SUBMITTED BY:-

SHAVI
MBA(IB)
16421405
 Project appraisal is the structured process of
assessing the viability of a project or
proposal. It involves calculating the
feasibility of the project before committing
resources to it. It is a tool that company’s
use for choosing the best project that would
help them to attain their goal. Project
appraisal often involves making comparison
between various options and this done by
making use of any decision technique or
economic appraisal technique.
 Assessment of a project in terms of its
economic, social and financial viability.
 Decide to accept or reject a Project.
 It is a tool to check the viability of a Project
proposal.
PROJECT APPRAISAL UNDER RISK
AND UNCERTANITY
MEANING:- Risk refers to the possibility that
some unfavourable event will occur. It is the
possibility of loss, injury, or exposure to
harm.
Risks may be classified into main groups:
(1) socio-economic or business risk and
(2) physical or pure risks.
Socio-Economic / Business
1. Economic risks
 Economic risks such as changes in price of
inputs and output inflation, recession,
depression and other economic conditions
which affect national income are primary
concerns of commercial producers.
2. Marketing risks
 Risks may also result from uncertainty in
demand, supply and prices.
Physical risks results from conditions of
nature, such as rain windstorms, clouds,
flooding, and drought. Other types of pure
risks are plant breakdowns, and failure of
safety and other devices. These risks
associated with physical or pure risks can be
managed to minimize their effects on
producers.
MEANING:-It is a situation in which the probability of an
outcome is not known. Uncertainty is a state of being
doubtful about future events, which cannot be
foreseen exactly.
Types of Uncertainity:
Price uncertainty: It is associated with the price of
products and input factors, such as price offish in a
market.
Yield uncertainty: The fluctuations in yield are
associated with weather conditions and incidence of
diseases and pests and the impact of new practices.
Technological uncertainty: Technological changes
influence production function and create conditions
of variability, which, in turn, lead to uncertainty.
 It
is a simple method which estimates the
length of the time required for an
investment to itself out; that is the number
of years required for a firm to cover its
original investment from the net cash
inflows.
FORMULA:-
Initial Investment
Payback Period =
Cash Inflow per Period
 Better than pay back period method.
 Considers earning of full project during its
economic time.
 Also known as return on investment (ROI).
 FORMULA:-

ROI= AVERAGE EARNING AFTER TAX

AVERAGE INVESTMENT
 CONSIDER TIME VALUE OF MONEY
 IT COMPARE RUPEE VALUE OF TODAY &
AFTER AYEAR
 CALCULATE BY PRESENT VALUE
 A project is accept if NPV>0 and rejected if
NPV<0.
 The internal rate of return of a project is the discount rate
that makes the net present value equal to zero. In other
words, internal rate of return is that rate of discount
which would equate the present value of cash out flows to
the present value of cash inflows.
 FORMULA:-
 Calculate ratio of present value of inflows
and outflows.
 Profitability ratio of project more than 1 is to
be selected.
 FORMULA:-

PI= Present value of cash inflows

Present value of cash outflows
THANKS