Financial vs economic table & Link impact to valuation Essay Example

  • Category:
  • Document type:
  • Level:
  • Page:
  • Words:

Financial vs. economic impacts (Wyaralong Dam Construction)


Financial vs economic impacts of Constructing the Wyaralong dama 2

Investment Appraisal technique’ Net present value 2

NPV of the project (Construction of the Wyaralong dam) 2

Cost benefit Analys of the project (Wyaralong dam) 3


Passenger time savings 4

Valuation techniques 4

Water shrotage 4

Valuation technique: 5

Construction of the dam 5

Valuation technique: market prices 5

Loss of fisheries 6

Valuation technique: market prices 6

Financial vs. economic impacts of constructing the Wyaralong dama

Affect Financial (money) Economic (real)

Labour Labour Time wastage

Materials Market going prices Next best Options

Water quality Commercial fishing lost fish, retained inputs


More water supply Extra pay more output

Improved human life $ savings Alternative use of water

(Reduced water shortage)

Improve environmental $ savings More water, good Health

(Reduced medical payments)

Investment Appraisal technique’ Net present value

We will use the NPV appraisal technique to evaluate our project. NPV is the difference between yearly benefit and cost adjusted for the discounting rte and sum over the project useful life. The adjustment for the discounting rate entails the multiplication of the yearly cost, benefit or the net benefit by the discounting factor. The discounting factor is different as per the discounting rate chosen and the project useful life.

NPV of the project (Construction of the Wyaralong dam)

Time is 10years

Project discounting factor is 10%

Estimated Initial outlay is $246000, 000

Estimated Net benefit of the project is $815000, 000

Therefore, the estimated project Cost and Benefit for the project is as follows

Total cost

$ 246,000

Total benefit

$ 100,000

$ 110,000

$ 120,000

$ 815,000

Net benefit

$ 109,500

$ 569,000

Discount factor (10%)

$ 307,039

From the above NPV Analysis of the project, it is evident that the construction of Wyaralong dam would lead to positive NPV of $307,039. The implication is that the construction of the dam is viable since, it will bring more benefit to the society like constant supply of clean water for basic needs and improved living standards of the people leaving around. As a result, the project must be implemented since, the benefits of contracting the dam is more than the cost.

Cost benefit Analyse of the project (Wyaralong dam)

Cost-Benefit Analysis of Wyaralong dam project

Net Present Values in 2016 $ million



Present Value


More water

Cost saving from buying costly water

Cost saved: valued at $10/litre.

Water treatment cost saving

Less time spent in looking for constant supply of clean water

marginal operating costs by amount of water usage per day at 870% water usage per day

Extra use of water

Excess water above the normal litres required in the dam

Water billing fee monopoly that must be shadow pricing.

Economic multiplier effect

Spending by more people as planed creates flow on effect by growht in spending to maintain the dam and water quality

GEM multiplier adjusted to just comprise of usage assets ($455m undiscounted)

Enviroment safety

New dam will ensure that the enviroment is safe for animals living around

Asset value methodology

pre-emptive cost

Contingency valuation

sunk cost

market price

Dam Development

market price of inputs


Increased aircraft movements *

market prices

Lost fisheries

The construction of the dam will destroy fish breeding grounds & cloud the water as the construction in progress

approval of recompense

Change in value of output


Water effluence will harm aquatic animals and animals living around the dam for a short period under construction.

Water effluence will necessitate sanitization for business users

Loss of aquatic life

precautionary cost

surrogate cost

emergency assessment

Water shortage

Extra cost of buying water

Water cost: valued at $10/litre

Net benefit


Passenger time savings

Devoid of the new source of water, the demand for water will grow leading to poor quality of human life because of water shortage and costly water price that will exist which many may not afford. By getting rid of water shortage, the construction of Wyaralong dam will free citizens from water shortage and ensuring that every person gets the cheaply available water.

Valuation techniques

The number of water users is multiplied by the effect of water shortage and is appraised at 10/litre. As a result, water shortage factor was included. The shortage is different between people and class of people in the country, which increase as the demand for water increase and water supply decline as result of non-constant supply of water. The assumption about the new project is that the construction of new dam will ensure that there is constant supply of cheap and affordable water at every one at all time. The number of water uses is estimated to grow. The present value of the project is estimated to be $307,039,000

Water shortage

Devoid of the Wyaralong dam, the growth in the demand for clean and constant supply of water will lead to poor living standard and poor sanitation. By ensuring that there is constant supply of water, it will save life by ensuring that every gets sufficient and quality water at a cheap price.

Valuation technique:

Cost savings (loss of life and poor sanitation)

The construction of new dam will ensure that there is decline in the loss of life because of lack of water and costly water purchase of the existing water supply. The estimates are based on marginal operating cost for the dam with an assumption that the average water capacity of 70% of water storage in the dam is maintained.


Construction of the dam

The resource employed in the construction of Wyaralong dam depicts some alternative use that is lost to the community when the asset is employed in the dam construction.

Valuation technique: market prices

The construction assets are existing in a competitive market, which are ideal appraisal of the societal worth. In this regards, the market price employed in financial forecasting for the project are used.

Approximates cost of dam construction and associated facilities ($ millions April 2016 dollars)

Year of outlay




Fencing-perimeter road

Electrical-airfield lights

Control tower-navigation aids

Staffing Office

• hangars

• car park

• apron

• access road-bridge

Rescue-fire fighting



$ 200,000



$ 460,190

Multiplier flow-on to Sydney

Employment (no. of jobs)

Dam construction

Multiplier flow-on to Sydney

Present value in 2016 dollars is $307,039 million.

Loss of fisheries

The search in the Botany Bay for materials employed to fill the dam will pollute the water and hence affect the aquatic life. Less fish will be caught in the river in which the dam will be constructed. The loss of assets is because of the construction of the dam by blocking part of the river to save on water.

Valuation technique: market prices

Estimates of annual loss to fisheries

Value per




to amateur





King prawns


Present value in 2016dollars is $ 650,000.


, London : Cingage learning.Project Risk ManagementBarkle, B. (2004)

, Sydney: Springer.Doing a Research Project in Nursing and Midwifery: A Basic GuidComerasamy, H. (2013)

‎, london: Springer.Practice of Project Management — Page 353Dennis, E.F. (2005)

, London: Cingage Learning.Understanding Strategic ManagementHenry, A. (2011)

.ArgusMoran, K. (2015) ‘Floodplain needs work’,

, London: John Wiley’s & Son’s.Project Management for Environmental, Construction and ManufacturingMunier, N. (2012)

.office of enviroment Heritageoffice of enviroment Heritage (2016) ‘Project summaries — Restoration and Rehabilitation — community grants’,

, New York: Cingage Learning.Mastering Project Management Integration and ScopeSokowski, D. (2015)

, New York : John Wiley & Son’s.Project Management Communications Bible — Page 388Taylor, ‎. (2010)

Triantis, J. (2015) Navigating Strategic Decisions: The Power of Sound Analysis , London