FEASIBILITY STUDY

Course Code:

REAL103

Semester:

A Semester

Course Hours:

2

ECTS:

7,5


Course Tutors

Gkikas Grigoris

Course Outline

Week 1 : General Information on Investment

  • The Concept of Investment and the Investment Plan
  • The Importance of Investment in Economic Growth
  • Investment categories
  • The Multidimensional Character of Investment
  • Why are Feasibility Studies needed?

 

Week 2 : Savings and Economic Growth

  • Savings as a Determinant of Economic Growth
  • The Role of Financial Markets in the Convertibility of Savings into Investments
  • Credit Policy and Economic Development

 

Week 3 Investment Cycle and Feasibility Study Structure

  • Prefeasibility study
  • Feasibility study
  • The Structure of a Feasibility Study
  • Feasibility Study versus Business Plan
  • Stages of Business Plan Development and Business Plan Structure

 

Week 4 : Value of Money in Time

  • Future Value (Simple Interest, Compound Interest – Compounding Frequency, Annual Effective Rate)
  • Present Value
  • Payment series – Annuities (Future Value of Overdue Annuity, Present Value of Overdue Annuity, Present Value of Annuity in Perpetuity)

 

Week 5 : Bank Financing in the Real Estate Market

  • Loan interest rate
  • Insurance of the lending institution
  • Currency of the loan
  • How to repay the loan
  • Analysis of the borrower’s creditworthiness.

 

Week 6 : Estimating the cash flow of an investment

  • Calculation of Initial Investment Cost
  • Operating Cash Flow
  • Estimation of Revenue from Sales
  • Estimation of Operating Costs
  • Dealing with Depreciation
  • Addressing Residual Value
  • Estimation of Working Capital
  • Determination of Change in Taxes
  • Ignoring the Interest
  • Final assessment
  • Net Cash Flow
  • Case studies

 

Week 7 : Determination of the Discount Factor

  • Sources of funding
  • Cost of Capital
  • Cost of the Components of the Capital Structure
  • Asset Valuation Template
  • Dividend Discount Template
  • Risk reward model

 

Week 8 : Investment appraisal

  • Average Annual Return
  • Period for repayment or recovery of the investment
  • Discounted Period of Recovery of Investment
  • Net Present Value
  • Profitability Index
  • Internal Rate of Return
  • Comparison of the Net Present Value and Internal Rate of Return methods
  • Modified Internal Rate of Return

 

Week 9 : Property Valuation Methods

 

  • Income Method or Income Capitalisation Method or Investment or earnings Method:
  • Discount Cash Flows technique and
  • Technique of Direct Capitalization
  • Comparative Method
  • Residual method
  • Method of determining the objective value
  • Practical applications of real estate valuation methods using EXCEL Spreadsheets

 

Week 10   Real Estate Investment Evaluation Methods

 

  • Evaluation of real estate investments using the Net Present Value method
  • Evaluation of real estate investments with the Profitability Index
  • Evaluation of real estate investments using the Internal Rate of Return method
  • Practical applications of real estate investment appraisal methods using EXCEL Spreadsheets

 

Week 11 : Sensitivity and Risk Analysis

  • Risk measures
  • Methods of Risk Inclusion in the Capital Investment Budget:
  • Risk – Adjusted Return Method
  • Certainty Equivalent Approach
  • Scenario Analysis
  • Sensitivity Analysis
  • Decision trees