Publication: Projects with a Very Long Life
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Date
2005-01
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2005-01
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This note address issues considering: what types of project typically have a very long life? Section 1: discusses the choice of appraisal period; Section 2: analyses the use of residual values; Section 3: discusses the pitfalls to avoid; Section 4: looks at the sensitivity of these matters to the discount rate.
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“Mackie, Peter; Nellthorp, John; Laird, James. 2005. Projects with a Very Long Life. Transport Notes Series; No. TRN 18. © World Bank. http://hdl.handle.net/10986/11803 License: CC BY 3.0 IGO.”
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Publication Treatment of Maintenance(World Bank, Washington, DC, 2005-01)Maintenance is an often overlooked aspect of appraisal. The effective treatment of maintenance within an appraisal is, however, fundamental to informing the decision regarding the optimum investment strategy. This is because the nature of the maintenance strategy can have direct implications on operating costs and other benefits (e.g. travel time savings). As such the impact of maintenance within an appraisal extends far beyond a simple consideration of its financial cost. The first Section of this Note introduces the importance the correct treatment of maintenance has with respect to an economic appraisal. Following Sections present the primary components of maintenance costs, and introduce the notion of whole life costing and the fact that there is a risk that maintenance may not occur. Next, the Note discusses the issues associated with deriving future maintenance costs, and further discuss the need for inclusion within the appraisal of, first, delays to transport users during maintenance works, and second, of the amount of induced and re-assigned traffic. The final Section presents a summary of the key points that should be borne in mind with respect to the treatment of maintenance within an economic appraisal.Publication When and How to Use NPV, IRR, and Modified IRR(World Bank, Washington, DC, 2005-01)The Economic Evaluation Notes are arranged in three groups. The first group (TRN-6 to TRN-10) provides criteria for selection a particular evaluation technique or approach; the second (TRN-11 to TRN-17) addresses the selection of values of various inputs to the evaluation, and the third (TRN-18 to TRN-26) deals with specific problematic issues in economic evaluation. The Notes are preceded by a Framework (TRN-5), that provides the context within which we use economic evaluation in the transport sector. All three NPV, IRR, and modified IRR are summary measures of project performance. Each one provides a single figure summarizing the impact of the project on economic welfare. Each of the three measures does, however, give subtly different information: 1) NPV focuses on the total welfare gain over the whole life of the project; and, 2) IRR and Modified IRR focus on the rate at which benefits are realized following an initial transport investment.Publication Notes on the Economic Evaluation of Transport Projects(World Bank, Washington, DC, 2005-01)In response to many requests for help in the application of both conventional cost benefit analysis in transport and addressing of the newer topics of interest, we have prepared a series of Economic Evaluation Notes that provide guidance on some of issues that have proven more difficult to deal with. The Economic Evaluation Notes are arranged in three groups. The first group (TRN-6 to TRN-10) provides criteria for selection a particular evaluation technique or approach; the second (TRN-11 to TRN-17) addresses the selection of values of various inputs to the evaluation, and the third (TRN-18 to TRN-26) deals with specific problematic issues in economic evaluation. The Notes are preceded by a Framework (TRN-5), that provides the context within which we use economic evaluation in the transport sector. Economic evaluation involves the assessment of the net value of projects and policies. In the transport sector we value projects in terms of their net worth, the difference between the value of their benefits and their costs, both measured so far as is possible in terms of monetary units. This disarmingly simple statement leads to many questions; evaluation by whom, for whom, from what perspective, at what stage. One of the features of transport decisions is that they typically impact on many parties - transport operators, individual transport users, local residents and businesses, land and property owners, national and local taxpayers.Publication Sources of Operating Costs(World Bank, Washington, DC, 2005-01)Historically, road vehicle operating costs have tended to dominate highway economic appraisals in developing countries, due to the poor road surfaces that can occur there. The operating costs of railways and ports are also substantial, and form key components of cost benefit analyses of their associated infrastructure. The definition of operating costs for Bank projects is therefore important in obtaining a reliable economic appraisal. In this Note, Section 1 introduces the key issues associated with operating costs, whilst the following sections discuss the components and sources of operating costs by mode. 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This note reviews the general principles of risk and uncertainty analysis in transport (Section 1); and outlines the three principal methods which may be used- sensitivity analysis (Sectio
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