Su, Y and Lucko, G (2015) Synthetic cash flow model with singularity functions. II: Feasible prompt payment discount scenarios. Journal of Construction Engineering and Management, 141(3), ISSN 0733-9364
Abstract
Accurately comparing balances of normal versus discounted cash flow scenarios is the key for project participants to decide whether to offer or accept a prompt payment discount. Such a decision requires determining what rates and periods are acceptable. These values are calculated through a synthetic cash flow model that uses singularity functions. Singularity functions act upon limited ranges, which is ideal for modeling financial phenomena. A signal function is derived that expresses different payment scenarios and considers the time value of money. Research contributions to the knowledge of body include the following: (1) the model can calculate the balance accurately and efficiently; (2) the new approach evaluates the feasible range for a discount from the views of both payee and payer, which is verified with an engineering economics analysis; and (3) a streamlined process for decision making using new types of nomographs is provided, so that project participants can find mutually beneficial payment arrangements.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | cash flows; cost and schedule; nomograph; prompt payment discount; singularity functions |
| Index terms: | modelling, decision-making, engineering economics, cash flow, discounted cash flow |
| Subjects: | financial management, decision analysis, financial analysis, analytical methods |
| Topics: | Risk Management, Engineering Principles, Cost Management |
| Descriptive scope: | 2 PC |
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