Cost-benefit analyses (CBA) provide a basis for making decisions concerning implementation of investment projects and their financing from own resources, commercial loans, or EU contributions. Besides quantifying the financial effects of the investments from the investor´s point of view, CBA assesses their broader economic and social value and the sustainability of project outcomes.
FINSTRACO carries out project cost-benefit analyses through analysing discounted cash flows using the incremental method to quantify the differences in costs and benefits of an alternative without project implementation and an alternative with project implementation.
FINSTRACO offers the following analyses as standard parts of a cost-benefit analysis of an investment project:
- Financial analysis resulting in determination of the financial net present value (FNPV) and financial rate of return (FRR), which is to justify the financial efficiency of the project, expressing the ability of net project income to cover the investment costs. The financial analysis examines also financial sustainability of the project during the defined reference period.
- Economic analysis resulting in a justified positive social value of the project by determining indicators of the economic net present value (ENPV), economic rate of return (ERR) as well as the ratio of benefits and cost of the project (B/C). Also non-market impacts and their expression in monetary value are taken into account when preparing the economic analysis.
- Sensitivity analysis focusing on specifying the critical variable inputs of the project, the change of which will affect the main indicators of the project financial and economic analyses and thus its overall financial and economic efficiency. It also determines the scope of the change of defined variables which might cause the project to lose its social and economic justification.
- Risk analysis examining the risk of changes in critical variables, as well as the risk of changes in the results of the financial and economic analyses. We will identify adverse impacts and assess their significance, probability of occurrence and elimination possibilities.