What is financial appraisal and what does it involve?

Answer 1

Financial appraisal is a method used to evaluate the viability of a proposed project by assessing the value of net cash flows that result from its implementation.

Projects may involve asset construction, purchase, lease or sale and may be financed in a wide variety of ways - grants, borrowings, revenues, supplier finance or a combination of these.

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The sponsoring agency should undertake a structured, internal but independent review of the project's expected returns. The reviewer should be satisfied with the treatments of:

outputs and outcomes of the project;
range and realism of options considered;
completeness of the list of costs and impacts and their appropriate valuation;
adequacy of the investigation of the sensitivity of the results to variations in key parameters;
risks faced by the project as well as the implications of such risks to equity and debt parties;
the rate at which cashflows have been discounted;
identification of where the impacts associated with the project fall; and, identification of the parties responsible for project implementation and for monitoring the execution of the project and its results

Answer 2

Financial Appraisal Definition

Answer 3

For (US) Mortgage ? = it's same as UK 'valuation'

or do you mean for Credit Scoring ?