ABSTRACT
This chapter discusses project economic analysis of industrial projects. Basic cash-flow analysis and time value of money are presented along with related topics as cost concepts, cost estimation, and cost monitoring. Cost management in a project environment refers to the functions required to maintain effective financial control of the project throughout its life cycle. The techniques of computing cash-flow equivalence permit us to bring competing project cash flows to a common basis for comparison. Capitalized cost refers to the present value of a single amount that is equivalent to a perpetual series of equal end-of-period payments. The general effects of inflation are felt in terms of an increase in the prices of goods and a decrease in the worth of currency. Break-even analysis refers to the determination of the balanced performance level where project income is equal to project expenditure. Top-down budgeting involves collecting data from upper-level sources such as top and middle managers.
