Private Benefit-Cost Analysis
       Deriving ‘Project’ and ‘Private’ cash flows:
          • Project cash flow refers to cash flow for the overall project
          •  At market prices
          •  Irrespective of who gains or loses.
                                            
               Private Cash Flow
    Private cash flow refers to cash flow to the individual investor 
    engaged in project.
             • at market prices
             • after allowing for loan service costs
             • after payment of profits taxes
                           
          Deriving Private Cash Flow
     To derive private cash flow, we begin by calculating overall 
     project cash flow.
    We then subtract from the project cash flow:
         • Debt/financing inflows and outflows to creditors
         • Taxes paid to government
                           
                       Cash Flow on Equity
        •  The private cash flow is the cash flow on the investor’s 
           own funds or ‘equity’.
        •  Project cash flow minus debt cash flow = cash flow on 
           equity (before tax).
        •  Cash flow on equity is the residual: what is left over after 
           servicing debt.
                                            
          Deriving Project Cash Flow
     To derive project cash flow we need to be mindful of some 
     important concepts and conventions:
         • Incremental rather than total cash flow: ‘with project’ 
          less ‘without project’ cash flow. See table 4.2.
         • Inflation: usual to use constant prices with a real 
          discount rate (otherwise, nominal prices with nominal 
          interest rate). See table 4.1.