Question

In: Finance

Project: Bruj Khalifa Dubai 1. How the valuation of the project was done -Analyze using cash...

Project: Bruj Khalifa Dubai

1. How the valuation of the project was done -Analyze using cash flow and investment appraisal system

2. What are the major risks involved .Discuss both macro economic and commercial risks involved in project

Solutions

Expert Solution

1. In case of Project Burj Khalifa, the analysis of the cash flow and the investment appraisal was done using the risk matrix. The risk matrix is one of the modern techniques that is used to analyze the feasibility of a project. It prepares a graph with the probability of the risk on x-axis and the severity of the risk on y-axis.

2. The risks that were involved in this project were many. Some of the major ones being that the project aimed at constructing the tallest building in the world. There were chances of overdoing the budget. This actually happened in case of the project. There was an extra expenditure of $700 million in constructing Burj Khalifa. The other risks included the construction aspects like whether the project will be able to sustain itself. In other words, will making the tallest building be possible? With the kind of modern technology that is available today, it is possible as we can see but there was plenty of uncertainty involved. The commercial risks include the fact that if the project fails then the loss would be for a huge amount.


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