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Feasibility

A ‘feasibility study’ is defined as the process of undertaking an assessment to identify the opportunities and risks of a property development project and to estimate the projected costs, revenues and profit potential of the project.

The feasibility study is to be in a full report format, clearly describing the project in all respects and it should include a financial feasibility, using either a static analysis, dynamic analysis or DCF method of analysis

Static Analysis - With this approach costs are generally summated as at the date of completion of the project and income is assessed as at the same date with allowances for vacancies and letting up periods.This is the less complex financial analysis which is suitable for preliminary feasibility studies and for calculating profit and risk or land value. A static analysis assumes no change in prices or costs during the period of development. 

A 'Dynamic Analysis' allows for potential movements in prices and costs over the period of the development. 

Discounted cash flow method - With this approach, both costs and income are assessed over an appropriate time period and then discounted back to present value, generally being the date of the commencement of the project. This is the more complex financial analysis that should include interest rate calculations based on a 100% funded basis (an equity basis may also be included if required).



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