Construction Economics PDF
Added on 2021-04-24
18 Pages6167 Words47 Views
FinanceLeadership ManagementProfessional DevelopmentVisual ArtsEconomicsLaw
|
|
|
1Construction Economics
2Table of ContentsA. Key Developmental Conditions............................................................................................4Risk Tolerance or Appetite....................................................................................................4Return or Profits.....................................................................................................................5Tax Exposure.........................................................................................................................5Market Trends........................................................................................................................5Investment Horizons..............................................................................................................6B. Key assumptions, constraints and conditions of CBA..........................................................6Assumptions...........................................................................................................................6Constraints..............................................................................................................................6Conditions..............................................................................................................................7CBA Analysis.........................................................................................................................7Costs...................................................................................................................................7Benefits..............................................................................................................................9Payback Period.................................................................................................................10Internal Rate of Return.........................................................................................................10Net Present Value.................................................................................................................11Sensitivity Analysis..............................................................................................................11Risk Assessment...................................................................................................................11C. Project Alliancing................................................................................................................12Project Alliance for the Development Company.................................................................12Advantages of Project Alliance............................................................................................12Disadvantages of Project Alliance.......................................................................................13Suggestions..........................................................................................................................13Feasibility of adopting Project Alliancing...........................................................................13Success factors.....................................................................................................................13Challenges............................................................................................................................14
3D. Cost Control and Reduction Strategies...............................................................................14Cost Leadership....................................................................................................................14Differentiation......................................................................................................................15Focussed Low Cost..............................................................................................................15Focussed Differentiation......................................................................................................16Integrated Low Cost.............................................................................................................16Reference List..........................................................................................................................17
4A. Key Developmental ConditionsInvestment decisions refer to those decisions that the investors and top-level managersundertake related to the amount of funds that are contributed in a particular investmentopportunity (Brealey, Myers & Marcus, 2012). These further determine the amount of capitalthat will be spent and the debt acquired for making a profit. Thus, an investment decision iscarried out between an investor and investment advisors. Investments can include eitherpurchase of financial instruments and assets for gaining profitable income or appreciation ofthe value of the investment made (Fabozzi, 2018). Some of the major factors that areconsidered by the financier before making an investment decision include risk tolerance orappetite, return or profits, tax exposure, market trends and investment horizon.Risk Tolerance or AppetiteRisk tolerance refers to the variability in the returns of an investment that an investor is ableto endure (Frank & Hesse, 2009). It is one of the principle conditions of an investmentdecision. A financier must have clear understanding about his or her ability and willingnessof risk appetite before making any investment decision to withstand the large swings in thevalue of the investment. Investors carry out risk-related surveys and questionnaires foranalysing the risk associated with a particular investment opportunity. Furthermore, he or shecan also review the worst-case scenarios of returns in different asset classes to retrieve anidea about the potential loss that might occur during bad years of investment. In addition,various other factors related to risk tolerance include time horizon of investment, futureearning capacity, home pension and social security (Roszkowski & Davey, 2010). All thesefactors influence the risk appetite of an investor largely. Risk tolerance can be of three types,namely, aggressive risk tolerance, moderate risk tolerance and conservative risk tolerance.Aggressive risk tolerant investors are likely to be market-savvy and possess an in-depthunderstanding of different asset classes and securities (Frijns, Gilbert, Lehnert & Tourani-Rad, 2013). This enables them to purchase highly volatile instruments of small companystocks or option contracts having no worth in the market. Moderate investors undertake abalanced approach for tolerating risk with a time horizon ranging between five to ten years(Frank & Hesse, 2009). They tend to invest in large company mutual funds possessing lessvolatile bonds and riskless securities. Finally, the conservative investors are risk averse andare not willing to accept any volatility in their investment portfolios.
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Portfolio Management of Dendy Park Tennis Clublg...
|16
|3603
|220