KARATINA UNIVERSITY

SCHOOL OF EDUCATION AND SOCIAL SCIENCES (SESS)

BACHELOR OF EDUCATION (ARTS & SCIENCE)

END 400: DEVELOPMENT PROJECT APPRAISAL

GROUP ASSIGNMENT
Instructions
1. Place yourself in a group of not more than fifteen (15) members and not less than twelve (12)
members. You may use the existing class groups.
2. Each group should answer the respective questions in succeeding pages. Clear
explanations/definitions of terms and concepts should be done with proper citations and referencing.
3. Each group should submit a soft copy (saved in the name of group e.g. Group 1) of their work
through the e-mail to: [email protected] on or before 5th December, 2024.
4. Names and registration details of the group members should be clearly indicated on the cover page
of the submitted document. Save your work using the group no (e.g. Group 1).
5. The submitted work should either be in PDF format or in Microsoft Word or Open Office-Writer
format.
6. Each group shall prepare a PowerPoint (PPT) presentation of not more than 5 slides, and shall be
allocated 5 minutes to present their work online on 6th December, 2024.

Marking Guide
Description Marks
Proper format used for the paper 3
Clear explanation/calculation of concepts/constructs 4
Logical presentation of thoughts/answers 5
Evidence provided for the position taken/resources used (references) 3
Total 15

NOTE:
1. Late submissions will not be accepted and shall be treated as NO SUBMISSION.
2. Use credible sources as references to your work. Popular internet sites (e.g. Wikipedia, blogs) are
not credible sources.
3. The work shall also be subjected to plagiarism tests for similarity checks with AI tools (e.g.
ChatGpt).

1 Released on 29/11/2024, deadline for submission of soft copy of the group work is by close of
business on 5th December, 2024
Group 1
i. Compare the following two mutually exclusive projects on the basis of Accounting Rate of
Return (ARR) and advise the investors. Cash flows and salvage values are in thousands of
Kenya Shillings. Use the straight line depreciation method.

Project A:
Year 0 1 2 3
Cash Outflow -220
Cash Inflow 91 130 105
Salvage Value 10

Project B:
Year 0 1 2 3
Cash Outflow -198
Cash Inflow 87 110 84
Salvage Value 18

ii. Suggest an appropriate methodology to value each of the following project impacts:
a) a tourism project that attracts more visitors to a national park
b) a highway project that generates increased traffic noise and air pollution in the vicinity
of the highway
c) a dam project that floods a valley which results in the loss of unique prehistoric
archaeological sites.

Group 2
Explain the following terms and concepts as used in development project appraisal
i. Time value of money
ii. Discounting
iii. Compounding
iv. Appraisal
v. Opportunity cost
vi. ‘With’ and ‘Without’ project scenarios
vii. Cash flow
viii. Shadow price

Group 3
The heat loss through the exterior walls of a processing plant is estimated to cost the owner Ksh.
3,000 next year. A salesman from Superfiber, Inc. claims he can reduce the heat loss by 80% with the
installation of Kes 15,000 of Superfiber now. If the cost of heat loss rises by Ksh. 200 per year, after
next year (gradient), and the owner plans to keep the building ten more years, what is his rate of
return, neglecting depreciation and taxes?

Group 4
Describe the following project appraisal techniques highlighting their merits and demerits.
i. Payback period method
ii. Accounting rate of return
iii. Cost benefit analysis
iv. Net present value
v. Internal Rate of Return
vi. Profitability Index

2 Released on 29/11/2024, deadline for submission of soft copy of the group work is by close of
business on 5th December, 2024
Group 5
A distillery is planning to invest in a new still. There are two plans, one of which involves
continuing to produce the traditional mix of output blends and the second of which involves
experimentation with new blends. The second plan will produce lower cash flows in the earlier years
of the life of the still but it is planned that these cash flows will overtake the traditional pattern within
a short space of time. The cost of capital is 12% per annum. The cash flows are shown in the table
below.

Project Initial Cash flows

investment Year 1 Year 2 Year 3
Kes Kes Kes Kes
A 120,000 96,000 48,000 12,000
B 120,000 12,000 60,000 108,000

Required;
i. Using NPV method, advise the distillery on the choice of project.
ii. Compute the IRR for the two projects and interpret the results.
iii. Which of the two methods would you advise the distillery to follow in the choice of projects
and why?

Group 6
Give relevant examples, compare and contrast financial and economic analysis of investment
projects.

Group 7
A haulage company has three potential projects planned. Each will require investment in two
refrigerated vehicles at a total cost of Ksh. 120,000. The vehicle has a three-year life. The three
projects are:
(A) Expected cash inflows, after deducting all expected cash outflows, are Ksh. 60,000 per
annum.
(B) Expected cash inflows, after deducting all expected cash outflows, are Ksh.45, 000 per
annum.
(C) Expected cash inflows, after deducting all expected cash outflows, are Ksh. 40,000 in Year 1,
Ksh. 70,000 in Year 2 and Ksh. 80,000 in Year 3

If the company’s hurdle rate is 13%, advise the management on which of the three projects to invest
in using NPV method.

Group 8
Justify the case for project analysis and appraisal as part of the wider framework of project planning
and management.

Group 9
Mr. A is considering investing Ksh. 250,000 in a business. The cost of capital for the investment is
13%. Following cash flows are expected from the investment:
Year Amount (Ksh.)
0 (250,000)
1 58,000
2 120,000
3 230,000

3 Released on 29/11/2024, deadline for submission of soft copy of the group work is by close of
business on 5th December, 2024
Required:
Calculate the IRR for the proposed investment and interpret your answer.

Group 10
What are the main aspects to be considered under ‘Market and technical Analysis’ while working out
the project feasibility?

Group 11
Discuss the various feasibility studies that may be carried out before implementation of development
projects.

Group 12
a) Unlike construction projects manufacturing and management projects, pure scientific projects
are truly a special case. Discuss this statement using practical examples.
b) Distinguish projects and normal business operations.
c) Explain the essential skills of project managers.

Group 13
i. Describe the agile project life cycle phases.
ii. Explain the various tools and techniques used in managing the various constraints of project.
iii. In trying to consider the political climate that surrounds his project, a good project manager
should consider the potential effects for his stakeholders. Discuss this statement.

Group 14
i. Project analysis tries to identify and value costs and benefits that arise with the proposed
development project. Explain incremental net benefits arising from the development project
investment.
ii. Many people are affected in some way by the results of a development project. Change is
difficult even when it is good. Explain how you as a project manager may help the affected people to
cope with the change
iii. Differentiate leadership and management.

Group 15
i. In the example of Cow Ltd that we did in class, how would the results be affected if were you
informed that the asset could be sold after three years for Ksh. 60,000 and after six years for
Ksh. 30,000.
ii. Discuss the principles of project appraisal
iii. Discuss the advantages and disadvantages of Accounting Rate of Return (ARR) as a method of
project appraisal.

4 Released on 29/11/2024, deadline for submission of soft copy of the group work is by close of
business on 5th December, 2024
Group 16
i. What are the main criteria for assessing success of development projects?

ii. Why is discounting an important component part of the calculations that are made to appraise
net benefits of an investment project?

iii. Explain how changes of working capital are taken into account in the accurate estimation of the
Net Cash Flow of a project.

Group 17
i. Explain the concept of logical framework in project management and its uses in project
appraisal.
ii. Using a project of your own choice, develop a logical framework.

Group 18
i. Explain why project managers should undertake appraisal before implementing projects.
ii. Distinguish between social cost benefit analysis and cost benefit analysis methods of project
appraisal.
iv. Explain the differences between UNIDO and L-M approaches of social cost benefit analysis.

5 Released on 29/11/2024, deadline for submission of soft copy of the group work is by close of
business on 5th December, 2024