The object and, therefore, the importance of a project appraisal is making an analysis to see whether the project is viable. It is vital to know whether a project is technically feasible and whether it is going to be an economic liability or not.
A project appraisal is an important part of any project and should be taken seriously because a lot rests on it. The effects of a project appraisal are long reaching and have very definite long term effects because of the capital investment that is always required in any project.
Once a decision has been made to go ahead with a project, it is irreversible. Even if, through some catastrophic event, the project has to come to an unpredicted halt, the investment has been made so all could be lost. These high expenditures can be critical, not just for that particular project but for the health and survival of the entire business.
Making an effective project appraisal is no easy task because there are can often be unforeseen circumstances (though a good project manager should be able to cover as many eventualities as possible). It is also not easy to measure all costs and the potential benefits of a project. This high degree of uncertainty could undermine the confidence of a project so it is vital that the appraisal is as thorough as it possibly can be.
It is also important when it comes to a project appraisal to be realistic about the amount of capital that is going to be tied up, and the length of time that the project is going to take. If this is not done, it is possible that the business may suffer real hardship because it was unprepared for the financial constraints placed upon it.
