The%20Environment%20and%20Cost%20Benefit%20Analysis%20in%20Feasibility%20Studies

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The Environment and Cost Benefit Analysis in
Feasibility Studies

• Dr. John M. Hutcheson, Senior Lecturer, School of
  Building, the University of New South Wales,
  Kensington, NSW. , Australia
• Summarized by Kamal Al Dihan
• ARE 512

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Outline

• Introduction
• Reason for the Research
• A Framework
• The Model
• Sensitivity Analysis
• Summary Conclusion

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Introduction

• Standard format was used to highlight the impact
  of the following
• Taxation,
• Interest,
• Profit, and
• Risk
• Environmental changes were also analyzed such as
• Social,
• Economic,
• Political, and
• Physical aspects

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Reason for the Research

• 1. Reducing The Uncertainty
• Energy Supply
• Government Fiscal Policy
• International Economic, and
• Political Changes
• 2. Predict future trends and to make
  effective decisions

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A Framework

• Market,
• Financial, and
• Physical

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The Model

• Feasibility stage
• Design stage
• Pre-construction stage
• Construction stage
• Handover maintenance stage
• Sale or management stage

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Time Sequence Model
Interest Calculation (Approximate) P I OH (T1
T2 T3 T4) L-T2/10 LT3 LT4 C (T4)/2
(C L OH I) T5/2
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Sensitivity Analysis

• Overhead (OH)
• Timing
• Pre-Construction, and
• Construction Cost (C)

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Revenue (s)

• Current Prices / Income
• Future Prices / Income
• Patterns of Sales / Income

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Tax and Profit

• Profit
• Cash Flows
• Interest

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Environmental Impacts

• Political Action
• Social Change

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Political Action

• New Taxes,
• New Philosophies,
• Fiscal Measures,
• Subsidies,
• Decentralization,
• Discriminatory Taxation,
• Health Regulations,

• Development Regulations,
• Narrow or Overwhelming Parliamentary ,
• Majorities,
• Grants,
• Public Expenditure, and
• Rental Freezes., and
• Safety rules and labor laws,

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Social Change

• Demography,
• Work force,
• Household formation,
• Migration,
• Natural population growth, and
• Other social elements

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Risk

• Assessment
• Time and Place
• Location ,
• location, and
• location
• Continuing Evaluation

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Impact on the Environment

• Accountability
• Cost Benefit Analysis
• Presentation
• Project Selection

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Computers

• Format / Programs
• Holding periods,
• Financing terms,
• Taxation and
• Rate of return.

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Construction Software 
Project Accounting,  Analytics and Reporting,  Customization,  Distribution,  E-commerce,  Field Service Management,  and Financial Management, 
Accounting,  Estimating,  Procurement,  Project Management,  Reporting Other Tools,  Service Management,  Estimating, and Project Management
Estimating Software,  Bidding Software,  Scheduling Software,  Document Management Software,  and Accounting
Construction Accounting,  Job Management,  Revenue Billing,  Payroll,  Reporting,  Inventory,  Document Management,  Estimating
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Summary

• Sensitivity
• Format

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Sensitivity

• Revenue Assessment (Pattern of Income)
• Interest Calculation
• Risk
• Timing of Cash Flows
• Project Selection
• Taxation, and
• Environmental Impacts

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Format

• Used discounted cash flow (DCF) methods
• NPV to assist the feasibility of project
• Rate of Return for quick assessment (real estate).

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Conclusions

• Risk
• Format
• The Environment

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Risk

• Most professionals underestimate the sensitivity
  of critical elements of project profitability
  studies especially for neglected sensitive areas.

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Format

• Simple Format
• Cost Benefits
• Computers

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The Environment

• Environment and Benefit Analysis
• Probability Analysis

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The Future

• Educate and re-educate developers and their
  advisors to understand the rationale behind
  feasibility studies.
• Use the best available technology to develop the
  used model in order to depict all the neglected
  internal and external elements impacting projects.

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• Thank you