EX :

Timber bridge

steel bridge

Ini al inv cost

500,000

700,000

Opera ng cost

30,000

5000

Project life

15 years

(OMR )

30 years

He didnt tell me anything about revenue because rev is the same *achieve same target

Determine which has the least overall cost ?

Present worth timber (dis total worth timber )
a) Ini al cost = 500,000
b) P.V (OMR ) 30,000 * ( USPWF )
USPWF
PWF)
TO determine uspwf &pwf u must know i

c)

30,000 *11.2577 = 337731

Present value of renewal = 50,000 *PWF
500,000 *.31524 = 157,626

Present worth of total cost = a+b+c = $ 995,351

Present worth of total cost for steel bridge

a) Ini al cost = 700,000

b) Present worth of OMR cost = 5000 (Uspwf )
= 5000 *11.2577 = 56288
Present worth of total cost = a+b = 756288

Present cost of steel bridge

a) Ini al cost = 700,000
b) Present value (OMR) 5000 ( uspwf ) 30
= 5000 *11.2577
= 56,288
c) Present worth of total cost = a+b = 756,288
d) Result : present worth of total cost for timber greater than its value for steel bridge
So steel bridge more preferable than timber

(ch 6 )

1) Commercial feasibility study financial appraisal and private feasibility study

2) National feasibility study (economic appraisal )

On exam we ask to make F.ST

What are the diff between commercial appraisal &financial appraisal ?
Notes
1) At financial : all items of benefit and cost applied to M.P
Economic : all items of B&C applied to S.P
2) at financial :personal externalities are not included
At economic : it should included -ve externalities or +ve externalities

3) at financial : any item related to loans (loan value ,interest ,installment ) should
include
at economic : should exclude but if loan come from foreign include In commercial and
economic
4) any item related to government intervention and price transfer ( subsidies , tax )
should exclude from social study

EX 2 ( hand of by dr s3ed )
Part of ini al inv cost nanced by loans 600,000 &equity by 200,000
Interest rate 10% of balance
Amor za on of loans through 3 equal installment
Determine NPW of proposed project in both financial and economic analysis
*Use NPW of proposed project in both financial and economic analysis
*use NPW to determine if project accepted or rejected from private point view , eco
view

1st start with loan table

Calculate Interest = 1) 600,000 * 10 % = 60,000
2)600,000 200,000 ( repay of loan ) *10 % = 40,000
And same in 3,4 year

Note : in income st interest rate should deduct from gross profit or gross income for tax
purpose
Inc st should not include loan value , installment of loan
Inc st (social ) canceled interest ,tax &depreciation for tax purpose only not deduct

Cash in cash out statement : initial inv cost at the beg of first year/\; put it int the first year
(0 year )
Loan value &installment cost take consideration here

Sol: in the sheet

Note :
T.1 = tax rate *tax base = 25% * prot
profit = T.R - operating cost interest depreciation
correct PWF to 9%

NPW
1)
2)
3)
4)

ini al inv 800,000

R1 , R2 ,R3,R4 408,000
C1 100+60 ,C2 100 +40 ,C3 100 +20 C4 100 + 0 COST + INTEREST
NET REV before tax
1) R1- (c1+ i 1 ) = 248,000 - 12,000 (from table ) = 236 ,000 ( NR a er tax)
The same step in 2,3,4
5) Dis factor : from table
6) Present value of NRAT *FWF
7) NPW = 6-1

*H.W ( DETERMINE ) : 1) P.I

2) BCR

3) NPV FROM SOCIETY POINT VIEW : exclude tax

Steps to do economic appraisal

1)
2)
3)
4)

Social benefit = private benefit + external benefit

Social cost = private cost +external cost
NSB = TSB TSC
DNSB = DTSB DTSC ( step 3 * discount factor )

Note :
All items in f.st ( MP ) (OFFICIAL EXCHANGE RATE )
All items in eco st ( S.P ) that happened in competitive market

Exam :
1) Salaries paid to skilled labor : SP = MP
2) Salaries price to unskilled labor s.p <Mp OR said . ( S.P 50 % Mp )
3) Official exchange rate ( OCR ) is determined by government over value of EGY pound
$

Value of export
MP = 7$ ( 1 POUND )
700,000
BUT in fact S.P = 80,000 ( gain at SP )

Value of import
At MP paid 700,000

At S.P paid 80,000 ( loss at SP )