Course Summary:

This course covers techniques of financial analysis of investment expenditures as well as the economic and distributive appraisal of those projects. The course gives special consideration to cases in the developing world. Students will engage in a critical analysis of these tools and their role in the political economy of international development. The course will cover topics such as alternative planning strategies for conditions of uncertainty; organizations and project cycle management; the political environment; and interactions of clients and advisers, engineers, planners, policy analysts, and other professionals.

Course Objectives:

• Project cycle management, preconditions and assumptions, and its iterative structure.
• Alternative planning strategies for conditions of uncertainty.
• Organizational factors involved in developing new policies, choosing among alternatives, gaining acceptance, assuring implementation, and coping with unanticipated consequences.
• Political environment and the interactions of clients and advisers, engineers, planners, policy analysts, and other professionals.

Course Outline

I. Introduction

• Introduction to Project Evaluation and Course Overview
• The Development Planning Tradition
• The Project Cycle: Project Identification and Appraisal

II. Financial Appraisal

• Development of Financial Cash Flows for Project Evaluation: Investment Plan
• Development of Financial Cash Flows for Project Evaluation: Operating Plan, Analysis from Alternative Points of View
• Discounting and Alternative Investment Criteria
• Alternative Investment Criteria and Problems of Durability and Correction Procedures
• Scale, Timing, and Interdependencies in a Project - 1
• Scale, Timing, and Interdependencies in a Project - 2
• Forecasting and the Treatment of Inflation - 1
• Forecasting and the Treatment of Inflation - 2
• Risk Analysis
• Project Financing and Risk Management
• Debrief Problem Set 4: Risk Analysis

III. Economic Appraisal and Cost-Effectiveness Analysis

• Overview of Economic Analysis of Investment Decisions
• Measurement of Economic Benefits and Costs in Undistorted Markets; with Sales Taxes and Subsidies
• Measurement of Economic Benefits and Costs in Distorted Markets: Taxes, Rationing, Monopolies
• Measurement of Economic Benefits and Costs in Distorted Markets: Tradables and Forex
• Economic Opportunity Cost of Capital: Discount Rates
• Cost-Effectiveness Analysis

IV. Critical Analysis of Quantitative Appraisal Techniques

• Social-Distributive Appraisal of Projects
• Institutional Dimensions: Local Politics and Capacity - Project Implementation, Monitoring
• Institutional Dimensions of Project Appraisal: the Funders
• Project Appraisal and Project Evaluation
• Rational Analysis in the Field
• Participation in Development Projects
• Projects in Practice