Assignment on Project Administrator
Added on -2021-02-21
| 12 pages| 3142 words| 96 views
Trusted by 2+ million users,
1000+ happy students everyday
Showing pages 1 to 4 of 12 pages
PROJECTADMINISTRATION
Table of ContentsINTRODUCTION...........................................................................................................................3MAIN BODY...................................................................................................................................3A) Net present value calculation and financial as well as economic perspective.......................3B) Inflation rate...........................................................................................................................4C) Relevance of ACT Government's borrowings rate................................................................5D) Relevance of generated traffic...............................................................................................5E) Explanation of opportunity cost.............................................................................................6F) Explanation of 'do nothing case'.............................................................................................62. a) Confidence level on the project cost and benefits...............................................................6b) how susceptible the business case will change and emergence..............................................7C) Criticism of proposals ...........................................................................................................8CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9
INTRODUCTIONProject administration refers to the administration of the function related to the project. Itmay include the contact with contractors, suppliers, government regarding the project cost andtime required to complete the project. The report highlights two options for upgrading Airportroad. It explains the net present value of two option to determine the best plan on both financialand economic perspectives. It also explains the inflation rate, ACT Government Borrowings rateand general traffic in respect to upgrading airport. It also highlights the project cost and benefitsof both the projects and the changes in the changes and emergence in the business case. Thereport criticizes the both proposal on the stakeholders point of view identify the best option fordeveloping the airport in efficient time and cost.MAIN BODYA) Net present value calculation and financial as well as economic perspectiveThere are two important project K1 and K3, before carrying out discussion on NPV andfinancial as well as economic perspectives it is important to understand both projects in detail. Incase of K1 there is proposal to develop new free ways with overpasses/underpasses at majorarterial road intersections. On other hand, in case of K3 minor work will be done to maintaininteraction between roads. NPV results are indicating that project K1 is profitable because itsNPV is $371,537,259. It can be seen that positive value is very which strongly reflect that projecthave huge profit potential. On other hands, in case of project K3 there are three options in termsof cash flow expected to generate which are $58000 per annum, $93000 per annum and $28000per annum. It is observed that net present value in case of all these three projects and notprofitable. In case of first alternative for project K3 where cash inflow is 58000 per annumnegative NPV of $-944,157,043 is obtained. On other hand, in case of second alternative forproject K3 where cash inflow is 93000 per annum negative NPV of $-943,648,362 is obtained.Apart from this, in case of third alternative for project K3 where cash inflow is 28000 per annumnegative NPV of $-944,593,055 is obtained. All alternatives in respect to project K3 havenegative cash flows which make it less attractive project.Financial perspectiveFinancially good amount of returns is not obtained on K3 project because expenditure ismade on widening of roads and major expenditure is associated with road maintenance cost.3
Hence, new road is not constructed and due to this reason, any additional earning cannot begained. This is the main reason responsible for negative NPV on the project.Economic perspectiveFrom economic perspective it can be said that project will be going for long term.Construction activity will start from year 3 to 6. Up to 6 years’ time period excavation willhappened. So, in the project for performing single activity long time is required. Which lead toelevation in project cost. Inflation rate is expected to increase from 2.75% to 5% and due to thisreason in upcoming time period project cost may elevate. Through industrial park ACTgovernment is expected to receive $50 million per year which is higher amount of cash flow insingle year. It can be said that this factor will make K1more profitable project. However, in caseof project K3 situation is inverse and, on this front, there is need to maintain strict control oncost. Thus, it can be said that project is for long term and due to this reason number of factorsneed to be taken into account. Moreover, with change in economic condition of the nationproject estimations may also change significantly. B) Inflation rateInflation rate: It refers to the rate which are used by the government to increase fixedrate or price on the selected goods and items over the time period. The increasing inflation ratereduce the purchasing power of the customers (The Importance Of Inflation And GDP, 2019).The inflation rate in the question is 2.75% for the first 10 years and after that it rise to 5% fornext 20 years. It indicates that the cost of production or upgrading the Airport by arterial road isincreasing year by year because of the increasing inflation rate. It also reduces the net presentvalue of both the options.The increasing inflation rate also increases the maintenance cost, construction cost etc. inthe following project (Oda, 2016). The estimation of inflation rate helps the project to ascertainthe cost and profit related to the project. In the above case if the select the option 1 for upgradingairport than they have to prepare the plan regarding the various cost such as construction cost,right of way, housing acquisition, maintenance cost etc. The inflation rate helps to estimate thecost of following activities occurred in future and develop the plan to acquire find from differentsources.4
Found this document preview useful?
You are reading a preview
Upload your documents to download
or
Become a Desklib member to get accesss
Paid Plans
Free Plan
Single Unlock
Monthly Plan
Yearly Plan