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Ranasinghe, M (1996) Total project cost under inflation: a simplified model for decision makers. Construction Management and Economics, 14(06), 497-504.

Type: Journal Article
Keywords: cash-flow; escalation; future value; inflation; total project cost
ISBN/ISSN: 0144-6193
URL: https://doi.org/10.1080/014461996373205
Abstract:
A simplified model for total project cost is developed in this paper to meet the numerous request from decision makers for a model that can be used to estimate the total project cost from the estimated cash-flows, and more importantly check the accuracy of the project cost estimates in feasibility studies that require prudent decisions. It begins with base cost estimate in constant dollars and discrete cash-flows with discrete inflation rates as practised by the construction industry. The discrete inflation rates are used to estimate current dollar costs of the project. The effects of inflation are estimated as escalation during construction. Using the future value concept, interest during construction is estimated in a simplified approach to estimate the total project cost. Data from an actual feasibility study is used to highlight the strengths and weaknesses of the simplified model. The model is extended to treat discrete cash-flows with continuos inflation rates.