Project Investment Analysis and Its Role Essay

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Role of project investment analysis

Investment valuation is important in determining the value of the proposed investment in the short term and long term since it provides answers on the net worth of a proposed project. Through investment valuation, it is possible to make clear projections into the future, in terms of the scope of the project and expected returns. In the case of new ventures, project investment analysis provides the basis for the profitability of a project by reviewing the financial implications of a proposed project against expected returns over a specific period of time.

Project investment analysis might paint a clear picture on the practicality of the proposed project against series of investment variables such as cash flows (operating cash flow and terminal cash flow), initial capital outlay, and the duration of the project (Marino, Bertoldi, & Rezessy 2010). Therefore, in new ventures, project investment analysis might either give the green light or raise the red flag on the viability of a proposed project before actual implementation. This means that the analysis is important in safeguarding the interests of an investor before making the decision to either finance the new venture or not.

How investment analysis provides insight into the selection of energy-saving projects

In the selection of energy-saving projects, there are several variables and constraints that must be balanced to ensure that any proposed project is viable and sustainable in the short and long term. Basically, the aspect of viability is determined by the financial needs against expected returns since most of the energy-saving projects require a large amount of capital. The use of project investment analysis in the selection of energy-saving projects might track the variables such as cost constraints in setting up the project against variables such as payback period, annual cash flow, and initial capital outlay (Lisowski 2000). This means that the investment analysis might provide a clear blueprint for adoption or rejection of the capital intensive energy-saving projects on the basis of the generated financial data for present and future streams of cash flow.

Roles played by energy monitoring, targeting, and waste strategies: Financial performance

Energy monitoring

Energy monitoring aspect in implementing energy-saving projects involves proactive and constant review and evaluation of the production capacity against costs and demand to ensure that such projects operate within the optimal levels (Bernstein, Barnes, McCarthy, & Manuel 2005). Maintaining the state of optimal production translates into efficiency in the use of financial resources and maximum output, which translates into more revenues.

Targeting

Targeting is an important variable in balancing the market demand and company production capacity to ensure that energy production is supported by the market demand dynamics to ensure that project operates within the expected capacity, which satisfies the needs of potential customers (Norton 2012). Through targeting, it is easy for a company to improve financial performance since the aspects of supply and demand will be balanced.

Waste strategies

Waste strategies are meant to seal loopholes that generate inefficiencies in the general running of a project. These inefficiencies might seriously compromise the sustainability of a project since they affect the financial performance by increasing the cost of production against constant or even lower output (Räthzel & Uzzell 2013).

Reference List

Bernstein, H, Barnes, H, McCarthy, R & Manuel, T 2005, Program monitoring. Battelle, Columbus, Ohio.

Lisowski, S 2000, Real options in practice: Two examples from the energy sector. Decision Analysis Affinity Group, Calgary, Canada.

Marino, A, Bertoldi, P & Rezessy, S 2010, Energy service companies market in Europe. Institute of Energy, Ispra, Italy.

Norton, M 2012, Sustainability: duty or opportunity for business? Routledge, New York.

Räthzel, N & Uzzell, D 2013, Trade unions in the green economy: Working for the environment, Routledge, New York.

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