文档介绍：6. Economic Evaluation of Facility Investments
Project Life Cycle and Economic Feasibility
Facility investment decisions represent mitments of corporate resources and have serious consequences on the profitability and financial stability of a corporation. In the public sector, such decisions also affect the viability of facility investment programs and the credibility of the agency in charge of the programs. It is important to evaluate facilities rationally with regard to both the economic feasibility of individual projects and the benefits of alternative and mutually exclusive projects.
This chapter will present an overview of the decision process for economic evaluation of facilities with regard to the project life cycle. The cycle begins with the initial conception of the project and continues though planning, design, procurement, construction, start-up, operation and maintenance. It ends with the disposal of a facility when it is no longer productive or useful. Four major aspects of economic evaluation will be examined:
The basic concepts of facility investment evaluation, including time preference for consumption, opportunity cost, minimum attractive rate of return, cash flows over the planning horizon and profit measures.
Methods of economic evaluation, including present value method, the equivalent uniform annual value method, the benefit-cost ratio method, and the internal rate of return method.
Factors affecting cash flows, including depreciation and tax effects, price level changes, and treatment of risk and uncertainty.
Effects of different methods of financing on the selection of projects, including types of financing and risk, public policies on regulation and subsidies, the effects of project financial planning, and the interaction between operational and financial planning.
It is important to distinguish between the economic evaluation of alternative physical facilities and the evaluation of alternative financing plans for a projec