DEV7041-B Project Finance and Appraisal
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Division of Peace Studies and International Development
School of Social Sciences
POSTGRADUATE PROGRAMME 2021/22
|Module Title:||Project Finance and Appraisal||Assignment Number and Weighting||Individual Coursework. This counts for 60% of your module mark|
|Module Code:||DEV7041-B||Assignment Title||SDG Business Case- Nature based solution projects|
|Release Date:||17/06/2022||Module Leader||Dr Ambi Ambituuni|
|Submission Date/Time:||In July- Date TBC||Total wordcount- Including figures and tables and references||2000|
|Submission Time and Place:||Submission through Turnitin ONLY|
|Module learning outcomes being assessed|
|01. Demonstrate an advanced understanding of key concepts, principles and practice of project finance and appraisal in the development context;02. Demonstrate an advanced knowledge of the estimation of project costs and benefits and developing project cashflows in a variety of sector contexts; 03. Demonstrate an advanced understanding of how to interpret appropriate decision criteria for the selection of projects in a variety of project contexts; 04. Demonstrate how to prepare and interpret a project financing plan including loan repayment scheduling; 05. Understand the concept of profitability and how to calculate a project Income Statement; 06. Demonstrate an advanced understanding of how to incorporate environmental and social externalities and linkages into the project decision making process.|
This assignment is an individual assignment. This assignment requires you to prepare a Business Case base on the following questions:
- Explain what approaches can be used to include environmental impacts in the appraisal of projects. Critically assess the strengths and limitations of these approaches (30 marks).
- Consider the following financial information for a new productive sector investment project:
- Investment Costs – The total project investment cost is $230,000. This is made up of Land & Buildings $50,000, Machinery & Equipment $130,000 Vehicles $40,000 and Furniture and Fittings $10,000. You should assume that land clearance, construction, installation of machinery and commissioning of plant takes 12 months. The machinery and equipment has a useful life of 5 years with a residual value of $6,250. The project product will run for 12 years after which it would be decommissioned. You should calculate depreciation of the other assets using appropriate rates and methods of your choice. You must clearly explain the methodology employed and justify any assumptions that you make.
- Production – It is estimated that the plant will produce 61,000 units in the first year of production and will grow at 10% per year for the two subsequent years. Following this there will be no subsequent growth in production.
- Sales – The sales price is $2.6 per unit.
- Operating Costs – the project will operate and produce goods for 12 years. Direct labour costs are approximately 40% of the unit selling price and direct materials are 20% of the unit selling price.
- Fixed Costs – are $6,000 for all operating years.
- Physical Working Capital Costs – should be based on the following assumptions:
- Materials – 1.5 month’s supply kept in stock
- Final goods – 1 month’s stock kept on average
- Financial Working Capital – should be estimated on the following assumptions:
- Accounts receivable – 2.5 months credit allowed before payment due
- Accounts payable – 1 month’s credit given on materials purchased
- Equity Capital – The initial assumption is that $110,000 owner’s equity is available to contribute to the financing of the project.
Using this information and drawing on project management literature, you should answer the following questions to determine whether or not this project acceptable:
(a) Prepare an annual statement of costs and benefits (pre-financing) and calculate the NPV and IRR to total capital for this investment. Interpret the results with reference to the relevant theoretical literature and determine if the project is acceptable or not (Assume a discount rate of 10%). (20% of marks)
(b) Construct a cashflow for financial planning and use it to prepare an adequate financing plan for the project. The Bank has indicated that loans for this type of project would be available at 12% per annum. You should explain each aspect and justify all assumptions made in drawing up the financing plan. You should also clearly set out and explain your loan scheduling method and calculations. Critically assess the relative merits of other alternative sources of liquidity and project finance which might be available to you as a project analyst when constructing a financial plan of this nature? (20% of marks)
(c) Calculate the Trading and Profit and Loss Account (Income Statement) for the project. Profits are taxable at 40% of annual profit and no tax holiday is available, but earlier losses can be offset against subsequent annual profits where applicable. Using appropriate ratios determine whether the level of profit is acceptable? What additional information you would need to make a more informed and critical assessment of the profitability of the project. (30% of marks)
NOTE that it is not enough to present your tables and calculations. You MUST engage with literature to support the application of analytical methods and interpretation of results. Failure to engage with credible literature will result in low marks or even a failed attempt.
DO NOT USE appendix for any element of this work
Given that this is a resit attempt you MUST not copy any inputs from your last attempt
Criteria for Assessment
This table details the weightings of the criteria by which your work will be assessed.
|Criteria||Proportion of overall module mark|
|(Q1) Environmental impacts in the appraisal of projects (Q2) Investment Project calculations||30% 70%|
The word count for this assignment is 2000 words. There will be a penalty of a deduction of 10% of the mark (after internal moderation) for work exceeding the word limit by 10% or more. Tables, figures, and the final references do not form the overall word count. You must state the number of words used on the front cover of the assignment.
How to submit your assessment
- Your coursework will be given a zero mark if you do not submit a copy through Canvas. Please take care to ensure that you have fully submitted your work. You must submit a single MS word document and all analysis you’ve done on Excel must be copied to the word document.
- All work submitted after the submission deadline without a valid and approved reason (see below) will be given a mark of zero.
- The University wants you to do your best. However, we know that sometimes events happen which mean that you cannot submit your coursework by the deadline – these events should be beyond your control and not easy to predict. If this happens, you can apply for an extension to your deadline for up to two weeks, or if you need longer, you can apply for a deferral, which takes you to the next assessment period (for example, to the resit period following the main Assessment Boards). You must apply before the deadline. You will find information about the process and what is or is not considered to be an event beyond your control on your portal
- Students MUST keep a copy and/or an electronic file of their assignment.
- Checks will be made on your work using anti-plagiarism software and approved plagiarism checking websites.
GUIDELINES AND BACKGROUND TO THIS ASSIGNMENT
As part of your study you will be involved in carrying out research and using this when writing up your coursework. It is important that you correctly acknowledge someone else’s writing, thoughts or ideas and that you do not attempt to pass this off as your own work. Doing so is known as plagiarism. It is not acceptable to copy from another source without acknowledging that it is someone else’s writing or thinking. This includes using paraphrasing as well as direct quotations. You are expected to correctly cite and reference the works of others. The Centre for Academic Writing provides documents to help you get this right. If you are unsure, please visit. You can also check your understanding of academic conduct by completing the Good Academic Practice quiz available on Moodle.
Canvas includes a plagiarism detection system and assessors are experienced enough to recognise plagiarism when it occurs. Copying another student’s work, using previous work of your own or copying large sections from a book or the internet are examples of plagiarism and carry serious consequences. Please familiarise yourself with the Reference Style (on Canvas) and use it correctly to avoid a case of plagiarism or cheating being brought. Again, if you are unsure, please contact your Personal Academic Tutor or a member of the course team