Investment project analysis

Investment Project Analysis

The Outline and
Acknowledgement
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.

Chiba Univ. N. Suzuki

Module 1, Session 1: Overview

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1


Development Process
Identification

Preparation of
pre-investment
studies

Investment
opportunities

Problem

solving

Government
Policy

Key elements: Market, Technical, Financial
and Economic Analysis

Appraisal

Implementation

Commercial
Profitability

National Economic
Viability

Detailed Engineering
Implementation

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Who are we?

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2

Project Development Cycle
Support studies
Identification

Opportunity
Studies
No

Feasibility
Studies

Pre-feasibility
Studies

yes
No

Appraisal &
Decision
No
Yes

Management

Construction/
Supervision

Engineering

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Who does the work?
Consultants
Government officials
Plant engineers
Bankers
Foreign JV companies

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3


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
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Cokes Plant

Macadamia Nuts

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4


A Monumental
Building

A Bridge between
S & L City

Why do these project happen?

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Pre-investment Studies
Opportunity studies

Market analysis
Technical analysis

Pre-feasibility studies
Feasibility studies

Financial and economic
analysis

Support studies:
•Sub-sector studies
•Technology studies

•Location
•Raw materials
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5


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.

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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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6

Target Precision of Pre-investment
Studies

+30
-

Opportunity Study
+20
-

+10%
Feasibility Study
Pre-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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7


See you in the next class

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Module 1, Session 2: Project
Identification and Preparation

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8