Venture Project Economics and Finance: Case Study Analysis

This report provides a comprehensive analysis of the Ravenhall Prison Project, focusing on its economics and finance. It begins with a project background, objectives, and justification, followed by an overview of assumptions and constraints. A detailed literature review explores various economic analysis techniques and tools, including Equivalent Uniform Annual Cash Flow, Present Worth (Net Present Value), Internal Rate of Return, Modified IRR, and Cost-Benefit Analysis. Additionally, the report examines Multi-Attribute Decision-Making Models (MCDM), including MADM and the Analytical Hierarchy Process (AHP), along with best practices and strategies for business growth. The report also includes a section on the Profitability Index and concludes with recommendations for a financial model or plan for the case project. The report assesses the economic evaluation of the project by considering the expenses and total funding for the completion of the project.

Running head: VENTURE PROJECT ECONOMICS AND FINANCE
Venture Projects Economics and Finance
Name of the Student:
Name of the University:
Author’s Note:

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VENTURE PROJECT ECONOMICS AND FINANCE
Table of Contents
1. Introduction..............................................................................................................................3
1.1 Project Background...........................................................................................................3
1.2 Project Objectives and Justification..................................................................................4
1.3 Assumptions and Constraints............................................................................................6
2. Literature Review....................................................................................................................6
2.1. Overview of Project Economical Analysis Techniques and Tools...................................7
2.1.1. Equivalent Uniform Annual Cash Flow..................................................................10
2.1.2. Present worth (Net Present Value)..........................................................................12
2.1.3. Internal Rate of Return............................................................................................12
2.1.4. Modified IRR...........................................................................................................13
2.1.5. Cost-Benefit Analysis..............................................................................................13
2.2 Other Decision Making Models - Multi-Attribute Decision-Making Model.................15
2.2.1 MCDM in Financial Decision Making for Projects...............................................16
2.2.2 MADM....................................................................................................................16
2.2.3 Analytical Hierarchy Process (AHP).......................................................................17
2.2.4 Best Practices for Business Growth.........................................................................17
2.2.5. Business Growth Strategies.....................................................................................19
2.2.6 Profitability Index..................................................................................................20
3. Recommendations for case project financial model or plan..................................................21

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Reference List and Bibliography...................................................................................................22

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1. Introduction
With the advent of science and technology there have been various venture projects that have
been developing all over the globe in order to improve the economic and the operational
structure of the world. It has been observed that there are various projects that have been
constructed in order to build new buildings and artifacts that would enhance the lifestyle of the
human beings living in this world(Schaper, 2016).
This paper therefore is being constructed in order to undertake a fundamental analysis of on
ongoing project that is functioning in Melbourne so that a clear idea about the background of the
project along with its objectives can be understood. The assessment of the economic analysis and
tools and techniques would even be discussed and the cost benefit analysis of the project can
even be understood so that a clear cut idea about the project can be taken into consideration. This
paper therefore has considered Ravenhall Prison Project that has been operating from the year
2014 and still continuing so that precise knowledge about project and the cost associated with it
can be gained.
1.1 Project Background
The Ravenhall Prison Project is being constructed in order to provide a new medium-security
prison facility in order to provide accommodations to around 1000 prisoners and this project has
been predicted to be completed by the end of 2017. In the year 2014 on 15th September, the
Victorian state made a contract with GEO consortium in order to build, finance, design, operate
and maintain a new medium-security prison for men, which would be situated in Ravenhall, in
the west of Melbourne(Treasury and Finance - Ravenhall Prison - Project Summary 2017).
Ravenhall has been a key part of the prison expansion program of Victoria. The prison even has

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the ability to expand in future in order to accommodate around 1300 prisoners if deemed
necessary.
The new prison that is under construction would deliver the infrastructure and prison beds in
order to aid in explaining for the correctional services that have been demanded in Victoria. The
prison has been constructed on the existing Crown land at Ravenhall that is contiguous to the
Metropolitan Remand Centre and the dame Phyllis Frost Centre. The land is specifically flat in
nature and comprises of open paddocks that consists of vestige native grassland patches and few
trees that are scattered. The required planning along with the cultural heritage and environmental
approvals for this area are in place.
This project has been a joint venture of the public private partnership in which the private
sector is accountable for constructing, financing, operations, design and maintenance that are
custodial in nature. This project would provide increased value for money with respect to the
correctional services and even provide increased quality.
GEO Consortium was appointed to deliver the project after the completion of a tender
process and a contract was signed in the year 2014 in September. GEO Consortiu, consists of
John Holland Group, Capella Capital, Honeywell and GEO Group Australia. The essential
alliance partners are inclusive of the Gathering Place and Melbourne City Mission, Kangan
Institute and YMCA who would deliver services and programs in both post-release and the
prisoners under custody(Treasury and Finance - Ravenhall Prison - Project Summary 2017). The
health services within the prison would be given by Correct Care Australasia and the forensic
services of mental health at the prison would be given by Forensicare.

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1.2 Project Objectives and Justification
The construction of the project has been undertaken in order to improve the safety of the
society by humanely and securely preserving the prisoners and giving them with services and
programs that have been constructed in order to decrease the extent of reoffending.
This project reveals a key investment in the infrastructure and services of the prison with the
help of which GEO Consortium would deliver an innovative facility that would perform a key
role in the correctional system of Victoria. This project would be influential for generating
economic advantages as well as increasing employment with the establishment of 700 jobs
during the period of peak construction and ongoing jobs that would be more than 600. The
construction of the project would lead to development of new jobs in that area and thereby
increasing the employment rate and in a way benefit the economy(Burchardt et al., 2016). The
objectives of the project and the area of the focus has been explained as follows:
 Provide added capacity in the prison system of Victoria
 Provide added forensic metal health services to the prisoners
 Provide supplementary capability in order to lower the reoffending
 Encourage practices that are innovative in nature and effective operations that would
assist the value for money
The justification for the construction of the research project has been in order to secure
and safeguard the communal harmony and to maintain the prisoners in the prison cell in an
effective manner. The construction of a prison that would consist of various innovative
amenities would boost the confidence of the prisoners and would help them in turning over a
new leaf and start their life effectively(Gatti, 2013). The project construction is done in order
to focus on various aspects like targeted approach for the prisoners who are having

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challenging behavior, indigenous prisoners and improved responsiveness towards the
complexities of the young prisoners.
1.3 Assumptions and Constraints
The project has been constructed by depending on the financial capacity and the assumptions.
The assumptions of the project include identifying the financial capability of the participants and
the participating members in order to deliver the project within its completeness(Block et al.,
2017).
There are various constraints that are related to the project like the risks that are associated
with the planning of the project and gathering approvals for the planning, risks in the site like the
native titles and contamination of the sites, construction risks and the design risks in order to
construct the prison project and lastly the operational and the financial risks that are associated
with the completion of the prison project. Therefore, the risks are allocated and transferred
effectively in order to reduce the level of risks and thereby helping in improving and smooth
flow for the construction of the prison project.
2. Literature Review
The literature review would comprise of the various data and tools that have been used by the
project on order to determine their operational activities and to undertake economic analysis and
the cost benefit analysis of the Ravenhall Prison Project. This section of the paper would provide
an extensive research and analysis of the cash flows, the present worth, internal rate of return
along with the profitability index and business growth strategies and its best practices so that the
project can be concluded precisely. The use of the MADM and MCDM financial analysis

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process would be influential for understanding the process that would be used in order to
understand the current financial and economic position of the Ravenhall Prison Project.
The project explains about the literature review and the explanation regarding the economic
analysis and the cost benefit analysis of the Ravenhall Prison Project. A small overview of the
risk evaluation model of Ravenhall Prison Project in Melbourne Victoria will be discussed in this
section. The process of economic analysis are defined as the mathematical and statistics and
graphics. The economic analysis is based on the various methods of the economic sensitivity and
in order to make effective recognition of the similar input, it is essential to investigate two or
more processes.
2.1. Overview of Project Economical Analysis Techniques and Tools
Australia is regarded as a vivacious free democracy of the market and there has been
vibrant economic progress that has been possible due to absence of any sort of recessions. The
effective process of the government has been beneficial for the economy and a free well-
functioning legal system, bureaucracy has led to effective entrepreneurial enhancement.
Australia is considered as an attractive and dynamic position for investment(Stiglitz,
&Rosengard 2015). In most of the scenarios, the government has decreased the investment and
has influenced the private sector to undertake investments. This has been observed in the
Ravenhall Prison Project where investments are undertaken mainly by the private sector. The
country has been effectively competitive in the technological areas and services. The income tax
rate is around 45% and the rate of corporate tax has been 30%.
One of the optimistic parameters of project start up in Australia has been rate of start up
being higher as they have the probability of contributing to the expansion. The new business
ventures in Australia like the variations in funding sources and projects like the Ravenhall Prison

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Project tries to make use of the equity finance during the primary stages of the constructions. The
country has been experiencing shocks and problems in the during the past few years but during
the first quarter of 2017, the economy has recovered from this situation and this has led to rise in
the confidence for the business and the consumers and this in way would have a positive impact
on the investment of the business and spending of the investors. The Australian economy is
considered to be within a solid base in spite of the various weaknesses in the investments that are
non-mining in nature. With respect to Ravenhall prison project in Australia it has been observed
that the project has been experiencing growth and as this is an on-going process and this has led
to rise in investments(Coates 2014). The Australian economy has remained very is strong in spite
of the rise in the price of diesel and this has led to the fall in the disposable income for the
consumers. The economy of the country has been developing with the rise in the rate of interest
which is being used for reducing the rate of inflation. The growth of the economy has been
possible as the government has been reducing the rate of taxation. This would encourage the
investors of the project business to increase their investments in the Ravenhall Project Prison.
This has led to the construction of the prison much more effectively. The analysis of the
Ravenhall Prison has been possible by undertaking economic analysis like the construction of the
variables that are available in the project and the identities, functions and the equations that have
been seen in the project report of Ravenhall Prison Project.
The economic assessment of the project has been possible by looking at the expenses and
the total funding that has been undertaken for the completion of the project. The table below
would provide an overview of the economic evaluation of the project.
Particulars Amount
Residual
Value

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Non-Current Assets:
Trademark 500000 0
Patent 750000 0
Property,Plant& Equipment 15000000 4500000
Furniture & Fittings 1000000 150000
Motor Vehicle 1500000 600000
Computer Equipment 1500000 0
Preliminary Expenses:
Business Registration 100000
License Fees 150000
Deposit for Electricity 100000 100000
Deposit for Telephone &
Internet 50000 50000
Recruitment Cost 30000
Share Issuance Cost 35000
Bond Issuance Cost 20000
Other Miscellaneous Expenses 75000
Working Capital:
Purchase of Raw Material 30000000
Wages & Salaries 20000000
Manufacturing Overhead 13000000
Selling & Marketing Expenses 690000
General Administrative
Expenses 338250 64028250
TOTAL START UP COST 84838250
Capital Funding:
Equity Capital 38177213
5 yrs. Bond 27996623
Loan From Bank 18664415
TOTAL CAPITAL
EMPLOYED 84838250

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The notice that has been allocated to each of the employees who are performing for the
construction of the Ravenhall Prison Project has been given in the form of the table which
provides a guideline of the process that would be utilized for the completion of the project within
the scheduled time period.
Assignment Start date Submission Duration
Start up 15/09/2014 31/12/2017 3 years
Activity 1- Researching
the Australian markets
and its economic
scenario
20/09/2014 21/12/2014 3 months
Activity 2- Financial
evaluation of project
13/03/2015 31/12/2015 9 months
Activity 3-
Determining the
financial viability of
project by selecting the
best alternative
31/03/2017 09/04/2017 2 weeks
2.1.1. Equivalent Uniform Annual Cash Flow
The equivalent uniform cash flow of Ravenhall Prison Project has comprises of the
outflow and the inflow of the cash flow(Dopp et al., 2014). The cash flow from the operating
expenses refers to the payments made to the suppliers, direct labor cost. The annual cash flow for
the organization has been given below:
Particulars Year 1 Year 2 Year 3

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Cash Flow from Operating
Activities:
Cash Sales $56,000,000 $61,418,000 $67,360,192
Collection from Debtors $77,000,000 $91,449,750 $100,297,513
Cash Purchase ($24,000,000) ($26,322,000) ($28,868,654)
Payment to Suppliers ($30,000,000) ($38,902,500) ($42,666,317)
Direct Labor Cost ($36,666,667) ($43,547,500) ($47,760,721)
Manufacturing Expenses ($26,000,000) ($28,515,500) ($31,274,375)
Insurance ($12,000) ($12,300) ($12,608)
Rates & Taxes ($6,500) ($6,663) ($6,829)
Salary of Office Staffs ($91,667) ($102,292) ($104,849)
Cleaning Charges ($5,000) ($5,125) ($5,253)
Electricity for Office ($13,750) ($15,344) ($15,727)
Telephone & Internet ($7,333) ($8,183) ($8,388)
Salary of Marketing Staffs ($137,500) ($153,438) ($157,273)
Sales Commissions @1.5% on
Sales ($700,000) ($767,725) ($842,002)
Travelling charges @2% on Sales ($350,000) ($383,863) ($421,001)
Income Tax Expenses ($1,833,185) ($2,222,795) ($2,646,860)
Cash Inflow/(Outflow) from
Operating Activities $13,176,398 $11,902,524 $12,866,848
Cash Flow from Investing
Activities:
Purchase of Non-Current Assets ($20,250,000)
Preliminary Expenses ($560,000)
Sale of Assets
Return on Deposits
Cash Inflow/(Outflow) from
Investing Activities ($20,810,000) $0 $0
Cash Flow from Financing
Activities:
Share Issue $38,177,213
Bonds Issue $27,996,623