EPM5750 Project Investment Analysis: City Highrise Development

This report presents a financial analysis of the City Highrise Development project, evaluating its viability for investment. It encompasses various aspects, including development costs, revenue forecasts, and sensitivity analyses under optimistic and pessimistic scenarios. The project is divided into phases, from demolition to landscaping, with a total estimated timeframe of 36 months. Key assumptions include independent project phases, debt financing at 12%, and a 4% annual inflation forecast. The analysis incorporates market, business, and macroeconomic risks. While the developer's perspective shows potentially negative net present value due to changing business conditions, the project is deemed successful from John Wiley Pty Ltd's viewpoint, considering terminal value and exit strategies. The report includes a project evaluation letter, executive summary, detailed spreadsheets, Gantt charts, and recommendations for project management and development, emphasizing the importance of risk acceptance for project success. Desklib provides access to this and other solved assignments to aid students in their studies.

Running head: PROJECT ANALYSIS
PROJECT ANALYSIS
Name of the Student:
Name of the University:
Author’s Note:

1CITY HIGHRISE DEVELOPMENT PROJECT
City Highrise Development Project

2CITY HIGHRISE DEVELOPMENT PROJECT
Serial Particulars Yes No
1 Initial Development Cost Outflow Evaluation Yes -
2 City Highrise Project Outlay Yes -
3 Forecasting Cash Flow Outlay from the Project Yes -
4 Total Profit Evaluation with financial tools Yes -
5 Total Outflow for the project Yes -
6 Financing Cost of the Project Yes -
7 Rise in Expenses Yes -
8 Return generated from the Project Yes -
9 Evaluation and Forecasting Earnings of the Project Yes -
10 Exit Route/Sale of City Highrise Yes -
11 Cash Inflow for the Developers Yes -
12 Profit generated for the John Willey Pty Ltd Yes -
13 Yield generated by the company under different scenario Yes -
14 Leveraging Effect Yes -
15 Types of Risks Associated with the Project Yes -
16 Sensitivity Analysis Yes -
Checklist for the Assignment

3CITY HIGHRISE DEVELOPMENT PROJECT
Project Evaluation Letter
184/A Wall Street,
Brisbane, VIII 3000
Telephone [phone]
8620
www.financialadvisoryservice.com.
16th October 2018
Mr Mellon Mark
The Managing Director
City Highrise Complex Project Development Option.
Floor 8, Park Avenue Street
Brisbane SA 78520.
Dear Mr Mellon,
Sir, we are delighted to inform you that as per the guidelines provided by you for the
evaluation of the City Highrise Development project the same was evaluated and the findings
of the project has been described brief in the report attached. We would like to inform you
that the financial evaluation for the project City Highrise Development Complex was done by
incorporating several developments cost and revenue forecast for the same was evaluated
under different set of scenarios. The key assumptions taken in the project are highlighted
according to the business and macro-environmental analysis.

4CITY HIGHRISE DEVELOPMENT PROJECT
The project was grouped according to the different phase of the development and the
same was analysed for the project. The key risk involved in the project like the market risk,
business risk and macro-economic risks like demand and supply of the real estate and
inflation were accounted for the forecast. Sensitivity analysis performed gave us the brief
idea of the different possible scenario analysis from the project. The project analysis under
different scenario though has some aspects of risks involved but the same should be accepted
by the project.
Please note in case of any query and information needed for the analysis portion of the report
you contact us at our official email address.
Yours Sincerely
Financial Advisor
Financial Advisory Services
Enclosure: Investor Advisory Service
Cc: Harvard Paul

5CITY HIGHRISE DEVELOPMENT PROJECT
Executive Summary
The aim of the project is to conduct a financial analysis on the City Highrise Development
project. A financial analysis was done on the project to check the financial viability of the
project for the purpose of the investment. The various aspect of the project like the
development cost and the revenue analysis was done on a forecasting basis in order to get the
financial viability of the project. The key analysis of the project when the different
components were analysed and a sensitivity analysis was performed on the basis of the
different component of the project. The project scenario was evaluated under different
scenario under optimistic and pessimistic scenario to get the outcome of the project as the
business and macro-environment factors changes. The project from the developer’s point of
view does not deliver better returns an negative net present value for the developer of the
project was evacuated du to changing business and macro-economic conditions of the project.
However it is crucial to note that the project from the John Wiley Pty Ltd was a successful
one where the terminal value was forecasted an exit route of the project could potentially
turnout differences in the project.

6CITY HIGHRISE DEVELOPMENT PROJECT
Table of Contents
Project Evaluation Letter............................................................................................................3
Introduction................................................................................................................................8
Assumptions...............................................................................................................................9
Methodology............................................................................................................................11
Spreadsheet Computations and Graphs....................................................................................11
Part A...................................................................................................................................11
Part B....................................................................................................................................15
Discussion and Recommendations...........................................................................................17
Part C....................................................................................................................................17
Financial Leverage...........................................................................................................17
Part D...................................................................................................................................18
Risk and Sensitivity Analysis...........................................................................................18
Three Key Risk Evaluation..............................................................................................18
Sensitivity Analysis..........................................................................................................19
Conclusion................................................................................................................................19
Reference..................................................................................................................................21

7CITY HIGHRISE DEVELOPMENT PROJECT

8CITY HIGHRISE DEVELOPMENT PROJECT
Introduction
The City Highrise Development project Evaluation was based on the real
estate valuation approaches. The development project taken under consideration depends
upon the cost approach of real estate valuation of the City Highrise Project. The project has
different key components involved from the development of the project were the components
involved in the time frame like land acquisition costs and legal work are carried on for the
project. The development of the planned project begins after the demolition of the existing
old building/project taken under scenario (Agarwal, Ben-David and Yao 2015).
The first part of the project deals with the demolition and the settlement period. The
planning and designing cost is the other phase of the project that will start in the second phase
of the project where the project will take approximately take around 6 month of time for the
planning of how the construction will go on and the relevant designing of the City Highrise
Development project (Aizenman and Jinjarak 2014). The construction phase will soon after
the planning and designing period and after the demolition of the existing building. The
landscaping and the external work will start after the construction period of the City High rise
project. Thus an estimated all total of 36 month is the total time period analysed for the
development of the City Highrise project (An et al. 2016).
Demolition
Phase
Planning and
Designing
Phase
Construction
Phase
Landscapping
and External
Workings

9CITY HIGHRISE DEVELOPMENT PROJECT
Four Phase of the City Highrise Development Project
The key financial evaluation of the project helped us review when we performed an
sensitivity analysis on the same and forecasted the different scenario with the expected cash
outflow and inflow under optimistic and pessimistic scenario. The Assumption, Methodology
and the recommendations for the management and developer of the City Highrise Project
were outlined in the project (Bora 2015).
Assumptions
The key assumptions involved in the analysis of the City Highrise Project has helped
us evaluate the financial viability for the project. The key assumption in the Development
project was that the demolition of the existing building, planning and designing phase of the
project will be independent of each other while the construction period and the planning and
designing phase will go on hand by hand that is will be dependent (Cucchiella, D’Adamo and
Gastaldi 2015). The landscaping and the external working of the project will be completed
after the construction phase of the project which will be an independent phase of the project.
The total construction cost will be taken as a debt financing cost for the company where the
company will be going for financial leverage at the rate of 12% on the total development cost
of the project (Cupal 2014). The inflation forecast for the project is taken as 4% per year and
the same is expected to increase the development cost of the project by the forecasted
inflation. The increase or the escalation of the revenue is forecasted from the first year itself
which will help the company earn better results and result in increased earnings from
forecasted rental income (Del Giudice, De Paola and Cantisani 2017). The development costs
accounted in the project outlay will be accounted on an annual basis which will be compiled
with the development cost of the project the same was also accounted with inflation forecast.
The Cash flows generated from the project was taken as a final return generated from the

10CITY HIGHRISE DEVELOPMENT PROJECT
project as annual expected cash flow from the City Highrise project which was then mapped
with the discount rate or the required rate of the project to get the Net Present Value of the
Firm (Del Giudice, De Paola and Forte 2017). The Assumption used in determining the
developers profit and the cost at which the John Willey Pty Ltd will acquire the City Highrise
project is at a cost approach of valuation. The premium was calculated at the yield of 5%
premium over the total development expense after accounting of all expenses and all cash
outflows.
Construction Scheduled/Project Dispersion/Gant Chart
Components
Total
Time Year 2018 Year 2019 Year 2020 Year 2021
Relevant Activities
36
Month
s
30.06.
18
31.12.
18
30.06.
19
31.12.
19
30.06.
20
31.12.
20
30.06.
21
31.12.
18
Demolition Phase 3
Planning and Designing
Phase 6
Construction Phase 20
Landscaping and External
Working 6
9%
17%
57%
17%
Construction Scheduled/Project
Dispersion/Gant Chart
Demolition Phase
Planning and Designing
Phase
Construction Phase
Landscapping and External
Working

11CITY HIGHRISE DEVELOPMENT PROJECT
Methodology
The City Highrise Project was first divided into four key component phase of the
project from the development stage to the Landscaping stage that gave us a crucial idea for
about distributing the key costs and variable costs and components involved with the same
(Dziadosz and Meszek 2015). The Project outlay prepared acted as a key plan and was the
proper content for us to develop a methodology for proceeding with the financial evaluation
and analysis of the same (Gabriel et al. 2016). The financing cost for the company and the
development cost for the company and the other inflation forecast were incorporated into the
project outlay section of the report. The total cost of development was calculated at first then
the cash expenditure analysis was done in order to get an overview of the project (Glaeser et
al. 2017).
Demolition Phase
Planning and Designing Phase
Construction Phase
Landscapping and External
Working
0 5 10 15 20 25
Construction Scheduled/Project
Dispersion/Gant Chart
Spreadsheet Computations and Graphs
Part A
1) Total Development Cost as at 1st July 2018.
Part A
Cost Outflow for Development of the Project as at 1st July 2018