Assessment of the Profitability of an Apartment Building Complex Using a Stochastic Cash-Flow


  •  Nazim Noueihed    
  •  Fadi Asrawi    
  •  Najoie Nasr    

Abstract

The economic feasibility of apartment building complexes is mainly done by using one of the economic analysis methods: present worth, future worth, annual worth, rate of return, or benefit-cost ratio. The cash-flow used is based on the assumption that a certain fraction of the apartments will be sold during the construction period, and the rest equally sold annually over a certain period of time. This model may work sometimes, but its estimated profitability is inaccurate. The actual cash-flow to be used is stochastic. In this paper, we shall use a cash-flow with random separation time between successive sales of apartments after the construction period. We shall find a compact form of the expected present worth, and determine a range for the annual discount rate so that the project is profitable.



This work is licensed under a Creative Commons Attribution 4.0 License.
  • Issn(Print): 1927-7318
  • Issn(Onlne): 1927-7326
  • Started: 2012
  • Frequency: semiannual

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