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SBM1203 Project Economics And Finance OZ Assignment Help
About recharge station
Recharge station is also termed as electric vehicle charging station, electric charging point and EVSE (Electric Vehicles Supply Equipment). These are the infrastructure elements which provide the electrical energy to the electrical operating vehicles such as electric cars, plug-in hybrids, neighbourhood electric vehicles etc. With the extensive use of the electronic vehicles, it become necessary that its use can also be enhanced. Accordingly, the requirement of charging station has enhanced which is considered significant for the better operation of the vehicles. So, it become important that economic analysis of the recharge station be conducted adequately.
According to Wright, et. al.(2010), project economic analysis refers to the analysing the sustainability of the investment project along with designing and selecting the best project which can be helpful for the sustainable development of the project and the people associated with it. The benefit associated with the project is also analysed so that benefit to the country can also be provide to them in an effective and efficient manner (Wright, et. al.,2010). On the other hand, Bateman, et. al.(2011), described economic analysis in which analysis is conducted in such a manner in which adequate resources can be allocated appropriately which is helpful for the better conduction of the project. This sort of analysis is also essential as it enables in enhancing the income from the investment. This is the reason that it is conducted in the early stages so that adequate decision relating to the resources and cost can also be manage in an adequate manner (Bateman, et. al.,2011).
According to Ulukan and Ucuncuoglu (2010), the project relating to the information technology or the significant ratio relating to it required proper consideration. This is essential as various risk, as well as uncertainties, is associated with the project in this context. So, this economic analysis is the best scope which is essential for such purpose.
Reason associated with the economic analysis
This analysis is essential as it enables the better utilisation of the resources which is essential so that the project may not get dropped.
There is the advancement of the new technology on the regular basis which creates the necessity of the economic analysis as the technology currently used can get outdated.
This is the time sensitive project and if proper planning and analysis relating to resources are not done then the project can get disturbed effectively.
The information technology project is high budgeted project so there is a requirement that adequate project analysing so that cost can be taken under control (Ulukan and Ucuncuoglu, 2010).
Cost of the project
In the words of Georgiev (2015), the cost is the essential criteria on which each and every project is based. This is required so that the project cost capability, as well as efficiency, can be maintained. This is done by collecting and recording all the actions which would be considered in the project and the cost associated with it. Then all these integrated costs are considered and then proper evaluation of the resources are done so that most suitable resource can be selected for cost control (Georgiev, 2015).
Cost of Recharge station
Bansal (2015), there is various component associated with the EV charging. These costs include the setting up charging up cost, equipment cost, maintenance as well as electricity cost. Different areas fare differ. The cost of charging may differ on the basis of the infrastructure cost as well as equipment. It is estimated that around $15,000 to $ 18,000 can be charged for a level 2 station. On the other hand, for the DC fast charging cost estimation is quite high i.e. $65,000 to $ 70,000. But as the production cost has enhanced which helps in economies of scale which is essential to control the cost adequately.
The charges can also differ for the recharge station which can be helpful for controlling the cost and attaining the required profit effectively. These charges are based on the wireless technology and the plug-in technology of the service station. Some of the fare charges are mentioned below-
Figure 1- Comparison of the cost for home plug-in and wireless charging system
These changes differ due to the different approach through which charging is done for the electric vehicles. The technology differs due to which the rate or the cost also changes (Bansal, 2015). So, it can be said that different charging plan station can be adopted the project and economic finance of the recharge station and the wireless charging system can be used.
In the words of Xiong, et. al. (2016), a comparison was conducted in which the pricing policy i.e. uniform pricing policy was compared with the different pricing policy. This is considered as it enables the better generation of the profit. The prices are charged as per the services and the quality of the services considered by the customers. This makes the process easy and the chances of the loss also reduce. This occurs due to the providing of the services as per the demand and accordingly supply is provided. This makes the operation easy and prices are charged for those services which are provided to the customers. This is different from the uniform pricing as prices are flexible as per the quantity consumed. The prices are not fixed and the customers charged differ which makes the pricing simpler. Such as the customer's demand for the plug-in facility would be charged less as compared to the customers who demanded the wireless services of the recharge station. Other than that, there is also the change in the level of the product and the efficiency which makes the operation difficult. The staff or the professional are required to be skilled so that operation such as swapping of the batteries and other task required in the recharge station be done easily. These skilled staffs are expensive which also raise the cost high so that uniform costing method cannot be adopted for setting such project. So the different prices costing method is required to be charged in such a case project. The ranges of the product differ as some of the project scales is high which can get the benefit of the economies of scale but a business which are small can easily suffer loss from the uniform costing methods. Other than that, there is also the problem of the geographical difference which creates the problem in keeping the uniform pricing. As this case arises due to the difference in availability of the cheap labour and competition that exist in the different region. All these aspects at last leads to the selection of the different pricing charged method as it enables in better project and finance can be managed accordingly (Xiong, et. al., 2016).
According to Gao and Guo (2013), there is certain disadvantage associated with it that enables in the elimination of the expensive trial and error method which makes the operation easy and effective. This different pricing as per the service's method creates the unhealthy competition which at last creates the problem on the customers. It also creates the situation of the price cutting below cost which at last creates the complication in formulating the effective cost for the product or the services. Other than that, this type of costing does not highlight the unprofitable product or the product line. This leads to the non-availability of the required information which can help in strengthening the project of the recharge station (Gao and Guo, 2013).
As per Tulpule (2011),the economic analysis is conducted for the recharge station and certain points can be taken into account adequately. This can be considered that recharge station scope has enhanced and the demand of such station has also increased. This is the reason that it is operated by various private companies so that operation can be enhanced drastically. There is the existence of the charging connectors which makes the operation easy and effective and raise the demand for such services in the market. Due to its use, the supply has also increased of such product with the additional features and the facility. The demand for the services are increasing in the market and if the adequate supply of such product or the services are not provided then the prices would also raise. This is the reason that private company is enhancing such level so that competition can tackle and the set standard services can be provided to the customers (Tulpule (2011).
Figure 2: Expectation of the future for the recharge station
The methodology that can be used in the project is the collection of the secondary sources which can be collected with the help of literature and the journal of the authors. Through these aspects, a better functioning of the resources can be taken into account. This is essential as various judgement and the arguments of the authors or the specialist in considered effectively. This is necessary as a better project of the recharge station can be established. This makes the operation easy as the data are easily collected from the journal which saves the time and the cost for the recharge station so that operation can be conducted adequately (Weber, 2015).
Financial Model of the Case project
According toFinnerty(2013), the financial model of the project is the set of all the financial costs and financial benefits in relation to the project. These include financial specifications of project in terms of incomes and expenses, interest rates involved for project financing, sources from which the funds for the project can be procured, financial constraints and budgets, financial objectives and other financial data related to the project. The project relates to the development and installation of charging station which contains the complete infrastructure to facilitate the charging of electric vehicles. The project will involve high fixed costs due to installation of charging infrastructure.
The assumptions in relation to project are the factors which set guidelines for the evaluation and analysis of the benefits from the project. The assumptions set the constraint on the basis of which the financial model is prepared for assessing the financial viability. The assumptions which will have to be made for the installation of charging station include the interest rate for the project which can be considered the cost of capital. The estimated initial fixed cost for the set-up of charging station, estimated maintenance and repair expenses, estimated profits from the project etc. will have to be assumed for the financial analysis.
Interest rate or cost of capital– As per Burke (2013), the interest cost is the cost of obtaining the funds for the project. The assumption for the interest cost can be on the basis of debt cost for procuring loans in the country where the project is implemented or it can be assumed on the basis of overall cost of capital including both equity cost and debt cost or any other cost. The assumption of interest rate shall be justified in context of the funds actually involved for the project. The cost of capital can be assumed to be 10%. This is the general rate of interest which can be considered with regards to the overall cost of capital. The internal rate of return of the project shall be higher than the cost of capital of the project to ensure the profitability of the project. Internal rate of return is the rate of interest at which the present values of cash inflows discounted is equal to the discounted present value of cash outflows.
Life of the project -The life of the project can be assumed to be 5 years. The life has been assumed to be 5 years since this is not the long term project. The life of the project is the duration in which the project initiated is completed fully withal the tasks and activities completed effectively within the budgeted costs. The duration within which the project will last is the life of the project. The life is the most important factor in the financial analysis of the project since the life is the basis on which the profitability of the project is determined (Tianyin, 2011).
The constraints which will be included in the project will relate to the limits which define the maximum capacity of the project. The exceeding of such limits or constraints will result in additional cost for the project since the budgets are set as per these constraints. When the limits are crossed for the project or the budgets and timelines are exceeded against such constraints then the probabilities of failure of project increase (Larson & Gray, 2011). The constraints which relate to the implementation of project for the set-up of charging station include the timelines for the different project activities. Out of all the project activities some are the critical activities the delay of which causes the whole project to be delayed. These critical activities are required to be completed within the allocated timelines and allocated costs so that the project achieves its aims and objectives and the success of the project is ensured. Other constraints will relate to the signoffs and approvals of the project with the government authorities and project owners. The standards and benchmarks for the project are defined by such constraints which set the goals of the project.
The risks of the project are those unexpected events or uncertainties which cause the losses or increased expenses for the project. The risks arise when such events take place. There are various types of risk which relate to a project such as business risks, financial risks, environmental risks, legal risks, technical risks etc. The implementation of the project is to set up the charging station. The risks which may arise in this project include mainly environmental risks. The electric charge station is prone to hazards and disasters such as fire explosion, electric currents etc. The business risk of the project will include non-working of sockets, low supply of electricity, insufficient space for vehicles, etc. The operational risks which form part of the business risks will include risks of non-performance of operations of business in an effective manner, increased operational costs, declining productivity etc. The legal risks will relate to the risks of application of health and safety laws, legislation and regulations of local as well as national government. The technical risks will also form part of the business risks including failure of infrastructural set-up, non-working of sockets, etc. The risks occur when the threats materialise and probable losses increase (De Bakker, et.al, 2010).
Cash Inflows and outflows
Cash inflows are the receipts from the business after the implementation of the project in the form of profits whereas cash outflows are the payments for the expenses related to the project costs. The cash inflows are generated from the project throughout the life of the project and are considered the benefits of the project undertaken. The prices charged from the customers for allowing the charging of their electric vehicles will generate revenues in the form of cash inflows. The consistency of cash outflows depend on the nature of the project activities. The project for the recharging station will include regular cash outflows since it include repair and maintenance expenses, expenses for technology updating, overhauling expenses and other administration costs. These costs are other than the initial cash outflow which will be incurred to install the infrastructure and set up of the station comprising of cost of land. Alternatively the cost can be procured on lease which will comprise of cash outflows annually throughout the life of the project in the form of rentals. The estimated cash inflows and outflows of the project are as follows:
Cash Inflows and outflows
Total Fare charged from customers per annum
Annual Overhauling and maintenance expenses to be incurred at the end of second and fourth year
Annual Lease rentals
The initial investment of $42,000 will be made for the purchase of equipment and set p of infrastructure. Other than this the cost of rental for the land will be annual rentals of $10,000 to be paid for all the five years. The maintenance and overhauling expenses will have to be made up to $18,000 at the end of second year and also at the end of fourth year only. The estimate inflows in the form of revenues is likely to be $40,000 every year which represents the fare which will be charged from the customers for charging of electric vehicles at the station. The net present value of the project can be calculated to identify whether the project will be financially viable or not. Net present value is the difference of present value of cash inflows of the project and cash outflows of the project (Titman, e.al, 2011). The NPV and IRR can be calculated as follows:
Net cash inflows
Discount rate 10%
PV of cash inflows
Total cash outflows
Discount rate 10%
PV of cash outflows
Net present value = PV of cash inflows – PV of cash outflows
= $151,631.47 - $116,429.94
Thenet present value of the project is positive which means that the cash inflows from the project are higher than the cash outflows. The project will be able to generate net cash inflow amounting to $35,201.53 on an estimation basis throughout the life of 5 years on the cost of capital of 10%.
The Internal Rate of return of the project calculated using Microsoft Excel comes out to be 13% which is higher than its cost of capital of 10%. This means that the project will be profitable.
According toTianyin (2011), in this assignment it has been discussed about the start-ups, financial models as well as literature review that play a very significant role in the economic analysis. It is the overall report including all the financial models as well as literature review of the recharge station and the economic analysis which will help in knowing all the facts and figures of the economic analysis of the case project of the recharge station. This sort of analysis is as well important as it supports in increasing the earnings from the investment .In this report it has been discussed about the case project and the money inflow as well as money outflow. The plan for the charging station will encompass methodical cash outflows in the meantime it reside of makeover as well as viewing the expenses, expenses for technology bring up to date, repairing expenses as well as other managing charges.
As per the literature review of the case project of economic analysis, the recharge station is as well characterized as electronic means of transportation charging station, electronic charging theme as well as Electrical Vehicles Source Tools. These are the structure fundamentals that make available the electronic energy to the electrical functioning vehicles like electronic cars, plug-in crosses, neighbourhood automated means of transportation etc. As a result, the necessity of charging station has improved that is well-thought-out important for the improved process of the means of transportation (Tianyin, 2011). Hence, it turns out to be essential that monetary study of the recharge station must be directed effectively and efficiently. A start up business is an innovative venture that is usually an afresh arisen, fast increasing corporate which targets to come across a market essential by means of increasing or proposing a new product, procedure or facility. A start up is generally a business such as a small corporate, an enterprise or else an association premeditated to quickly cultivate a company. A project monetary study refers to the examining the sustainability of the outlay project along by means of planning as well as selecting the finest project that can be supportive for the sustainable enlargement of the project as well as the people linked to it. This kind of analysis is also essential as it enables in enhancing the income from the investment. This is the cause that it is accompanied in the initial phases so that sufficient decision concerning to the possessions as well as cost can also be accomplish in a satisfactory method.in the literature review it has been mentioned or discussed about the cost of the projects as well as what are the benefits of the case project. The price is the needed standards on which all the project is grounded. It is mandatory so that the project price ability, as well as competence, be conserved. According toFinnerty(2013), it is finished by gathering as well as recording the whole thing, the engagements that might be measured in the project as well as the price connected with it. The economic study is accompanied for the recharge station as well as assured opinions can be involved into account sufficiently. It is the cause that it is functioned by numerous private businesses so that process can be improved radically. The demand for the services is growing in the marketplace as well as, if the sufficient supply of such manufactured goods or the services is not delivered then the charges would similarly increase. This is the only cause that Private Corporation is improving such level, therefore that struggle can challenge as well as the set standard services can be provided to the customers
As per the financial model of the case project it can be understood that the monetary model of the plan is the set of the whole thing the monetary costs as well as monetary welfares in relation to the scheme. These comprise monetary provisions of project in relations of earnings as well as expenses, interest rates elaborate for project funding, bases from that the reserves for the project can be obtained, fiscal limitations as well as budgets, monetary purposes as well as other financial information linked to the project (Finnerty, 2013). The project relays to the expansion as well as setting up of charging station that comprises the whole structure to enable the charging of electric means of transportation. The project will encompass large fixed prices in line for setting up of charging set-up.in the financial model of the case project it has been mentioned so many things such as assumptions, constraints as well as risk. The assumptions in consideration to project are the aspects that set strategies for the assessment as well as examination of the welfares as of the project. The suppositions established the limitation on the grounds of which the fiscal model that is settled for considering the monetary capability. The assumptions which will have to be made for the setting up of charging station take account of the interest rate for the plan that can be measured the price of capital.
According to Wright, et. al.(2010), the constraints that share to the putting into practice of scheme for the arrangement of charging station consist of the timelines for the dissimilar plan actions. More than of such boundaries or limitations will outcome in surplus total for the plan .subsequently the financial plan is set as per according to these limitations. As soon as the restrictions are overlapped for the plan or else the financial plan as well as timelines are overdone in contradiction of such limitations then the possibilities of let-down of project upsurge. Out of the whole actions the scheme accomplishments are the serious doings, the delay of which effects the whole project to be delay. These serious actions are mandatory to be accomplished inside the allocated timeline as well as allotted charges as a result to that the project attains its purposes, objectives as well as the achievement of the project is certified. The restrictions that will be comprised in the proposal will relate to the boundaries that outline the extreme capability of the scheme (Wright, et. al., 2010).
Cash Inflows and outflows
They (Cash inflows) are the receipts from the commerce once the carrying out of the project in the procedure of earnings however cash outflows are the expenditures for the payments associated to the project prices. According to Georgiev (2015), the cash invasions are produced from the project during the course of the lifetime of the project as well as are measured the welfares of the project carry out. The project for the charging station will comprise systematic cash outflows meanwhile it consist of renovation as well as looking after expenditures, payments for technology bring up to date, servicing expenses as well as other management charges. The charges stimulating from the clients for permitting the charging of their electronic vehicles will produce incomes in the procedure of money inflows. The reliability of cash discharges is determined by on the nature of the scheme actions. The projected cash inflows as well as outflows of the project are mentioned below:
The early stage investment of $42,000 will be take place so as to but the tools and equipment for the purchase of as well as setting up of organization. Further the cost of rent payment for the land will be yearly payments of $10,000 that to be salaried for entire five years. The repairs as well as renovating payments will must to be done up to $18,000 at the completion of second year as well as also at the completion of fourth year .The approximation of the inflows in the kind of incomes is expected to be $40,000 every single year that signifies the charge that will be indicted from the consumer for charging of electronic means of transportation at the station (Georgiev, 2015).
In the above mentioned report it has been mentioned or discussed about the recharge station are considered as automated means of transportation charging station, automatic charging theme also Electrical Vehicles Source Tools. They are the arrangement of details that make accessible the electronic energy to the electrical operative vehicles like automated cars, plug-in signs, neighborhood automatic means of transportation etc. Henceforth, it turns out to be needed that economic study of the recharge station need to be directed successfully and proficiently. Further it has been concluded on the financial models of the case project. It is the complete report comprising all the monetary models as well as literature review of the recharge station plus the economic analysis that will help in knowing the whole facts as well as figures of the economic analysis of the recharge station. The cash inflow and outflow has been measured so as to know the case project efficiency and effectiveness.
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