PROJECT COST ANALYSIS TOPICE
- 1. CENTRAL UNIVERSITY OF HARYANA TOPICS- Depreciation Types of values Purpose of valuation PRESENTED BY-SUMIT MALAN(11446) SUNIL KUMAR(11447) SUNIL MENNA(11448) TULSI RAM(11449) PRESENTED TO-DR.NEERAJ KUMAR CIVIL ENGINEERING PROJECT COST ESTIMATE
- 2. VALUE Value is nothing but the worth or utility of certain building, property, machinery, equipment, etc. Value always changes from time to time and always depend upon supply and demand. The value of the property within short time may be more than its existing worth or price. There are many types of values which are used while Estimating and Costing of certain thing.
- 3. Types of Value in Civil Engineering 1. Scrap Value : Scrap Value is defined as the Value of dismantled materials. For a building when the life is over at the end of it’s utility period, the dismantled materials like steel, timber, bricks, etc will fetch certain value which is called as the Scrap Value of that building. 2. Salvage Value : It is the value of the building at the end of the utility period without being dismantled. For example, A machine after the completion of it’s usual span of life or when it becomes uneconomical to use, it may be sold and the same machine may be purchased by the other person for use for some other purpose. The price at which he purchased that machine is called as Salvage Value and which is called as Sale Value.
- 4. Types of Value in Civil Engineering 3. Market Value : The market value of the property is the amount which can be obtained at any particular time from open market if property is put on for sale. Market Value may differ from time to time according to demand and supply. The Market Value also changes from time to time for various miscellaneous reasons such as change in industry, change of fashion, cost of labours and materials, cost of transportation etc. 4. Book Value : Book Value is the amount shown in the account book after allowing the necessary depreciation. The Book Value of the property at a particular year is original cost minus the amount of depreciation upto previous year. The Book Value depends upon the amount of depreciation allowed per year and will gradually increase year to year and at the end of utility period of property the Book Value will be only Scrap Value. 5. Potential Value : When the property is capable of fetching more return due to it’s alternative use or by advantageous planning or providing development works then that value of property is called as Potential Value.
- 5. Types of Value in Civil Engineering 6. Sentimental Value : When the property is sold or purchased at the higher value than the market value due to sentiments of the owner or the purchaser of the property is called as Sentimental Value. The main causes for Sentimental value are as follows : The owner may be very much attached to the property so he/she shall demand fancy price. The situation and the class of the property may suit a particular prospective purchaser which may be ideal for his/her purpose and may have special value to him/her. If the property is put on for sale and 2 prospective purchasers are determined to outbid then definitely the value of that property will reach higher than the existing market value. 7. Speculation Value : When the property is purchased so as to sell the same at profit after some duration, the price paid is known as Speculation Value. For example, If Government is planning for some project or construction of new road or expansion on existing road from a particular area then that area gains more value from actual and market value and the speculators always buys such property low cost and sell it again after some duration.
- 9. NUMERICAL ON DEPRECIATION:- 1.Straight Line Method Que. Company A purchases a machine for 1,00,000 with an estimated Salvage value of 20,000 and a useful life of 5 years. Ans.Cost of the asset: 1,00,000 1. Cost of the asset – Estimated salvage value: 1,00,000 – 20,000 = 80,000 (Total depreciable cost) 2. Useful life of the asset: 5 years 3. Divide step (2) by step (3): 80,000 / 5 years = 16,000 (Annual depreciation amount) Therefore, Company A would depreciate the machine at the amount of 16,000 annually for 5 years.
- 10. NUMERICAL ON DEPRECIATION:- The depreciation rate can also be calculated if the annual depreciation amount is known. The depreciation rate is the annual depreciation amount / total depreciable cost. In this case, the machine has a straight-line depreciation rate of 16,000 / 80,000 = 20%. YEAR BOOK VALUE(BEGINNING) DEPRECIATION BOOK VALUE(END) 1 1,00,000 16,000 84,000 2 84,000 16,000 68,000 3 68,000 16,000 52,000 4 52,000 16,000 36,000 5 36,000 16,000 20,000
- 11. NUMERICAL ON DEPRECIATION:- 2.Constant Percentage Method/Declining Balance Method Que. Ci=1100 (initial cost) Cs=100 (salvage value) i=8% per year,Calculate depreciation and book value for each year and life of asset is 5year. Ans. Cost of the asset:1100 Fixed/Constant decline balance rate(FDB) =1-(Cs/Ci)^1/n =1-(100/1100)^⅕ =0.381
- 12. NUMERICAL ON DEPRECIATION:- YEAR BOOK VALUE (BEGINNING) DEPRECIATION =FDB*BOOK VALUE(BEG.) BOOK VALUE (END) 1 1100 419 681 2 681 259 422 3 422 161 261 4 261 99 162 5 162 62 100
- 13. NUMERICAL ON DEPRECIATION:- 3.Sinking Fund Method Que. Ci=1100 (initial cost) Cs=100 (salvage value) i=8% per year,Calculate depreciation and book value for each year and life of asset is 5year. Ans. Cost of the asset:1100 Depreciation=(Ci-Cs) (i /(1+i)^n -1) =(1100-100) (0.08 /(1.08)^n -1)
- 14. NUMERICAL ON DEPRECIATION:- YEAR BOOK VALUE(BEGINNING) DEPRECIATION BOOK VALUE(END) 1 1100 170.46~170 930 2 930 184 746 3 746 199 547 4 547 215 332 5 332 232 100
- 15. NOTE:- 1.In Straight Line Method,the depreciation is CONSTANT throughout. 2.In Constant Percentage Method,the depreciation is HIGH IN EARLY YEAR but it reduces in later year. 3.In Sinking Fund Method,the depreciation is LESS IN EARLY YEAR but it increase in later year.
- 16. VALUATION Valuation is the technique of estimation or determining the fair price or value of property such as building, a factory, other engineering structures of various types,land etc. By valuation the present value of a property is defined. The present value of property may be decided by its selling price, or income or rent it may fetch. The value of property depends on its structure, life,maintenance, location, bank interest, etc. Cost: means original cost of construction of purchase.
- 17. PURPOSE OF VALUATION:- Buying or selling property: when it is required to buy or to sell a property, its valuation is required. Taxation: To assess the tax of property its valuation is required. Taxes may be municipal tax, wealth tax, property tax, etc., and all taxes are fixed on the valuation of the property. Rent fixation: in order to determine the rent of a property, valuation is required. Rent is usually fixed on certain percentage of valuation (6% to 10% of the valuation).
- 18. PURPOSE OF VALUATION:- Security of loans or mortgage: when the loans are taken against the security of the property, its valuation is required. Compulsory acquisition: whenever a property is acquired by law compensation is paid to the owner. To determine the amount of compensation valuation of property is required. Valuation of a property is also required for insurance etc .