1. Assessment of the Profitability of an Apartment Building Complex Using a Stochastic Cash-Flow
- Author
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Nazim Noueihed, Fadi Asrawi, and Najoie Nasr
- Subjects
Rate of return ,Present value ,Apartment ,Work (electrical) ,Rest (finance) ,Economics ,Range (statistics) ,Econometrics ,Profitability index ,Cash flow - Abstract
The economic feasibility of apartment building complexes is mainly done by using one of the economic analysis methods: present worth, future worth, annual worth, rate of return, or benefit-cost ratio. The cash-flow used is based on the assumption that a certain fraction of the apartments will be sold during the construction period, and the rest equally sold annually over a certain period of time. This model may work sometimes, but its estimated profitability is inaccurate. The actual cash-flow to be used is stochastic. In this paper, we shall use a cash-flow with random separation time between successive sales of apartments after the construction period. We shall find a compact form of the expected present worth, and determine a range for the annual discount rate so that the project is profitable.
- Published
- 2019
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