Concept of the project

• This mall is designed to discover an innovative development concept of a

high rise building, in a well-planned living environment.
 ENGINEERING
ECONOMICS PROJECT
GROUP MEMBERS

MUHAMMAD NURAIMAN BIN MOHD HASSAN

ABDUL RASHID BIN AHMAD NASRI
KELVIIN A/L PETER
NURUL IZLIN BINTI MAZLIN
NURUL SOFIYYAH BINTI MOHD YUSOFF
 Project Background
• Goldfish Mall is a five stories shopping mall
• Located at the center point of Cheras
• Nearby accessibilities within convenient radius.
 Contractor Information
• BERJAYA MAJU CONSTRUCTION
• Lot 253, Jalan Mawar 1, Marida Height,
• 71525 Senawang, Seremban,
• Negeri Sembilan Darul Khusus
• Tel no : 06-62372993
• Email : BMC.hobin@voovle.com
Price and Duration of Contract
Price and Duration of Contract
Price and Duration of Contract

Contract Price : RM 2 085 000.00

Contract Duration : 6 Months
 Project Information
• LOT 55511 (PT9204), 55964 (PT7246), PT9110 UNTUK PROJEK
USAHASAMA DI ANTARA TETUAN DEWAN BANDARAYA KUALA
LUMPUR & TETUAN RETRO HIGHLAND SDN.BHD. (Phase 1B)
• This is a joint venture project between Dewan Bandaraya Kuala Lumpur
(DBKL) and Retro Highland Sdn. Bhd. Both parties intended to upgrade the
said location which is Taman Ikan Emas, Cheras where they shall construct a
massive development in 70 acres plot of land (in Kuala Lumpur) that consist
a Shopping Mall with 250 units of shops.
 Objective
• To practice EE in project
• To determine the project are profitable or not
Work Breakdown Structure (WBS)
Cash Flow Diagram

MONTHS
YEARS
CALCULATION
• Cost of Project : RM 2 085 000
• Period : 5 years
• Initial investment : RM 2,500 000 ( debt + equity )
• Loan : 1 juta
• Equity : 1.5 m
• MARR : 10 %
• Assume that we are private company, our project cost is RM2, 085 000
Project Breakdown Based on Cash Flow

• • Initial investment: RM 2,500,000.00 (capital is borrowed from bank with interest of 5%

for RM 1 million and equity value is 1.5 million )
• • Annual revenue : RM 12,000 000 ( 250 units of shop lot rental)
• • Interest costs: RM 50 000
• • Total debt to be paid to the bank: RM 1,050,000
• • Annual operation and maintainance cost : RM 6,000 000
• • Contract period: 6 years
• oConstruction period: 1 year
• oConcession period: 5 years
 Minimum Attractive Rate of Return (MARR) Determination

• MARR value that we assume in this project is 10%. This project is profitable
or acceptable if the CBR value is more than MARR value.
Return on Investment (ROI)

The formula of ROI;

ROI= ((Gain from Investment-Cost of Investment)/(Cost of Investment))×100%

Based on cash flow;

Total gain from our investment after 5 years = RM 28,950,000
[RM 12,000,000 - RM 6,000,000 - (RM 1,050,000/5) ] x 5 years= RM 28,950,000
Total cost required for the project (including interest cost)
RM 2,085,000 + RM 50,000 = RM 2,135,000
ROI = ((RM 28,950,000-RM 2,135,000 )/(RM2,135,000 ))×100%
ROI = 1256%
Profit Margin Determination

Profit Margin is calculated by using;

Profit Margin = (Gain from Investment-Cost of Investment)/(Gain of Investment)×100%

Based on cash flow;

Total gain from our investment after 5 years = RM 28,950,000.
Total cost required for the project (including interest cost) = RM2, 135,000.

Profit Margin = ((RM 28,950,000-RM2,135,000 )/(RM 28,950,000))×100%

Profit Margin = 92.63 %
Present Worth (PW) Method

Compute the present equivalent of the estimated cash flows using the MAR as the interest rate.
If PW(MARR) ≥ 0, then the project is profitable.
If PW(MARR) < 0, then the project is not profitable.

PW(10%) = 21, 948 655.39

PW(10%) = 21, 948 655.39 (P/A, 10%, 5)

Since PW(10%) ≥ 0, the project is profitable.

PW = 21, 948 655.39 tells us:
We have recovered our entire $2, 500,000 investment,
We have earned our desired 10% on this investment,
We have made a lump sum equivalent profit of $21, 948 655.39 beyond what was expected (required).
Future Worth (FW) Method
Compute the future equivalent of the estimated cash flows using the MARR as the interest rate.
If FW(MARR) ≥ 0, then the project is profitable.
If FW(MARR)<0, then the project is not profitable.

FW(10%) = A [((1+i)^n-1)/i]
= 5 790 000 [((1+0.1)^5-1)/0.1]
= 35 348 529
FW(10%) = 35 348 529 (F/A, 10%, 5)

Since FW(10%) ≥ 0, the project is profitable.

 WACC
WACC = E/ D+E (re) + D/D+E (rd) ( 1-t )
• Capital : 2.5 M
• Company Capital: 1 M
• Company market value : 0.5 M
• Market value of company debt : 1 M
• Cost of equity : 10 %
• Cost of debt : 5 %
• Tax rate : 35%
WACC = E/ D+E (re) + D/D+E (rd) ( 1-t )

WACC =((1.5/2.5)x0.06)+[((1.0/2.5)x0.05)*(1-0.35))]
=0.049
=4.9%
Cost Benefit Ratio (CBR)

Investment : RM 2,500,000.00
Period : 5 years
Assumption of inflation : 3%
NPV = 12000000 / ( 1-0.03)^5
= 13, 974, 059
CBR =13, 974, 059/12,000,000
=1.16
 Conclusion
• CBR=1.16, CBR> 0
• MARR=0.01
• CBR>MARR = profitable
• Since the profit margin and return of investment both shows a positive
figure, it means that our project will gain increment of income after period
of 5 years.