Revenue

The following should be considered for an F-CBA aiming to evaluate the financial results of the LAI modernization process:

• The sum corresponding to the increase in sales of registration, certification and other services related to land transactions owing to the increase in the number of properties formally registered and possible increased market dynamism.
• The sale of new products such as maps, geographic information systems or legal diagnoses resulting from the development of IT systems.
• Savings in operating costs of LAIs owing to the development of human capabilities, the setting up of IT systems for processing and registering data and the general modernization of equipment.

The flow of costs for the F-CBA of an LAP, from the perspective of LAIs, consists of the following:

• The investment made throughout the project cycle, in relation to the modernization of LAIs; these refer to staff training, the development of property information systems, the purchase of equipment, i.e. its annualized budgeting (in the case of an ex ante evaluation) or funds used during the LAP implementation (in the case of an ex post evaluation).
• The additional operating costs of LAIs and municipal governments, such as specialist technical assistance for IT system maintenance.
• Contracting mediators to help with tenure dispute resolution.
• The part of the administration costs of the project corresponding to the specific investment made to strengthen LAIs (it may be distributed in proportion to the sum of each component).
• Recurrent operating costs, i.e. those which will be incurred from the operational closure of the LAP until the last year of the analysis period, to guarantee the generation of benefits once the LAP has closed operations, for example the replacement of equipment purchased or continued personnel contracts after the closure of the project, regardless of the funding source.

The flow of incremental financial benefits of LAPs from the perspective of LAIs is generally insufficient to cover the corresponding investment costs and incremental operating costs. This is explained by the fact that a large part of the benefits generated by LAPs are not effective monetary benefits that return to the investor, but economic benefits (which also include social, environmental, etc. benefits in a monetized form, see module 4) which are given back to society as a whole. Furthermore, if the incremental financial revenue meets or exceeds the incremental operating and investment costs, it would be valid to question whether the investment should have involved public funding because there would be sufficient incentive for the operation to be financed with private funds. When evaluation of the efficiency of an investment by means of a financial cost-benefit analysis is difficult because it does not generate quantifiable revenue, an alternative to the CBA is a cost-effectiveness analysis.

To calculate the IRR and financial NPV for one or more LAIs, proceed in the same way as for the E-CBA.

The main changes are:

- The flow of costs should be adjusted to the investment corresponding to the improvement in the efficiency of the services offered by the LAI or LAIs to be evaluated ex ante or ex post.
- Conversion factors between market price and shadow price are not used.
- To calculate the NPV, the discount rate that reflects the opportunity cost of capital on the international financial market is used, and this is considered the annual return of the best alternative investment to the project. A proxy indicator can be the interest rates in real terms of long-term commercial loans or the return on an investment in long-term state bonds in real terms. A standard value frequently used is 12%.