Assessment and Evaluation Flashcards
7 cards from real CP3P practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Assessment and Evaluation flashcards as text
In cost-benefit analysis (CBA) of a PPP highway, which outcome indicates the project is economically justified?
Answer: An economic net present value (ENPV) greater than zero
A positive ENPV means the project's social benefits exceed its social costs when discounted at the social discount rate.
What distinguishes economic analysis from financial analysis in PPP project assessment?
Answer: Economic analysis evaluates costs and benefits to society as a whole, including externalities, using shadow prices
Economic analysis takes a societal view, adjusting market prices to shadow prices and including externalities, while financial analysis looks at the project entity's cash flows.
A project shows a strong economic NPV but weak financial viability for private investors. What is a common PPP structuring response?
Answer: Introduce viability gap funding or government payments to make the project bankable
Viability gap funding or availability payments bridge the gap when a socially valuable project cannot attract private capital on user revenue alone.
In a 'risk matrix' used during PPP appraisal, which information is typically recorded for each identified risk?
Answer: Risk description, probability, impact, mitigation measures, and proposed allocation
A risk matrix lists each risk with its likelihood, consequence, mitigation, and the party best placed to manage it.
Which discount rate approach is generally used when calculating the net present cost of the PSC and comparing it to PPP bids?
Answer: A rate set by the government's finance ministry or policy guidance, applied consistently to both options
Governments prescribe a discount rate in their VfM guidance so that PSC and PPP cash flows are compared consistently.
Why is sensitivity analysis an essential part of PPP project appraisal?
Answer: It tests how changes in key assumptions such as demand, costs or discount rates affect the project's viability and VfM conclusion
Sensitivity analysis shows how robust the appraisal results are to changes in uncertain input variables.
A 'switching value' in a sensitivity analysis refers to what?
Answer: The value of a variable at which the project's preferred option or viability conclusion changes
A switching value is the threshold level of an input at which the decision, such as positive NPV or PPP preference, would flip.