GDV: dev period=1yr

200 300,000.00 60,000,000.00 TDC:

55 500,000.00 27,500,000.00
total 87,500,000.00

DISCOUNTED CASH FLOW METHOD

if the land is offered at RM3,000,000 calculate i.the profit to the developer;and ii. the IRR of the project
Land Cost 3,000,000.00
(ASSUMPTION: 5% USED AS SITE ACQUISITION COST) 5%
Land Cost + Acquisition Cost 3,150,000.00
DISCOUNTED CASH FLOW METHOD
PROFIT TO THE DEVELOPER
period 0 1 2 3
cash inflow 4,375,000.00 4,375,000.00
cash outflow 3,150,000.00 6,500,000.00 9,750,000.00 9,750,000.00
net cash flow (3,150,000.00) (2,125,000.00) (5,375,000.00) (9,750,000.00)
PV @1.45% per period 1.0000 0.9857 0.9716 0.9577
discounted value (3,150,000.00) (2,094,627.90) (5,222,450.90) (9,337,883.72)

IRR OF THE PROJECT

period 0 1 2 3
cash inflow 4,375,005.00 4,375,000.00
cash outflow 3,150,000.00 6,500,000.00 9,750,000.00 9,750,000.00
net cash flow (3,150,000.00) (2,124,995.00) (5,375,000.00) (9,750,000.00)
PV @12% per period 1.0000 0.8929 0.7972 0.7118
discounted value (3,150,000.00) (1,897,316.96) (4,284,917.09) (6,939,857.42)
0.12 1.40

period 0 1 2 3
cash inflow 4,375,000.00 4,375,000.00
cash outflow 3,150,000.00 6,500,000.00 9,750,000.00 9,750,000.00
net cash flow (3,150,000.00) (2,125,000.00) (5,375,000.00) (9,750,000.00)
PV @14%per period 1.0000 0.8772 0.7695 0.6750
discounted value (3,150,000.00) (1,864,035.09) (4,135,887.97) (6,580,972.28)
0.14 1.48

R1 12 R2 14
R2-R1= 2
NPV1= 1,005,448.33
NPV2= (639,499.83)
IRR CALCULATION
NPV1/(NPV1+NPV2)= 0.6112
multiple (X) R2-R1 2
= 1.2225
plus (+) R1 13.2225
therefore the @ IRR= 13 %

NOTE:
IRR can be compared with finance rate interest, if the IRR more than finance rate interest it shows that the project developm
The developer profit can compare with target rate of reture if the % profit more than target rate its shows that the developm
The developer profit is idea/viable if
Developer’s Profit as % of GDV 20%-25%
Developer’s Profit as % of Total Dev. Co25%-55%

To advice the Development Profitability

IRR=R2-R1*(NPV1/NPV1+NPV2)+r1
 0.09
65,000,000.00 (1.09)=(1+i)^6 dev. Profits=
(1+i)= (1.09)^(1/6)
1+i= 1.0144665921417
i= 0.01447
% 1.45

RR of the project

4 5 6 TOTAL GDV=
78,750,000.00 TDC=
13,000,000.00 19,500,000.00 6,500,000.00 DEV PROFIT=
(13,000,000.00) (19,500,000.00) 72,250,000.00 profit ON GDV=
0.9440 0.9306 0.9172 profit ON TDC=
(12,272,559.51) (18,145,726.24) 66,271,308.13 16,048,059.85
A RM1.00 @1.45% 1.0902
DEV.PROFIT 17,495,842

4 5 6 TOTAL
78,750,000.00 87,500,005.00
13,000,000.00 19,500,000.00 6,500,000.00 68,150,000.00
(13,000,000.00) (19,500,000.00) 72,250,000.00
0.6355 0.5674 0.5066
(8,261,735.02) (11,064,823.69) 36,604,098.51 1,005,448.33 NPV+ NPV1

4 5 6 TOTAL
78,750,000.00
13,000,000.00 19,500,000.00 6,500,000.00
(13,000,000.00) (19,500,000.00) 72,250,000.00
0.5921 0.5194 0.4556
(7,697,043.61) (10,127,688.96) 32,916,128.07 (639,499.83) NPV- NPV2
erest it shows that the project development is viable/profitable and vise versa
target rate its shows that the development is viable OR
17,500,000.00

87,500,000
54,754,158
17,495,842
20.00% 20 %
31.95% 32 %
GDV:
200 300,000.00 60,000,000.00 TDC: 65,000,000.00 (1.09)=(1+i)^6
55 500,000.00 27,500,000.00 (1+i)= (1.09)^(1/6)
total 87,500,000.00 1+i= 1.01446659214166
i= 0.0145

NET TERMINAL VALUE METHOD

DEVELOPER'S PROFIT
period 0 1 2 3 4 5
cash inflow 4,375,000.00 4,375,000.00
cash outflow 3,150,000.00 6,500,000.00 9,750,000.00 9,750,000.00 13,000,000.00 19,500,000.00
net cash flow (3,150,000.00) -2125000 -5375000 -9750000 -13000000 -19500000
A RM1.00 @1.45% 1.0902 1.0746 1.0593 1.0441 1.0292 1.0145
NET OUTLAY (3,434,178.48) (2,283,595.57) (5,693,596.35) (10,180,304.54) (13,379,733.25) (19,782,750.00)
 dev. P 17,500,000.00

1.45

6 TOTAL GDV= 87,500,000.00

78,750,000.00 TDC= 54,754,158.18
6,500,000.00 DEV PROFIT= 17,495,841.82
72250000 profit ON GDV= 20.00% 20 %
1.0000 profit ON TDC= 31.95% 32 %
72,250,000.00 17,495,841.82
Developer Profit 17,495,841.82
GDV:
200 300,000.00 60,000,000.00 TDC: 65,000,000.00
55 500,000.00 27,500,000.00
Total 87,500,000.00 1+i=
PERIOD-BY-PERIOD METHOD i=

PROFIT TO THE DEVELOPER

period 0 1 2 3 4
cash inflow 4,375,000.0 4,375,000.0
cash outflow 3,150,000.0 6,500,000.0 9,750,000.0 9,750,000.0 13,000,000.0
net cash flow -3,150,000.0 -2,125,000.0 -5,375,000.0 -9,750,000.0 -13,000,000.0
capital outstdg 0.0 -3,150,000.0 -5,320,675.0 -10,772,824.8 -20,679,030.7
fr prev. period
interest @1.45% 0.0 -45,675.0 -77,149.8 -156,206.0 -299,845.9
capital outstdg -3,150,000.0 -5,320,675.0 -10,772,824.8 -20,679,030.7 -33,978,876.7
(1.09)=(1+i)^6 dev. Profits= 17,500,000.00
(1+i)= (1.09)^(1/6)
1.01446659214166
0.0145 1.45

5 6
78,750,000.0 GDV= 87,500,000.00
19,500,000.0 6,500,000.0 TDC= 54,754,158.2
-19,500,000.0 72,250,000.0 DEV PROFIT= 17,659,374.13
-33,978,876.7 -53,971,570.4 profit ON GDV 0.201821418660014 20 %
profit ON TDC= 0.323487299370675 32 %
-492,693.7 -782,587.8
-53,971,570.4 17,495,841.8
Developer Profit 17,495,841.8