Ranasinghe, M (1996) Total project cost: A simplified model for decision makers. Construction Management and Economics, 14(6), pp. 497-505. ISSN 01446193
Abstract
A simplified model for total project cost is developed in this paper to meet the numerous requests from decision makers for a model that can be used to estimate the total project cost from the estimated cash flows and, more importantly, to check the accuracy of the project cost estimates in feasibility studies that require prudent decisions. It begins with a base cost estimate in constant dollars and discrete cash flows with discrete inflation rates as practised by the construction industry. The discrete inflation rates are used to estimate the current dollar costs of the project. The effects of inflation are estimated as escalation during construction. Using the future value concept, interest during construction is estimated, in a simplified approach, to estimate the total project cost. Data from an actual feasibility study is used to highlight the strengths and weaknesses of the simplified model. The model is extended to treat discrete cash flows with continuous inflation rates.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | cash flows; escalation; future value; inflation rates; interest; total project cost |
| Index terms: | estimate, construction industry, cost estimate, accuracy, project cost, cash flow, feasibility study, inflation |
| Subjects: | industry analysis, professional development, economics, financial management, economic analysis, financial and cost management, design stages |
| Topics: | Research Practice, Information Management, Cost Management, Business Strategy, Design Practice |
| Descriptive scope: | 4 PCTA |
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