Economics and Financial Management in Construction

OBJECTIVES:

• To study the concepts of construction economics and finance such as comparing alternatives proposals, evaluating alternative investments, management of funds, Insurance procedures, risks involved and economics of costing.

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UNIT I - BASIC PRINCIPLES

Time Value of Money – Cash flow diagram – Nominal and effective Interest – Continuous interest – Nominal and effective interest- continuous interest . Single Payment Compound Amount Factor (P/F,F/P) – Uniform series of Payments (F/A,A/F,F/P,A/P)– Problem time zero (PTZ)- equation time zero (ETZ). Constant increment to periodic payments – Arithmetic Gradient(G), Geometric Gradient (C).

UNIT II - MARKET STRUCTURE AND CONSTRUCTION ECONOMICS

Types of Market Structure in the Construction Industry – Markets and the competitive environment- Perfect competition -. Monopolistic competition – Oligopoly – Monopoly – Characteristics and economic Profit – Construction Economics – BOOT, BOT, BOO Methods – Depreciation – Inflation-Taxes

UNIT III - EVALUATING ALTERNATIVE INVESTMENTS

Present worth analysis, Annual worth analysis, Future worth analysis, Rate of Return Analysis (ROR) and Incremental Rate of Return (IROR) Analysis, Benefit/Cost Analysis, Break Even Analysis – Replacement Analysis- Equipment Replacement Analysis.

UNIT IV - FUNDS MANAGEMENT

Project Finance – Sources – Working capital management- Inventory Management- Mortgage Financing– Interim construction financing – Security and risk aspects.

UNIT V - ECONOMICS OF COSTING

Construction accounting-Chart of accounts- Meaning and definition of costing – Types of costing – Methods of calculation (Marginal costing, cost sheet, budget preparation) – Equipment Cost- Replacement Analysis – Role of costing technique in real estate and infrastructure management.