DEVELOPMENT APPRAISAL

ANSWER
TUTORIAL 1

A. DISCOUNTED CASH FLOW APPROACH -NPV

PERIOD TOTAL 0 1 2 3 4 5 6 7 8

A. CASH INFLOW (GDV) 90,000,000

5% 5% 90%
TOTAL CASH INFLOW 4,500,000 4,500,000 81,000,000

B. CASH OUTFLOW 66,101,840

LAND & ACQUISITION COST 31,101,840 31,101,840
5% 10% 15% 15% 30% 10% 10% 5% 100%
TOTAL DEVELOPMENT COST 35,000,000 1,750,000 3,500,000 5,250,000 5,250,000 10,500,000 3,500,000 3,500,000 1,750,000

TOTAL CASH OUTFLOW 31,101,840 1,750,000 3,500,000 5,250,000 5,250,000 10,500,000 3,500,000 3,500,000 1,750,000
NET CASH FLOW -31,101,840 2,750,000 1,000,000 -5,250,000 -5,250,000 -10,500,000 -3,500,000 -3,500,000 79,250,000

DISCOUNT FACTOR @ QTR 1.71% 1.0000 0.9832 0.9667 0.9505 0.9346 0.9189 0.9035 0.8883 0.8734
7%
PRESENT VALUE (PV) OF CASHFLOW -31,101,840 2,703,876 966,736 -4,990,240 -4,906,542 -9,648,495 -3,162,222 -3,109,184 69,220,019
NPV 15,972,108

A$1 FOR 2 YRS @7% 1.1449

DEVELOPER'S PROFIT IN 2 YEARS TIME 18,286,466
SAY 18,286,000
% FROM GDV 20%
% FROM TDC 28%

B. DISCOUNTED CASH FLOW APPROACH -IRR -TRIAL AND ERROR 27% - 28%

I. WITH (+) NPV

R1 27% p.a
NPVR1 451,592

PERIOD TOTAL 0 1 2 3 4 5 6 7 8

NET CASH FLOW -31,101,840 2,750,000 1,000,000 -5,250,000 -5,250,000 -10,500,000 -3,500,000 -3,500,000 79,250,000

DISCOUNT FACTOR @ QTR 6.16% 1.0000 0.9420 0.8874 0.8359 0.7874 0.7417 0.6987 0.6582 0.6200

PRESENT VALUE (PV) OF CASHFLOW -31,101,840 2,590,489 887,357 -4,388,403 -4,133,858 -7,788,156 -2,445,471 -2,303,624 49,135,098
NPVR1 451,592

II. WITH (-) NPV

R1 28% p.a
NPVR2 -127,672

PERIOD TOTAL 0 1 2 3 4 5 6 7 8

NET CASH FLOW -31,101,840 2,750,000 1,000,000 -5,250,000 -5,250,000 -10,500,000 -3,500,000 -3,500,000 79,250,000

DISCOUNT FACTOR @ QTR 6.37% 1.0000 0.9402 0.8839 0.8310 0.7813 0.7345 0.6905 0.6492 0.6104

PRESENT VALUE (PV) OF CASHFLOW -31,101,840 2,585,415 883,883 -4,362,665 -4,101,563 -7,712,174 -2,416,869 -2,272,221 48,370,361
NPVR2 -127,672

IRR USING FORMULA

R1 27%
R2-R1 1%
NPVR1 451,592
NPVR1+NPVR2 579,264
IRR PER ANNUM 27.8%
 DEVELOPMENT APPRAISAL
ANSWER
TUTORIAL 1

C. PAYBACK PERIOD BY PERIOD (PBP)

PERIOD TOTAL 0 1 2 3 4 5 6 7 8

A. CASH INFLOW (GDV) 90,000,000

5% 5% 90%
TOTAL CASH INFLOW 4,500,000 4,500,000 81,000,000

B. CASH OUTFLOW 66,101,840

LAND & ACQUISITION COST 31,101,840 31,101,840
5% 10% 15% 15% 30% 10% 10% 5%
TOTAL DEVELOPMENT COST 35,000,000 1,750,000 3,500,000 5,250,000 5,250,000 10,500,000 3,500,000 3,500,000 1,750,000

TOTAL CASH OUTFLOW 31,101,840 1,750,000 3,500,000 5,250,000 5,250,000 10,500,000 3,500,000 3,500,000 1,750,000
NET CASH FLOW -31,101,840 2,750,000 1,000,000 -5,250,000 -5,250,000 -10,500,000 -3,500,000 -3,500,000 79,250,000

CAP OUT. FRM PREVIOUS PERIOD - -31,101,840 -28,882,392 -28,375,083 -34,109,120 -39,940,971 -51,122,305 -55,494,376 -59,941,028

INTEREST PER QUARTER @ 1.71% - -530,552 -492,691 -484,037 -581,851 -681,334 -872,071 -946,652 -1,022,506

CAP OUTSTANDING -31,101,840 -28,882,392 -28,375,083 -34,109,120 -39,940,971 -51,122,305 -55,494,376 -59,941,028 18,286,466

DEVELOPER'S PROFIT @ THE END OF PROJECT PERIOD 18,286,000

% FROM GDV 20%
% FROM TDC 28%
RESULTS

ASSESSMENT CRITERIA RESULT VIABLE JUSTIFICATION

DCF-NPV 15,972,108 √ Positive NPV

> INTEREST RATE OF

√
6%. > TARGET RATE
DCF-IRR 27.8% OF RETURN 20%
PAYBACK WITHIN
√
PAYBACK PERIOD 8 PROJECT PERIOD.
DEVELOPER'S PROFIT 18,286,000 -
RATIO PROFIT FROM GDV 20% √ >15%
RATIO PROFIT FRM TDC 28% √ >20%

ADVICE AND RECOMMENDATION