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This document outlines the main appraisal methods and techniques which should be used as part of the Public Spending Code. It provides a brief introduction to each technique and contains reference material at the end of the document. This information is intended to provide a general overview of these techniques, helping to orient new Public Spending Code users and point the way to further more detailed material, both in the Public Spending Code and more generally.
1. Overview of appraisal
The basic purpose of systematic appraisal is to achieve better spending decisions for capital and current expenditure on schemes, projects and programmes. This document provides an overview of the main analytical methods and techniques which should be used in the appraisal process. These techniques can also be used in the evaluation process. More detailed information on individual techniques can found in financial and economic textbooks, examples of which are listed at the end of this document and in other guidance material on the VFM portal.
An understanding of discounting and Net Present Value (NPV) calculations is fundamental to proper appraisal of projects and programmes. A good understanding of Cost Benefit Analysis (CBA), Internal Rate of Return (IRR), Multi Criteria Analysis (MCA) and Cost Effectiveness Analysis (CEA) is also essential for economic appraisal purposes.
2. Analytical methods
The recommended analytical methods for appraisal are generally discounted cash flow techniques which take into account the time value of money. People generally prefer to receive benefits as early as possible while paying costs as late as possible. Costs and benefits occur at different points in the life of the project so the valuation of costs and benefits must take into account the time at which they occur. This concept of time preference is

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