Economic assessment of investments in rural infrastructure in hilly-mountain areas

As one of the important elements of rural infrastructure, water supply represents the major precondition of modern lifestyle. However, in hilly mountainous re gions of Serbian rural areas, water supply still does not have the treatment it deserves, while is not in line with the concept of sustainable development. Due to mentioned, there is a need for prompt attention to the issue of fresh water sup ply, while approach has to be in a planned manner, respecting both professional aspects, and all three pillars of sustainable development (economic, environmen tal and social). Considering that in hilly mountainous areas there are still local communities that have existed for many years without centralized or public water supply system, rural settlements are usually forced to rely on individual water supply solutions. Simultaneously with social progress, as well as towards the gen eral increase in “urbanization” of villages, this issue is indispensably linked to overall development. Author’s research is focused on finding quality (technical) alternatives that secures the quality of fresh water, with special emphasis on economic assessment of invest ment in establishment of centralized water supply system. Preset economic model assumes overall investment of 1,843,589.74 EUR, or investment in fixed assets of 1,691,025.64 EUR, and investment in permanent working capital of 152,564.10 EUR. Applying the dynamic methods for evaluation of economic effectiveness of investments, there were derived next results: Net Present Value of 4,129,742.47 EUR, Internal Rate of Return of 87.59%, and Payback Period of 10 years and 1.53 months. Considering planned exploitation period of investment (30 years) and oc curred discount rate (7%), there could be concluded that in economic sense the in vestment is fully justified, while the local rural community could expect achieving of significant profit by its further utilization.