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FINANCIAL ANALYSIS The financial analysis of the project was aimed at assessing the financial effects the project will have on farmers, public and private firms, government operating agencies (CRBDA) and anybody else who may be participating in it. It established the magnitude of costs of capital investments and production and weighed these against future financial benefits of the project. The following group of data from various sources was utilized to carry out benefit cost analysis for the project. 1. Administrative Cost; this is not chargeable to construction or Maintenance. Under this head the following are inclusive; Personnel Services Equipment and construction operations Office including building Insurance and other overhead costs. Irrigation Operation; Under this head the following items are included 3. Irrigation operation capital cost Equipment and building cost Fuel services Office requirement and services Insurance and other overhead cost

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Irrigation Maintenance cost; under this head following items are included Equipment Material Office and services Personnel services Insurance and other overhead charges Initial Cost; this comprised of up to date cost of land acquisition, compensation money, legal and administrative cost of construction of the scheme. Production cost; this comprise of the production cost of the individual crop

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Taking into account all the forms of cost involve, the viability or worthiness of the project that takes the timing of costs and benefits into account was measured, using the following indicators:

Net Present Value (NPV) Benefit/Cost (B/C) ratio Internal Rate of Return (IRR)

Net Present Value (NPV) The NPV is defined as the present worth of the net benefits (= benefits - costs) of the project. In the financial analysis, it is the present value of the net income stream accruing to the entity from whose point of view the analysis is being undertaken. Net benefits for the Aya irrigation scheme are shown Table 7. The selection criterion is thus NPV > 0. The NPV being an absolute measure, it does not give us any idea of the relative return of capital. It only tells us that all the projects with a positive NPV are profitable to initiate. Benefit/Cost (B/C) ratio The B/C ratio is the ratio between the Present Value (PV) of the benefit stream and the PV of the cost stream. It thus is an indication of how much the benefits exceed the costs. The selection criterion is thus B/C ratio > 1. Internal Rate of Return (IRR) The IRR is the rate of discount at which the total discounted cash benefits expected from the project equal the total discounted cash costs required by the investments. It is the rate that makes the NPV of the project equal to zero. The IRR can also be described as the rate of growth of an investment. This rate can be interpreted as the highest rate of interest an investor could pay, without losing money, if all the funds to finance the investment are borrowed and if the debt service (loan and accrued interest) was repaid by use of cash proceeds from the investment. The investment criterion is that the IRR should be greater than the discount rate. The following formula is used: IRR = ldr +(
( ) )

Where: IRR = Internal Rate of Return hdr = Higher discount rate ldr = Lower discount rate NPV = Net Present Value

From Table 7, the calculated project worthiness indicators (NPV, B/C ratio, IRR) show that the irrigation project as an investment is viable, which means that the investors are likely to get their money back and earn a fair return on top