Economic Evaluation Of Investment Essay

3378 words - 14 pages

CRAWFORD UNIVERSITY, IGBESA, OGUN STATE

PGD ACCOUNTING

ECONOMIC EVALUATION OF INVESTMENT
“A SYSTEM FOR BUILDING CONSTRUCTION PROJECTS IN THE CONCEPTUAL PHASE”
BY

ADENUGA OLUFEMI SOLOMON
MATRIC NO: PG14/05/005
JUNE 2015

ECONOMIC EVALUATION OF INVESTMEST

“A SYSTEM FOR BUILDING CONSTRUCTION PROJECTS IN THE CONCEPUTAL PHASE”

ABSTRACT

The conceptual phase of capital projects is of strategic importance – an economic evaluation at this early stage is critical to the owners’ decision-making with limited information. The current study developed a comprehensive but practical system that can be used in such an early phase for economic evaluation of capital building construction projects.
...view middle of the document...

However, most existing software programs in construction have been developed separately for cost estimation or for project evaluation while they have different levels of detail in the analysis.

Thus, the efficiency of the evaluation task has been limited – it is difficult to manage project information and any revision of it between the analytical steps, especially more when multiple alternates need to be analyzed. Also, controlling the information and the changes becomes complex if a project includes multiple buildings of mixed-use. The current study develops a comprehensive but practical economic evaluation system to combine the analytical steps so that the information flow can be efficiently managed in an integrated way based on the computerized automation, but using limited project information available in an early phase of project planning.

  Information for an Economic Evaluation time
 
                          Quantity & Time |
 
 

All Capital Expenditures |   | All Expected Revenues |
 
 - Land Acquisition - Construction - O & M Costs - Other Expenditures    |   |  - Sales - Rents - Operating - Other Revenues |
 
Fig. 1 Information for economic evaluation

2. EFFICIENCY OF EVALUATION SYSTEM

The essential element of economic evaluation is project cash flow analysis, which requires quantifying all monetary items and specifying the time of their occurrence.
The introduction conceptually depicts the information for an economic evaluation of a capital building construction project. All expenditures and revenues should be accounted for in the analysis in forms of quantity and time within the prediction period. For multiple alternates (the initial plan and its revisions), quantifying and scheduling of all the items for each alternate is a challenging task. A practical system for use by practitioners should be able to deal with all the quantity and time information in an integrated way based on automated estimating and scheduling.

However, the system should consider the trade-off between automation and flexibility – the efficient use of un-detailed project information supported by the automation, as well as the flexibility, that is, allowing manual adjustments by users.

Information for an Economic Evaluation -All Capital Expenditures All, Expected Revenues Quantity and Time Quantity

- Land Acquisition
- Construction
- O & M Costs
- Other Expenditures
- Sales
- Rents
- Operating
- Other Revenues

3. CONSTRUCTION COST ESTIMATING

3.1. Estimating in the Conceptual Phase

In the conceptual phase, cost estimate with a reasonable accuracy is required within a limited time period while information is limited. Various estimating methods for the conceptual phase have been proposed:

(i) Simple Square foot method,
(ii) Regression analysis,
(iii) Probabilistic estimating,
(iv) Neural network,
(v) Case-based reasoning,
(vi) Fuzzy models, and so on.

Meanwhile there are criticisms on some empirical...

Other Papers Like Economic Evaluation of Investment

What Is the Purpose for Foreign Investment Regulations

718 words - 3 pages investment regulations which can range from; requiring of approval of investment to board restrictions on the basis of economic security and cultural policy. Recently due to national security issues, some countries have also introduced lists of strategic sectors in which foreign investment requires government review and approval. There are however, according to an article in the GAO Highlights, a core set of issues that all country’s share. These

Servervault: “Reliable, Secure, and Wicked Fast”

519 words - 3 pages Case 1 DIAMOND CHEMICALLS PLC (A): THE MERSEYSIDE PROJECT 1. This case study the payback period, payback period and Net present value, but also the time value of capital was analyzed. Net Present Value and internal rate of return investment criteria are met. 2. In the economic evaluation of the project, it needs to forecast and analysis for the product cost situation and market sales and sales price. Overall consumer buying behavior is

Managerial Accounting Assignment 2

1602 words - 7 pages discount rate that leads to a zero value of the NPV. Among all capital investment appraisal techniques, IRR is generally considered to measure the efficiency of the capital investment. ("Capital Investment Appraisal - Capital Investment"). The IRR in that it takes into consideration the time value of money. Typically after the company examines investments with these evaluation methods, a comparison will be done of the proposed projects by the

Fin 534 Student Guide

1252 words - 6 pages * Discussions Evaluation * Midterm Exam Part 1: Chapters 1 through 3 * Midterm Exam Part 2: Chapters 4 through 7 | 205050 | 6 | Preparation * Reading(s) * Chapter 10: The Basics of Capital Budgeting: Evaluating Cash Flows * Chapter 11: Cash Flow Estimation and Risk Analysis * Scenario (See Faculty Notes for more details) * e-Activity * Use the Internet to research two (2) mutually exclusive investment projects to compare. The

Capital Budgeting

1416 words - 6 pages . averaging may yield inaccurate answers 4. utilizes concepts of capital and net income primarily designed for the purpose of financial statement preparation and may not be relevant for the evaluation of investment proposals II. Discounted cash flow techniques: Advantages: 1. more reliable because it considers the time value of money 2. cash flows over the entire life of the project is considered 3. more objective

Factors That Attractiveness of a Country for Foreign Investors

1257 words - 6 pages 2021987. Wei, Y., Liu, B., & Liu, X. (2005). Entry modes of foreign direct investment in China: a multinomial logit approach. Journal of Business Research, 58(11), 1495-1505. Schneider, F., & Frey, B. S. (1985). Economic and political determinants of foreign direct investment. World development, 13(2), 161-175. Habib, M., & Zurawicki, L. (2002). Corruption and foreign direct investment. Journal of international business

Decision Making Courses and How They Relate to Decision Making

1291 words - 6 pages govern the global economic environment of business Economy and monetary policy Moderate Business Economics study the workings of a price system and theories of consumer and firm decision-making Studying market structures. Moderate Advanced Corporate Finance Study the major decision-making areas of managerial finance and some selected topics in financial theory. Financial management and planning High computer support Investment Management

Student

3933 words - 16 pages market due to familiarity, and the lack of currency risk. Funds are often selected on the basis of these specified investment aims, their past investment performance and other factors such as fees. Financial services are the economic services provided by the finance industry, which encompasses a broad range of organizations that manage money, including credit unions,banks, credit card companies, insurance companies, accountancy companies, consumer

Phuket Beach Hotel

1225 words - 5 pages two potential projects for Phuket Beach Hotel, there are several different project evaluations which can be used to make a practical decision. As previously discussed, a thorough evaluation of the capital investment, cost of capital, payback schedule, net present value, internal rate of return, equivalent annuity, and project lives should be completed prior to making an informed investment decision. In the Phuket Beach Hotel case study, the

Foreign Direct Investment

5163 words - 21 pages Introduction 2.1 Origin of the report 02 2.2 Objective 02 2.3 Methodology 03 2.4 Limitations 03 3 Findings 04 05 06 10 3.1 Key Features Of Investment 3.2 Economic Overview of Bangladesh 3.3 Bangladesh economy: at a glance 3.4 Competitive advantages 3.5 Investment opportunities in Bangladesh 14 3.6 Drawbacks of Investment 19 4 Conclusion 23 5 Recommendation 24 6 Appendix

Corporate Finance Npv Irr

2195 words - 9 pages +IRR) 4 (1+IRR) 5 IRR = 14.7% Evaluation Results and Interpretation Pay back using discounted cash flow is the number of years needed to recover the initial investment outlay; in this case it is 4.8 years. 5-year payback rule would mean that the firm accepts all projects that recover their initial outlay within 5 years. If internally use a 3 year payback this project would be rejected. This would a missed opportunity given

Related Essays

The Effects Of Foreign Direct Investment (Fdi) On The Economic Growth Of China

1550 words - 7 pages The purpose of this paper is to examine the effects of foreign direct investment (FDI) on the economic growth of China. Such growth was achieved through China taking in tremendous amounts in FDI, increasing its productivity, especially in the export manufacturing sector of the economy. This paper provides mounting evidence that China’s growth has been largely fuelled by FDI through capital formation, export promotion, technological and skill

Program Evaluation Overview Essay

2263 words - 10 pages formative evaluation that the evaluator knows the organization, its culture, stakeholders, and possessing investment in the program. These requirements make formative evaluation ideal for internal evaluators to conduct. Summative evaluations are outcome-oriented by assessing the effectiveness of a program. They examine program development and assessment and Smith (2010, p. 33) concludes these models include goal or outcome and influence evaluations

Cerebos Essay

252 words - 2 pages adviser is not very proper and he could be the scapegoat of senior manager who act as an important role in the decision. On the other hand, in the portfolio management process, continuous evaluation for changes in the economic and socio-political environment is a critical duty of fund manager, even though we cannot attribute a fault to only the fund manager when confronted unpredictable events, we must emphasize the duty of fund manager should

Overview Of R&D Evaluation Accounting Essay

1155 words - 5 pages [Overview of R&D Evaluation Methods] 4/27/2015 Strategic Cost Management 1 Background- Strategic Management in R&D • Traditionally R&D Division in any company as been a part of Company’s overhead. • The investment in R&D has been strategically planned to be an “X”% of the sales or the profits achieved by the company. • The financial Matrix for an R&D organization has been poorly defined. • With recent stress on innovation