Article ID: | iaor2003185 |
Country: | United Kingdom |
Volume: | 20 |
Issue: | 5 |
Start Page Number: | 351 |
End Page Number: | 363 |
Publication Date: | Jul 2002 |
Journal: | International Journal of Project Management |
Authors: | Tiong Robert L.K., Hwee Ng Ghim |
Keywords: | project management, engineering, financial, construction & architecture |
When a construction project is in progress, it would be beneficial to the contractor if prior knowledge on trend of cash flows in the project is available. The purpose of this paper is to present a computer based model that has a cash flow forecasting ability and to study the impact of five risk factors on a project's cash flows. The five factors are duration, over/under measurement risk (during work progress), variation risk and material cost variances. The model was developed into a program that can be used to predict future trend of cash flows in a project, as well as to analyse impact of risk factors on cash flows. The five risk factors were tested on the model and analysed with sensitivity analysis. In the research, the internal rate of return and capital requirement are used to indicate the performance of cash flow. With data from actual projects, the forecasting capability of the model and impact on cash flow caused by the five uncertainties were studied. The results show that the model gives a good prediction of internal rate of return and capital requirement of projects.