FEASIBILITY ANALYSIS OF A PROPOSED HOTEL DEVELOPMENT

Abstract

In recent years, a considerable amount of interest and enthusiasm has been generated in the real estate industry over the methodology employed in investment analysis as well as valuation. There is a growing concern among the professionals and academicians with regard to the merits and demerits of various approaches, both the conventional and the modern methods represented by the Discounted Cash Flow and Internal Rate of Return; sensitivity analysis and simulation by computers have come for examination. These concepts have been used extensively in many areas of capital budgeting, project evaluation and investment appraisal. Interestingly enough, there is a marked preference for more conventional approaches partly as a result of the socio-economic complications which real estate entails and partly because its analysis is not an exact science and therefore the use of quantitative methods which demand exactitude in the inputs and outcomes is irrelevant. The prevailing outlook in the property market tends toward conservatism. However, with the growing scale and magnitude of development in real estates the investment decision is becoming increasingly complex. The rules-of-thumb and the heuristic approach in the conventional methods lack thoroughness, soundness, flexibililty and sophistication. The implication is clear. A call for computer-aided techniques is imperative. It is upon these premises that this study directs to achieve its aims.