EDP Notes

There are mainly seven aspects of project appraisal. They are:
1) Technical Feasibility: - It includes detailed estimates of the goods and services needed
for the project- land, machineries and equipments, raw material, trained labour etc. Location of the
project should be given special attention in relevance to technical feasibility. Another important
feature of technical feasibility relates the type of technology to be adopted for the project.
2) Economic Viability: - It is a study on capital cost, working capital, operating cost and
revenue, marketing, profitability etc. It also includes an appraisal of anticipated demand and
capacity utilization.
3) Commercial Viability: - T he appraisal of commercial aspects of a project involves a
study of the proposed arrangements for the purchase of raw materials and sale of finished products
etc. The main objective is to see that the proposed arrangements will ensure that the best value is
obtained for money spent.
4) Financial Feasibility:- It seeks to ascertain whether the project is financially viable
regarding the cost of project, cost of production and profitability, cash flow estimate and Performa
balance sheet. It will study whether the project will satisfy the return expectations of those who
provide the capital.

5) Managerial Competence: - Proper evaluation of managerial ability and talent is an
essential part of appraisal of a project. While evaluating the management, back ground of the
entrepreneur and promoters, their character and integrity, past record of promotion etc are studied.
6) Social Consideration: - The social objective of a project are also considered keeping in
view of the interests of the public. The projects which offers large employment potential, which are
located in backward areas or projects which will stimulate small industries or growth of ancillary
industries are given special consideration.
7) Ecological Analysis: - It is necessary to ensure whether the project causes pollution,
whether it disturbs the equilibrium of ecology and whether it fits into the environment.
8) Project Risk Analysis:- Project face a host of risk such as project completion risk,
resource risk, price risk, technology risk, political risk, interest rate risk etc. An analysis of such
risks is helpful in the appraisal of a project.