One of the main tasks of project analysis is to establish the value of the project, which is defined as the difference between positive (benefits B) and negative results (costs C):
Project value = Benefits – Costs.
That is, it is necessary to evaluate all the results of the project and establish whether the benefits of it exceed the cost of its implementation. Analysis of benefits and costs is the basis for making project decisions, since it allows you to answer the following questions:
what is the desired result of the project?
who is incurring the costs of the project?
Who will benefit from the positive results of the project?
when and how will the positive results of the project be manifested?
how to compare and summarize the benefits and costs of different types to determine the final value of the project?
how do the positive results of this project relate to the results of other alternative projects?
If the purpose of the project analysis is to establish the amount of excess of additional benefits from the project over the additional costs necessary for its implementation, then it is necessary to determine the methodology for calculating additional benefits and additional costs.
The model for assessing additional benefits is based on the calculation of the increase in benefits obtained through the implementation of the project multiplied by the price of benefits:
Additional benefits of the project = ΔB·Pв, where ΔВ are additional benefits obtained through the implementation of the project; RV is the price of benefits.
The model for estimating additional costs is based on determining the number of additional resources needed multiplied by their price:
Additional project costs = ΔQp·Pp, where ΔQp is the number of additional resources needed to implement the project; Pp is the price of resources.
Determination of costs and benefits should be carried out in the context of each year of the project. To reflect the benefits and costs in monetary terms, it is necessary:
1.Establishing a quality composition of benefits and costs arising from the material impacts of the project.
2.Measurement in monetary units of these benefits and costs.
3. Determination of real and future monetary indicators that characterize the benefits and costs of the project.
4. Comparison of benefit and cost flows based on the criteria adopted for this project.
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