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Capital Projects

Published online by Cambridge University Press:  10 June 2011

C.G. Lewin ,
S.A. Carne ,
N.F.C. de Rivaz ,
R.E.G. Hall ,
K.J. McKelvey  and
A.D. Wilkie
C.G. Lewin
Affiliation:
Unilever plc, Unilever House, Blackfriars, London, EC4P 4BQ, U.K. Tel: +44 (0)20 7822 6144
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Abstract

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The paper surveys the present state of knowledge about the appraisal and control of capital projects, and identifies the useful contribution which actuaries can make to the process.

Relevant theoretical considerations are discussed, including the choice of appropriate discount rates for use by companies when screening proposals. It is recommended that discount rates should be lower than those commonly used. Some practical working methods are summarised and examples are given of how risk analysis can be carried out, for both simple and complex appraisals. Attention is drawn to the special ‘social’ considerations which may apply in the case of Government projects. The opportunities now opening up for joint ventures between the UK Government and private sector partners are examined, and it is concluded that proper sharing of costs and risks can facilitate arrangements which are acceptable to both sides.

The paper concludes with a discussion of the procedures which companies can use to identify, appraise, control and monitor projects.

Keywords

Appraisal TechniquesCapital ProjectsCost Benefit AanalysisDiscounted Cash FlowInternal Rate of ReturnInvestment AppraisalsNet Present ValuePrivate Finance InitiativeProject AppraisalsProject Control/MonitoringRisk Analysis

Information

Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 1 , Issue 2 , 01 June 1995 , pp. 155 - 249
Copyright
Copyright © Institute and Faculty of Actuaries 1995

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