Financial and Economic Analysis of Projects
The primary objective of the investment appraisal methods presented in chapter 4 is to assess the profitability and cost-effectiveness of potential investment projects. After a favorable project has been identified, a financial analysis applying a cashflow model has to follow. The primary objective of financial analysis is to demonstrate that the cashflow is positive and sufficient to repay the loans and deliver the expected returns (dividends) for the investors. Cashflow is defined as the net income (revenues minus expenses) plus depreciation.
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