Project Costing and Financial Management

Project Costing and Financial Management
MPM 581
A INDIVIDUAL WRITTEN ASSIGNMENT – Project Funding Sources & Methods
Done by: Rafef kaes Al anee
ID:1038089
Submitted to: Professor Dr. Christopher Preece

PROJECT COSTING AND FINANCIAL MANAGMENT 2
Table of Content
1.0 Question 1: What is project financing? What are the varieties of funding sources available?..3
1.1 Introduction............................................................................................................................3
1.2 Loans......................................................................................................................................3
1.3 Grants.....................................................................................................................................4
1.4 Equity.....................................................................................................................................4
2.0 Question 2: What are the benefits and risks of joint-ventures to the long-term business plan
and funding of projects?..................................................................................................................5
2.1 Benefits..................................................................................................................................5
2.2 Risks.......................................................................................................................................5
3.0 Question 3: Project financial management requires very detailed processes concerning
planning, control and administration and records. Briefly describe these processes with reference
to PMBOK.......................................................................................................................................6
4.0 Question 4: What is the definition of; i) resource planning, ii) cost estimating, iii) cost
budgeting and iv) Cost control?.......................................................................................................7
4.1 Resource Planning..................................................................................................................7
4.2 Cost estimating.......................................................................................................................7
4.3 Cost budgeting.......................................................................................................................7
4.4 Cost control............................................................................................................................8
5.0 Question 5: Is cost control the biggest challenges in project cost and finance management?
Why?................................................................................................................................................8
6.0 Conclusions................................................................................................................................8
7.0 References................................................................................................................................10

PROJECT COSTING AND FINANCIAL MANAGMENT 3
1.0 Question 1: What is project financing? What are the varieties of funding sources
available?
1.1 Introduction
Project financing can be defined as the financing or funding of term infrastructure that is
long term, that is industrial and public services by utilizing the limited resources available or by
using secured loans. The cash generated from the particular project will be used to settle the loan
whereas the project will be financed by equity (Lee, Lim, & Arditi, 2013). The private sector
project financing over other financing options because big projects can be funded off the balance
sheet. Interests, rights, and project assets act as secondary collateral (Finnerty, 2013). In order to
protect other assets owned by sponsors of the project from possible failure, an entity created for a
special purpose for any project. To ensure that the project is viable, the owners are sometimes
expected to provide a capital contribution commitment. The major component in project
financing is risk identification and allocation.
There are a variety of funding sources available for project finance. The nature of a
company is a big determinant on the sources that can be used; a projects cash flow, overall cost,
liability, and claims to projects assets and incomes are the key implications in financial
alternatives (Milosevic, & Martinelli, 2016). Some of the main financial sources are loans,
government grants, and equity. Additionally, there exists diverse benefits and risks that joint-
ventures experience to the long-term business plan and funding of projects that appear vital for
the day to day business operations. Moreover, project financial management basically needs
detailed processes that concerns planning, control and administration and records based on the
aspect of PMBOK. Furthermore, major challenge that affect a start-up projects is getting
required sources of funds that are needed in order to start the business operations are discussed in