792
3 0.7513 7,513 150,260 22,539 22,539
4 0.6830 13,660 136,600 20,490 20,490
5 0.6209 62,090 186,270 18,627 46,568

NPV 618 -179,770 13,721 21,662

Cost-Benefit Evaluation
Techniques

Net present value disadvantages
may not be comparable to
other investments
cost of borrowing capital

a solution to this is to utilise Internal Rate of
Return

Cost-Benefit Evaluation
Techniques

Internal rate of return (IRR)
provides a profitability measure as a percentage
return
this directly comparable to interest rate
IRR is used in conjunction with NPV
Cost-Benefit Evaluation
Techniques
IRR is the discount rate when the NPV is 0
e.g. in project 1 the IRR is just over 10%

Calculation of IRR is trail and error when
done by hand
IRR can also be estimated using a graphical
method
Spreadsheet can often calculate IRR
Cost-Benefit Evaluation
Techniques
Using the graphical method

-20000
-15000
-10000
-5000
0
5000
10000
15000
20000
25000
5 15
Discount rate (%)
N
e
t

P
r
e
s
e
n
t

V
a
l
u
e

(
N
P
V
)
Cost-Benefit Evaluation
Techniques


NPV and IRR are not the complete answer
funding, future earning prediction, organisation
context, etc. must all be taken into consideration

Sustainability
Why consider it

How has it affected project appraisal and
design

The use of Through Life Costing and Whole
Life Costing
Whole Life Costing
What are the various things you think may
have to be considered when developing a
whole life costing model of a project.
The model would need to consider things from
initial conception to disposal.
Whole Life Costing
Annual Net Cash Flows
NPV
Capital
Costs
Environ-
mental
Costs
Major
Update
Costs
Down-
time
Costs
Operating
Costs
Initial
Spares
Costs
Energy
Costs
M & R
Costs
Disposal
Costs
Positive Cash Flows
Negative Cash Flows
Grants
and
Subsidies
Sales Revenue
Product Price
Asset
Sales
Tax
Credits
Product Throughput
Whole Life Costing
Annual Net Cash Flows
Product Throughput Product Price
Asset
Sales
Sales Revenue
Grants
and
Subsidies
Tax
Credits
Positive Cash Flows Typical Commercial
Negative Cash Flows
Whole Life Costing
Annual Net Cash Flows
Treasury
Asset
Sales
Positive Cash Flows - Governmental
Negative Cash Flows
Whole Life Costing
Annual Net Cash Flows
NPV
Positive Cash Flows Private Finance
Negative Cash Flows
Asset Availability Asset Lease (Treasury)
Asset
Sales
Lease Revenue
Grants
and
Subsidies
Tax
Credits
Environ-
mental
Costs
Major
Update
Costs
Down-
time
Costs
Capital
Costs
Operating
Costs
Energy
Costs
M & R
Costs
Disposal
Costs
Initial
Spares
Costs
49
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
The use of Life Cycle Models within the
Marine Industry
50
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Ship Designers approach as reported to me
Virtually no life cycle analysis done at design stage
Even less whole life modelling done

Most life cycle analysis is carried out on naval vessels

Most life cycle modelling appears to be driven by legislation

A major owner/operator has recently set up a research project to
look at using life cycle and whole life modelling in the future.

Overall there appears to be less being done voluntarily now than in
2005
51
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Ship Owners approach as reported to me
Where owner is not operator
Low cost is prime driver
Will pay for no more than current IMO law requires in respect of
environmental issues

Green design is rarely asked for
As cost and bottom line is what matters not the environment

The IMO Green Passport
Being used as a way of demonstrating Corporate Social Responsibility
and a positive approach to the environment, without the need to really
do much for the environment
52
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
The Green Passport

53
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers

Statutory
Commercial
Operational
Non-operational

54
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


55
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


56
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


57
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


58
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


59
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


60
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


61
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


62
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


63
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


64
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


65
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


66
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


67
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


68
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Environmental Impact and Life Cycle Drivers


69
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Financial Concerns approach as reported to me
Commercial pressures drive what is done or rather what is not done!
Bottom line is the main driver

Sometimes it can make sense to built to future regulations and so
reduce update costs

Regulators have reduced scantling as a way a way meeting
sustainability requirements
Reduces lightweight and increase deadweight for a given hull
Reduces cost as less material used
But may lead to foundering if rigorous maintenance regime not used
70
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
Financial Concerns approach as reported to the authors
Sometimes though a design can lead to:
Lower operating cost
More profit
Environmentally friendly

An example is shown in the video in the next slide
71
The Efficacy and Acceptance of Environmental Impact and Life Cycle Models within the
design sector of the marine industry, Ridley and Hutchinson. The Environmentally Friendly
Ship, The Royal Institution of Naval Architects, London, UK, 28-29 February 2012,
The Maersk Triple E
A ship that will have
Lower operating cost
More profit
And be environmentally friendly
ENGM91 ENVIRONMENTAL and LIFE CYCLE COST DRIVERS
Whole Life Analysis and Costing
Annual Net Cash Flows
DCF
Calc
Capital
Costs
Commis-
sioning
Costs
Operating
Costs
Energy
Costs
M & R
Costs
Update
Costs
Sustain-
ability
Costs
Down-
time
Costs
Disposal
Costs
Residual
Value
Grants
and
Subsidies
Fiscal and
Tax
Allowances

Revenue
OUTLINE
DESIGN
MODEL

Performance
Sizing
Layout
MCDM
Factors
Infrastructure
Costs
Efficiency, Cons
Fuel Price
Availability
Revenue Loss
Emissions
Legislation
Manufacturing
Process
Procurement
Process
Manning
Consumables
Spares
Reliability
Design Margins
Midlife Update
Decommissioning
Clean-up
REVISE
DESIGN
Product
Price
Life
Cycle
Process
Comparisons
and Design
Decisions
Equipment
selection
Performance Change
Cost Escalation
Market Changes
Risk Factors
Product
Output
ENGM91 ENVIRONMENTAL and LIFE CYCLE COST DRIVERS
Whole Life Analysis and Costing
Annual Net Cash Flows
OUTLINE
DESIGN
MODEL

Performance
Sizing
Layout
Residual
Value
Grants
and
Subsidies
Fiscal and
Tax
Allowances

Revenue
Product
Price
Product
Output
ENGM91 ENVIRONMENTAL and LIFE CYCLE COST DRIVERS
Whole Life Analysis and Costing
Annual Net Cash Flows
OUTLINE
DESIGN
MODEL

Performance
Sizing
Layout
Residual
Value
Treasury
ENGM91 ENVIRONMENTAL and LIFE CYCLE COST DRIVERS
Whole Life Analysis and Costing
Annual Net Cash Flows
DCF
Calc
Capital
Costs
Commis-
sioning
Costs
Operating
Costs
Energy
Costs
M & R
Costs
Update
Costs
Sustain-
ability
Costs
Down-
time
Costs
Disposal
Costs
OUTLINE
DESIGN
MODEL

Performance
Sizing
Layout
MCDM
Factors
Infrastructure
Costs
Efficiency, Cons
Fuel Price
Availability
Revenue Loss
Emissions
Legislation
Manufacturing
Process
Procurement
Process
Manning
Consumables
Spares
Reliability
Design Margins
Midlife Update
Decommissioning
Clean-up
REVISE
DESIGN
Life
Cycle
Process
Comparisons
and Design
Decisions
Equipment
selection
Performance Change
Cost Escalation
Market Changes
Risk Factors
Residual
Value
Grants
and
Subsidies
Fiscal and
Tax
Allowances
Lease
Revenue
Asset
Lease
Asset
Availability
Environmental Impact
Assessment
Why carry out an environmental impact
assessment (EIA)?
They are mandatory within the EU for certain
projects
To identify environmental issues
To ensure that various laws are not broken
To provide pointers towards a way forward


What is a EIA

Is a procedure that must be followed before
development consent will be given for certain
project

Enables environmental factors to be given due
consideration

Should allow environmental consideration to
form part of design development
What is a EIA

It provides a guide for planning authorities to
assist them in making better decision from an
environmental perspective

It can help inform the publics concerns about a
project
as these concern are often to do with a projects effect
on the local environment
When is an EIA needed
Schedule 1 projects, for which EIA is
required in every case
e.g.
Crude-oil refineries
Power station over 300 Mw
Any nuclear power stations or nuclear reactor
Works for the initial smelting of cast-iron and steel
Trading ports, piers for loading and unloading
connected to land and outside ports (excluding ferry
piers) which can take vessels over 1350 tonnes
When is an EIA needed
Schedule 2 projects, for which EIA is
required only if the particular project in
question is judged likely to give rise to
significant environmental effects
The list of project is very comprehensive
The important point is what is significant
environmental effects for example
Sites of Special Scientific Interest
Areas of Outstanding Natural Beauty
When is an EIA needed
Schedule 2 projects cont.
How is significance assessed
General guidance on how to assess `significance' is
contained in DETR Circular 2/99
Circular suggests three main criteria of significance:
1. major developments which are of more than local
importance

2. developments which are proposed for particularly
environmentally sensitive or vulnerable location

3. developments with unusually complex and potentially
hazardous environmental effects
Environmental
Statement
Preparing an environmental statement and the
planning procedures
Preliminary consultations
Content of the environmental statement
Statutory and other consultees; the general public
Techniques of assessment; sources of advice
Submission of environmental statement with planning application
Handling by the planning authority
Requests for further information
Determination of application
Appeals and call-ins
Procedural stages
Environmental Impact
Assessment
Remember
What it is
When it is need
The importance of the environmental statement

Risk Analysis

All projects involve some form of risk
Project evaluation has risks associated with it
Risk Identification
potential risks are identified, evaluated and
ranked
Various analysis techniques available
e.g. Monte Carlo simulation
Risk Analysis
Monte Carlo simulation (MCS)
Simulation an analytical method meant to
model real life scenarios
MCS utilises random numbers for deciding the
input variables
Numerous simulations (often several 1000) are
then performed utilising randomly generates
inputs
The result is a simulated model of the real life
system of interest.
Quantitative Risk Assessment predictions can happen ..
Risk Assessment
Concluding remarks
Project Evaluation

Strategic

Technical

Economic

Environmental

Risk considerations
NPV exercise
A four year financial project has net cash
flows of:
20,000, 25,000, 30,000 and 50,000 in
the next four years.
It will cost 75,000 to implement the project.
If the required rate of return is 0.2, conduct a
discounted cash flow calculation to
determine the NPV.