This chapter highlights the basics principles of how to finance a project cash flow. Funding issues are discussed from three major perspectives: owner, project, and contractor financing. Then, a set of popular tools to assist with evaluation of projects is presented: qualitative models and quantitative/mixed models. Profitability evaluations are based on an understanding of the concept of interest compounding with derivative concepts concerning the time value of money and discounted cash flows. These ideas lead to the definition of Net Present Value and Internal Rate of Return. Notions and basic formulae are presented, as well as the usage of such indexes for comparing projects.
References and Additional Resources
- Brealey, Myers, Allen (2006) Principles of corporate finance. McGraw-Hill, New York, NYGoogle Scholar
- Construction Specifications Institute, http://www.csinet.org/
- Finnerty JD (2007) Project financing asset-based financinal engineering. WileyGoogle Scholar
- Hendrickson C (2008) Project management for construction, Chapter 7. http://www.ce.cmu.edu/pmbook/07_Financing_of_Constructed_Facilities.html
- Sullivan WG, Bontadelli, JA, Wicks EM (2001) Engineering economy. Prentice HallGoogle Scholar