Capital available to provide assets is always limited, and subject to many competing demands. Regardless of whether funds are provided by the public or the private sector, careful analysis and evaluation of capital projects is essential if that scarce capital is to be wisely allocated.
There are two main perspectives from which this analysis and evaluation may be undertaken:
- An economic perspective, in which the focus is on the overall impact on the material well-being of the society as a whole
- A financial perspective, in which the focus is on the monetary return to the proponent of the project.
Although there is considerable common ground in the techniques that are applied in undertaking these two forms of analysis, they are distinctly different.
It is also important to distinguish between economic evaluation and economic impact analysis. Economic evaluation is normative: it is designed to assess whether or not a project will, on balance, improve economic welfare. Economic impact analysis is descriptive: it is intended to describe the effect that a project will have on certain measures of economic activity, but provides no direct guidance on whether or not a project is worthwhile.
Our consultants have very wide experience in project evaluation
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