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p. 10 of 14 BACK | NEXT Introduction Part I: Scope of Project Economic Analysis Part II: The 10 Areas of Analysis 1. Assess Macroeconomic Context 2. Assess Sector Context 3. Assess Demand 4. Identify Economic Rationale 5. Identify Project Alternatives 6. Identify and Compare Benefits and Costs 7. Assess Financial and Institutional Sustainability 8. Undertake Distribution Analysis 9. Undertake Sensitivity and Risk Analysis 10. Establish a Project Performance Monitoring System (PPMS) Part III: Areas of Analysis in ADB's Project Processing Cycle

Key Areas of Economic Analysis of Projects : Part II: The 10 Areas of Analysis

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Assess Financial and Institutional Sustainability

• If the project generates revenue, estimate the financial internal rate of return (FIRR) and compare to the weighted average cost of capital (WACC). Analyze and explain any difference between the FIRR and EIRR.
• Estimate the financial returns to different project participants. Evaluate whether the financial returns are adequate to attract investment or ensure active involvement.
• Explain any cost recovery measures or charges for goods and services, including how charges were incorporated into the demand and rate of return analysis.
• Analyze the project and associated enterprises for both external and internal (cross-) subsidies. Evaluate and explain the basis for any identified subsidies.
• Evaluate the financial sustainability of the project, both with and without any subsidies.
• Evaluate the fiscal impact of the project on the capital and recurrent budget, and identify and evaluate the source of funds to meet net fiscal requirements.
• Use the institutional assessment results to identify how functions, form and capacity of project related agencies are likely to affect project-related input and service delivery and implementation. Identify implications for likely implementation schedules.

Back 6. Identify and Compare Benefits and Costs	Next 8. Undertake Distribution Analysis