An investment project is a document that outlines how the development, production, and promotion of a product will be carried out. It must include sections describing where funds will be invested, projected profitability, the project's duration, and a step-by-step implementation plan.
No matter how detailed the project is, it must answer the main question: is it worth investing funds? To determine this, experts conduct an evaluation of the existing investment plan. A specialist assesses how quickly the investments will be recovered, what the profitability is, and what the internal and external risks entail.
When i an investment project evaluation is needed
Project evaluation is carried out for various purposes: when seeking investors, when selecting a credit system or other forms of financing, and when insuring the business as a whole. The document obtained by the company is used by credit institutions and potential investors as justification for the economic feasibility of the investment volumes and timelines.
The process of evaluating an investment project is complex and cannot be carried out solely by the company's own specialists. It is necessary to involve an independent expert who will conduct a thorough analysis of the justifications reflected in the business project. Firstly, the efficiency of financial and socio-economic activities is assessed, and secondly, the feasibility of the project is calculated.
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How is an investment project evaluation conducted?
An external expert understands the goals of the investor who will make the decision to invest or not in the project. Therefore, when evaluating the business plan, the specialist takes into account the requirements and key indicators that are essential for potential financing. Based on a comprehensive analysis, a presentation is prepared to visualize the project. |
The project evaluation is conducted in several stages:
- Preliminary analysis: The specialist examines the team's experience and the participants' competencies. The selected project strategy is analyzed in relation to the market sector, identifying potential risks and assessing the uniqueness of the product.
- Detailed analysis: At this stage, all factual information, precise figures, amounts, and timelines are collected. The expected profitability and payback periods are described. The specialist forecasts the profitability assessment of the investments based on net present value. As a result, investors should see a professional business plan with relevant data that demonstrates the company's understanding of its intended actions.
- Evaluation of investor participation in the project: At this stage, it is important to demonstrate the benefits that project participants will gain. Specialists use financial cash flow evaluation methodologies and various multiplier models to make these calculations.
- Determination of stages and financing schedule: The company defines the implementation steps and the project's timeline, as well as the anticipated funding flows for each stage. For specific periods, a tranche is determined, representing a portion of the funds borrowed from the investor for the project, along with performance measurement tools.
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Criteria for Project Evaluation
Financial experts utilize progressive methodologies to evaluate projects, which may vary depending on the scale of the business, product characteristics, and market requirements. |
The investment consultant selects the best approach based on the project's conditions. Specialists employ over fifty evaluation criteria, which can be categorized as follows:
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If the evaluation of an investment project is conducted correctly, its participants will receive a detailed description of investment needs and the necessary conditions for it. Based on the findings, decisions are made regarding the attraction of funds. The analysis involves the systematic categorization of risks and factors that can impact the project and its final outcome. The consultant assists in developing an operational plan for investment monitoring and timely responsiveness to changes.
