UNIVERSITY OF THESSALY - SCHOOL OF ENGINEERING
DEPARTMENT OF PLANNING AND REGIONAL DEVELOPMENT
Program of Postgraduate Studies in European Regional Development Studies
COURSE: PROJECT AND INVESTMENT APPRAISAL
TAUGHT BY: S. POLYZOS, A. PAPADOULIS
1. AIM OF COURSE
This course aims at contributing to the comprehension of Project and Investment
Appraisal fundamental principles and to the way these principles have been applied
on planning, programming and management of private and public Projects and
Investments. The course focuses on describing and analyzing Project and
Investment outlining, Project Objectives and Identification, Mathematical methods in
economics and Finance and Project Financial Analysis. Even, it outlines the
methodologies of evaluation approaches and project risk assessment and the
relationships between investment and regional or urban development are analyzed.
Moreover, project analysis by sector is presented and characteristic exercises and
case studies are discussed. The course contains a series of exercises regarding the
implementation of methodologies presented in the theoretical part. The exercises
target at simulating real-world problems and, thus special attention is paid to project
size issues. In this way, students can become effectively familiar with reality and get
the sense of project or investment appraisal, project programming and planning.
2. CONTENT OF COURSE
 Introduction to project and investment appraisal, description, concise description of
basic concepts concerning project and investment objectives, cost and benefit
analysis, direct and indirect cost and effects, project and investment life cycle 
Analysis of factors that influence investment decision  Analysis of fundamental
concepts on financial mathematics (cash flows, rate of return, interest rate,
compound interest, time value of money, present value, future value, annuities) 
Investment and project appraisal techniques (net present value NPV, benefit – cost
B/C ratio, internal rate of return IRR), project financing, estimation on investment
costs, total operating costs and revenues, estimation on loan repayments and loan
balance  Strategic analysis of Business Environment  Special Issues in project
appraisal, social discounting, economic performance indicators, cost-effectiveness
analysis, multi-criteria analysis, economic impact analysis  Direct positive impact of
an investment  Project and investment appraisal under uncertainty, sensitivity
analysis, probability distributions, expected present value, assessment of acceptable
levels of risk, decision tree  Indirect positive impact of an investment  Direct and
indirect negative impact  Break even point analysis, linear and non linear model of
break even point, sensitivity analysis  Project and investment analysis in the context
of urban and regional planning, case studies
1
3. SEMESTER LECTURE PROGRAM
Lecture/
Content of lecture
week
1
Introduction to project and investment appraisal and
course description
Lecturer
S. Polyzos
(a)
(b)
(c)
(d)
Definition of project and investment, examples
Definition of project and investment objectives
What is “cost and benefit analysis CBA”
Project analysis in a social and economic context,
economic, definition of financial and social evaluation.
(e) Direct and indirect cost and effects
(f) Project and investment life cycle
2
Introduction to the terms of the investment decision
A. Papadoulis
(a) Entrepreneurship of opportunity and necessity.
(b) Competition conditions.
3
Fundamental concepts of financial mathematics
S. Polyzos
(a) Definition of basic financial concepts, cash flows, rate
of return, interest rate, compound interest, time value of
money.
(b) Accumulated value
(c) Discount or Present value, future value
(d) Annuities
(e) Valuing annuities, annuity due, increasing annuities
4
Investment and project appraisal techniques
S. Polyzos
(a) Discounted cash flow techniques for investment
appraisal
(b) Definition and equation of net present value (NPV)
(c) Benefit – cost (B/C) ratio
(d) Internal rate of return (IRR), IRR decision rule,
problems with the IRR
(e) Project financing, cost of capital, sources of financing,
financial return on investment, financial sustainability,
financial return on capital
(f) Total investment costs, Total operating costs and
revenues
(g) Loan repayments, loan balance
5
Strategic analysis of Business Environment
A. Papadoulis
6
(a) External Environment.
(b) Internal Forces.
Special Issues in project appraisal
S. Polyzos
2
(a)
(b)
(c)
(d)
(e)
(f)
7
Monetisation of non-market impacts
Inclusion of indirect effects
Social discounting
Calculation of economic performance indicators
Cost-effectiveness analysis, multi-criteria analysis
Economic impact analysis
Direct positive impact of an investment
A. Papadoulis
(a) Economic impact.
(b) Socio – political impact.
(c) Fiscal impact.
8
Project and investment appraisal under risk
S. Polyzos
(a) Sensitivity analysis
(b) Probability distributions for critical variables, Expected
value, Standard deviation, Coefficient of variation
(c) Risk analysis
(d) Assessment of acceptable levels of risk
(e) Risk prevention, Risk-adjusted discount rate, Decision
tree
9
Indirect positive impact of an investment
A. Papadoulis
(a) Economic impact.
(b) Socio – political impact.
(c) Fiscal impact.
10
Direct and indirect negative impact
A. Papadoulis
(a) Socio – economic
(b) Political.
11
S. Polyzos
Break even point analysis
(a) Definition and mathematic formulae of break even
point, fixed cost, variable cost, total cost
(b) Linear model of break even point
(c) Non linear model of break even point
(d) Sensitivity analysis by using break even point
12
Project and investment analysis in Urban and Regional
Planning
(a) Investment and urban impact
(b) Investment and regional impact
(c) Evaluating investment impact in urban and regional
level
(d) Case studies
S. Polyzos
13
General review and discussion
S. Polyzos and
A. Papadoulis
3
4. ASSIGMENTS AND EXAMS
Student performance evaluation will be based on one take-home assignment (30% of
final grade) and a final exam (70% of final grade).
5. BIBLIOGRAPHY
Main textbook
European Commission, Directorate General Regional Policy (2008), Guide to Cost –
Benefit Analysis of investment projects, Structural Funds, Cohesion Fund and
Instrument for Pre-Accession, Final Report.
Additional textbooks
1
Asian Development Bank, (2002), Handbook of integrating risk analysis in
economic analysis of project, Manila.
2
Australian Transport Council, (2007), National Guidelines for Transport
System Management in Australia, Volume 2: Project Appraisal
3
Belli, P., Anderson, J. R., Barnum, H.N, Dixon, J. A., Tan, J-P, (2001),
Economic Analysis of Investment Operations, Analytical Tools and Practical
Applications, WBI, World Bank, Washington D.C.
4
Brown W. Brayan, (1972), Public investment criteria in cost-benefit analysis.
A thesis in economics submitted to the Gratuate Faculty of Texas Tech
University, AC 805, T3 1072, No 11, Cop. 2
Chvanov K., Okladnikov G., Plakhuta D., Stanyakin P., (2009), Issues in
Public Investment Evaluation, Public Policy Paper, St. Retersburg State
University.
5
6
Dixit, A.K., Pindyck, R.S., (1994), Investment under uncertainty, Princeton
University Press, New Jersey.
7
Economic Development Institute, (1996), The economic evaluation of
projects, World Bank, Washington D.C.
EVALSED the resource for the evaluation of socio-economic development
(2007), european Commission, Directorate General Regional Policy
Florio, M., (2007), Cost-Benefit Analysis and Incentives in Evaluation. The
Structural Funds of the European Union, Edward Elgar, Cheltenham.
8
9
10 Guide to cost-benefit analysis of investment project, structural funds,
cohesion funds and instrument for pre-accession, (2008), European
Commission, Directorate General Regional Policy.
11 Guide to cost-benefit analysis of investment project (1997), structural funds –
ERDF, cohesion fund and ISPA, European Commission, Directorate General
Regional Policy, evaluation unit.
12 HEATCO, (2006) Conference on a Harmonised European Approach for
Transport Costing and project assessment, sixth Framework Programme
2002-2006
13 Kirkpatrick, C., Weiss, J., (1996), Cost-Benefit Analysis and Project Appraisal
in Developing Countries, Edward Elgar, Cheltenham.
14 Nijkamp P. (1975) A multicriteria analysis for project evaluation: Economicecological evaluation of a land reclamation project, Papers in Regional
Science Vol. 35(1) pp. 87-111.
4
15 Lundolm, M., (2005), Cost-benefit analysis and the marginal cost of public
funds, Stockholm University, Stockholm.
16 Mishan, E.J., Quah, E., (2007), Cost Benefit Analysis, 5th edition, Routledge,
New York.
17 Polyzos S., (2011), Project Management, Kritiki Publications, Athens (in Greek).
18 Polyzos S., (2011), Exercises on Project and Investment Appraisal, University of
Thessaly (in Greek).
19 Potts, D., (2002), Project planning and analysis for development, Lynne
Rienner Publishers, London.
20 Ray, A. 1984, Cost-benefit analysis. Issues and methodologies, The Johns
Hopkins University Press, Baltimore, Maryland.
21 Shofield, J.A., (1989), Cost-benefit analysis in urban and regional planning,
Allen & Unwin, London.
22 Transport Economics, Policy and Roverty Thematic Group (2005), Notes on
the Economic Evaluation of Transport Project. The World Bank, Washington
D.C.
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