Abstract
M.Ing. (Engineering Management)
Capital intensive engineering projects involve the flow of
large sums of money over the project life. During the pretender
phase of the project, estimates of the forecast cash
flow and associate return on investment are made based on
certain assumptions which at the time are, at best, only
informed guesses. As the project progresses, the uncertainty
surrounding the magnitude and the timing of these cash flows
and rate of return, diminishes.
By recognising the time value of money and the importance of
the synthesis of time and cash flow as well as the interdependence
of project activities, it is desirable to obtain
an estimate of the PROBABLE outcome of the return on
investment~ should the bid be accepted. This outcome can
only be 'guessed' at by means of a probabilistic analysis of
the parameters that go to make up the nett cash flow.
This study is an attempt to find a model suitable for use in
the construction industry which accurately describes the
construction process, and presents an overall analysis of
the variation in the rate of return as a result of the
probabilistic nature of the original parameters.
Various models were investigated. All were found suitable
under limited conditions.