Project Development, Feasibility and Business Cases

Introduction

Construction projects are not justified merely because an asset can be designed or built. They must respond to a demonstrable need, support organisational and public strategy, be technically deliverable, generate acceptable value over their life, and remain affordable under credible financial conditions. Project development is therefore a decision process conducted before substantial commitment of capital. It converts an initial problem or opportunity into a defined investment proposition.

In civil engineering, early decisions have disproportionate influence on cost, carbon, safety, programme and operational performance. A poorly defined project may proceed through procurement only to encounter scope growth, planning objections, constructability problems, funding gaps or benefits that cannot be demonstrated. Feasibility studies and business cases provide structured evidence for deciding whether to proceed, modify, defer or abandon a proposal.

This chapter treats feasibility as a multidisciplinary process rather than a single calculation. It integrates strategic, technical, economic, financial, commercial, environmental and organisational considerations. Particular attention is given to cash-flow analysis, net present value (NPV), internal rate of return (IRR), benefit–cost ratios (BCR), sensitivity analysis, financing structure and incremental comparison of alternatives.

Learning objectives

By the end of this chapter, the reader should be able to:

1. Define a construction project need and test its strategic alignment.

2. Structure a feasibility study and distinguish financial from economic appraisal.

3. Assess technical feasibility, constructability, risk and whole-life value.

4. Construct discounted cash-flow models and calculate NPV, IRR and BCR correctly.

5. Explain debt service, capital structure, financing costs and affordability constraints.

6. Compare mutually exclusive alternatives using incremental analysis.

7. Apply sensitivity, scenario and switching-value analysis to investment decisions.

8. Prepare and critically evaluate a defensible construction business case.

1. From need to investment proposition

A project begins with a need, opportunity, statutory obligation or strategic objective. Examples include inadequate transport capacity, flood exposure, unsafe facilities, housing demand, regulatory compliance or decarbonisation. The need should be expressed as an outcome rather than as a predetermined asset. “Construct a new bridge” is a solution; “reduce peak-period crossing delay and improve network resilience” is a need statement.

A sound need statement identifies:

• the affected population, users or operational system;
• the scale, location and urgency of the problem;
• current performance and the consequences of doing nothing;
• constraints, dependencies and statutory requirements; and
• measurable outcomes and benefits.

The do-nothing or do-minimum case is essential. It is not necessarily a literal decision to make no expenditure; it represents the credible baseline against which incremental costs and benefits are measured. Options are then developed, such as demand management, refurbishment, operational change, phased investment or new construction.

Strategic alignment

Strategic alignment asks whether the project contributes to approved objectives at relevant levels: national infrastructure policy, regional plans, client strategy, asset-management policy, climate commitments and community priorities. Alignment should be evidenced by a traceability matrix linking each proposed output to an objective, performance indicator, responsible owner and intended benefit.

Alignment does not prove value. A strategically desirable project may still be unaffordable or technically infeasible. Conversely, a project with a strong financial return may conflict with environmental or social policy. Decision-making therefore requires multiple appraisal lenses.

2. The feasibility framework

A postgraduate feasibility study should normally address six connected dimensions:

1. Strategic feasibility: Is the need genuine and is the project aligned with policy and organisational purpose?

2. Technical feasibility: Can the required performance be achieved with available technology, land, materials, utilities and skills?

3. Economic feasibility: Do benefits to society exceed resource costs after allowing for externalities, transfers and opportunity costs?

4. Financial feasibility: Can the sponsoring entity meet capital, operating, debt-service and lifecycle obligations?

5. Commercial feasibility: Can the market, procurement route and contractual allocation of risk support delivery?

6. Management and institutional feasibility: Does the client have the governance, capability and authority to deliver and operate the asset?

Environmental and social assessment cuts across all six dimensions. It considers carbon, biodiversity, pollution, displacement, accessibility, health, heritage and distributional effects. Feasibility is conditional: a project may be technically feasible but financially unaffordable, or economically attractive but impossible to procure within the required time.

Option development and the logic of appraisal

Options should be sufficiently different to test the underlying decision, but not so numerous that analysis becomes artificial. A useful sequence is:

• define the baseline;
• identify a long list of interventions;
• screen against fatal constraints;
• develop a short list;
• estimate costs, risks, outputs and outcomes; and
• compare options using both quantitative and qualitative evidence.

Incremental analysis is fundamental. The relevant cash flow for an option is the difference between that option and the baseline, not its gross expenditure alone. Sunk costs are excluded because they cannot be changed by the current decision. Opportunity costs are included when resources could be used elsewhere.

For mutually exclusive options, selecting every option with a positive NPV is impossible; only one can be chosen. Options should therefore be ranked by NPV at the relevant discount rate, subject to affordability and strategic constraints. If capital is rationed across independent projects, alternative methods such as a profitability index may assist, but it should not replace portfolio optimisation.

3. Technical feasibility and constructability

Technical feasibility is more than proving that a structure can stand. It examines whether the complete asset can be surveyed, designed, constructed, commissioned, operated, maintained and eventually decommissioned within constraints.

Important investigations include:

• site surveys, geotechnical and hydrological conditions;
• utilities, access, logistics and temporary works;
• applicable codes, standards and approval requirements;
• availability and reliability of materials, plant and specialist labour;
• interfaces with existing assets and stakeholders;
• construction sequencing, temporary states and commissioning;
• climate resilience and future operating conditions; and
• safety, maintainability and end-of-life requirements.

Constructability reviews should occur before design is fixed. They test whether drawings, specifications and construction methods are compatible with site realities. Typical findings include inadequate crane access, unrealistic production rates, uncoordinated interfaces, unsafe temporary conditions, excessive tolerances or maintenance access that has not been designed.

A technical risk register should describe the cause, event, consequence, probability, impact, owner, response and residual exposure. Contingency should not be used to conceal immature scope. Cost and schedule estimates should record their estimating basis, price level, exclusions, quantities, productivity assumptions and confidence range.

4. Whole-life value and life-cycle costing

The lowest construction price is not necessarily the lowest-cost solution. Whole-life costing includes expenditure and relevant value over the asset life. A simplified present-value life-cycle cost is:

\[

PV_{LCC}=C_0+\sum_{t=1}^{n}\frac{C_t}{(1+r)^t}-\frac{RV_n}{(1+r)^n}

\]

where \(C_0\) is initial cost, \(C_t\) is cost in year \(t\), \(n\) is the appraisal period, \(r\) is the real discount rate, and \(RV_n\) is residual value at the end of the period. The formula assumes costs and residual value are measured consistently in real terms and occur at the stated times. If costs occur continuously or at irregular dates, a more appropriate time basis should be used.

Whole-life assessment should include energy, routine maintenance, renewal, inspection, downtime, insurance, adaptation and disposal. It should also consider non-monetised effects such as reliability, comfort, safety and carbon. Design decisions should be tested against uncertainty in service life, deterioration rates, energy prices and maintenance regimes.

Value management asks whether required functions can be delivered at lower whole-life resource cost, without reducing essential performance. It is not simply cost cutting. Removing a drainage feature that prevents future flooding may reduce capital cost while increasing whole-life risk.

5. Economic and financial appraisal

Financial appraisal

Financial appraisal examines the effect on the project owner, investor or sponsoring organisation. It uses actual market prices, taxes, grants, financing costs and contractual payments as relevant to that entity. It answers questions such as: Will the owner have sufficient cash? Can debt be serviced? What return does invested capital earn?

Economic appraisal

Economic appraisal examines changes in society’s use of real resources and welfare. It may include time savings, safety, environmental effects, reliability and wider impacts. Market prices may require adjustment where they do not represent opportunity cost, for example because of taxes, subsidies, unemployment, regulated prices or market power.

Transfers must be treated carefully. A tax, grant, fine or interest payment may be a cash flow for one party but a transfer within society, not a net resource cost. Distributional effects may still matter, but they should not be counted as a social benefit and social cost simultaneously. Economic appraisal can use shadow prices, such as a shadow wage or carbon value, where the market price is judged to misrepresent marginal social cost. Shadow pricing requires transparent assumptions and should not be introduced merely to improve an option’s result.

The economic benefit–cost ratio is commonly defined as:

\[

BCR=\frac{PV(benefits)}{PV(costs)}

\]

Benefits and costs must be incremental, discounted using the prescribed social discount rate, and valued over the same period. A BCR greater than 1 indicates that discounted benefits exceed discounted costs, but it does not by itself resolve mutually exclusive choices, distributional concerns or affordability.

Financial and economic results may differ substantially. A flood defence may have limited direct revenue but high avoided-damage benefits. A toll road may generate strong financial revenue but impose congestion or environmental costs not reflected in its accounts.

6. Discounted cash-flow methods

Net present value

For a project with net cash flow \(CF_t\) in period \(t\), including the initial investment at \(t=0\),

\[

NPV=\sum_{t=0}^{n}\frac{CF_t}{(1+r)^t}

\]

where \(r\) is the discount rate and cash-flow signs are preserved. A positive NPV means that, at the selected rate and assumptions, the project creates value relative to the required return. NPV is generally preferred for mutually exclusive investments because it measures absolute value added and satisfies value additivity, subject to consistent assumptions.

If cash flows are stated in nominal prices, the discount rate must be nominal. If cash flows are in real prices, the rate must be real. The relationship is approximately \(1+r_n=(1+r_r)(1+i)\), where \(i\) is inflation; mixing real cash flows with nominal rates creates bias.

Internal rate of return

IRR is the discount rate \(r^*\) that sets NPV to zero:

\[

0=\sum_{t=0}^{n}\frac{CF_t}{(1+r^*)^t}

\]

IRR is meaningful only when the cash-flow pattern and decision context support its interpretation. Conventional investment cash flows usually begin with a negative outflow followed by positive inflows, producing one economically relevant IRR. Multiple sign changes can produce multiple IRRs or no real IRR. In such cases, NPV at the required rate, or modified IRR, is preferable. IRR can also rank mutually exclusive projects incorrectly when scale, timing or reinvestment assumptions differ.

Payback

Simple payback is the time required for cumulative undiscounted cash flow to become non-negative. Discounted payback uses discounted cash flows. Both are useful liquidity indicators but ignore benefits after payback and do not measure total value; they should not replace NPV.

Worked Example 1: NPV and BCR

An option requires £75 million at time zero, followed by operating and maintenance costs with a present value of £10 million. It produces benefits with a present value of £90 million. At the prescribed discount rate, the financial or economic comparison is:

\[

NPV=£90m-(£75m+£10m)=£5m

\]

\[

BCR=\frac{£90m}{£75m+£10m}=1.0588\approx1.06

\]

The option has a positive NPV and BCR above 1. If the £10 million is not a real resource cost in the relevant appraisal—for example, it is already included in the £75 million—double counting must be avoided. This illustrates why the cost boundary must be stated before calculating a ratio.

Worked Example 2: Correct IRR calculation

A project has the following conventional cash flows:

| Year | 0 | 1 | 2 | 3 |

|---|---:|---:|---:|---:|

| Cash flow (£000) | -1,000 | 400 | 500 | 600 |

The IRR solves:

\[

0=-1000+\frac{400}{1+r}+\frac{500}{(1+r)^2}+\frac{600}{(1+r)^3}

\]

At 16%:

\[

NPV=-1000+344.83+369.82+384.59=£99.24\text{ thousand}

\]

At 20%:

\[

NPV=-1000+333.33+347.22+347.22=£27.78\text{ thousand}

\]

At 22%:

\[

NPV=-1000+327.87+336.46+331.83=-£3.84\text{ thousand}

\]

Therefore the IRR lies between 20% and 22%. Linear interpolation gives:

\[

r\approx20\%+\frac{27.78}{27.78+3.84}(2\%)=21.76\%

\]

A more exact numerical solution is approximately 21.75%. The interpolation is an estimate; spreadsheet or numerical iteration should be used for final reporting. This result demonstrates that an IRR must be derived from the stated cash flows rather than inferred from a payback period or a single ratio.

7. Financing, capital structure and affordability

Financing is distinct from economic value. Debt, equity, grants and user charges determine who provides funds and when, whereas economic appraisal determines whether society gains from committing resources. Financing cash flows should not be inserted into an economic cost–benefit analysis as if they were additional resource costs; interest is generally a transfer between borrower and lender in a social appraisal, although financing constraints and transaction costs remain relevant.

Sources and structure

Common sources include public capital allocation, retained earnings, commercial debt, bonds, equity, grants, land-value capture, availability payments and project finance. Capital structure determines the proportions and priority of debt and equity. Debt may reduce the immediate equity requirement but creates fixed obligations and refinancing risk. Equity bears more residual risk and normally requires a higher return.

The weighted average cost of capital (WACC), used cautiously for an appropriate project-risk class, is often expressed as:

\[

WACC=\frac{E}{D+E}k_e+\frac{D}{D+E}k_d(1-T)

\]

where \(E\) and \(D\) are market values of equity and debt, \(k_e\) and \(k_d\) are required returns, and \(T\) is the applicable corporate tax rate. The tax adjustment is relevant only where interest is tax-deductible and the tax assumption applies. WACC should not be used mechanically for projects whose risk differs materially from the organisation’s existing activities.

Debt service and affordability

A debt schedule should distinguish opening balance, interest, principal repayment, closing balance and fees. For a fully amortising loan with principal \(P\), periodic interest rate \(i\), and \(n\) equal repayments, the constant payment is:

\[

A=P\frac{i(1+i)^n}{(1+i)^n-1}

\]

This assumes payments occur at the end of each period, the rate remains constant and no fees or grace period apply. Actual project finance may include sculpted repayment, reserve accounts, floating rates and covenant tests.

Debt service coverage ratio (DSCR) is commonly:

\[

DSCR=\frac{CFADS}{Debt\ service}

\]

where CFADS is cash flow available for debt service after operating costs, taxes and required maintenance reserves, according to the financing definition. A DSCR of 1.30 means CFADS is 1.30 times scheduled debt service; the acceptable threshold depends on risk, lender requirements and contract structure. Affordability analysis should also test debt-to-income or debt-to-revenue measures, minimum liquidity, refinancing exposure, interest-rate sensitivity and contingent liabilities.

A project can have a positive NPV but be unaffordable in early years because construction payments precede benefits. Conversely, a project can be affordable through borrowing while destroying value. The business case must report both value and funding capacity.

Financing example

Suppose £60 million is borrowed for five years at a fixed annual rate of 6%, with equal end-of-year repayments. The annual payment is:

\[

A=60\frac{0.06(1.06)^5}{(1.06)^5-1}=£14.24m\text{ approximately}

\]

If annual CFADS is £20 million, the approximate DSCR is:

\[

DSCR=20/14.24=1.40

\]

This may satisfy a hypothetical 1.30 minimum, but a sensitivity test should examine lower CFADS, higher interest rates, delayed opening and additional maintenance expenditure. The example does not establish project viability by itself.

8. Risk, uncertainty and sensitivity analysis

Risk is an uncertain event or condition that affects objectives; uncertainty also includes imperfect knowledge about quantities, relationships and future conditions. A risk-adjusted business case combines a risk register, quantitative assessment where justified, contingency logic and sensitivity testing.

One-way sensitivity analysis changes one assumption while holding others constant. Variables may include capital cost, demand, tariff, operating cost, construction duration, discount rate, asset life and residual value. A tornado diagram ranks influence. Scenario analysis changes a coherent set of assumptions, such as low-demand/high-inflation conditions. Monte Carlo simulation can represent probability distributions, but its results are only as credible as the input distributions and correlations.

Switching analysis identifies the value at which a decision changes. For example, if a project’s NPV is £12 million and a 10% increase in capital cost would reduce NPV to zero, the decision is sensitive to cost escalation. Sensitivity is not a prediction; it reveals dependence on assumptions and helps target further investigation.

9. Business-case structure and governance

A robust business case normally contains:

• an executive case defining the need, objectives and strategic fit;
• an economic case comparing options and benefits;
• a commercial case covering procurement and market capability;
• a financial case covering affordability, funding and accounting effects; and
• a management case covering governance, programme, risk, benefits and assurance.

Benefits should have owners, baselines, measures, target dates and disbenefit controls. Governance should establish decision rights, independent review, change control, escalation thresholds and audit trails. Optimism bias should be addressed through evidence-based adjustment or explicit risk modelling rather than hidden contingency.

Ethical governance requires honest treatment of uncertainty, accessibility, affected communities, conflicts of interest and distributional consequences. A benefit to aggregate users does not automatically justify severe uncompensated harm to a vulnerable group. Regulatory approvals, environmental impact assessment, land acquisition, safety law, procurement rules and data protection may create hard constraints, not merely scoring criteria.

Digital twins, building information modelling and AI can improve option estimation, clash detection, demand forecasting and scenario analysis. However, automated outputs require data validation, transparent assumptions, cybersecurity controls, human review and accountability. AI-generated cost or schedule forecasts should never be accepted without checking training-data relevance, uncertainty and bias.

Applied case: illustrative metropolitan flood-resilience programme

Background

A fictional metropolitan authority experiences repeated flooding along a commercial corridor. It considers three mutually exclusive first-phase options: (A) a large flood wall, (B) distributed storage and property-level protection, and (C) relocation of critical services combined with targeted drainage upgrades.

Problem and options

The do-minimum case includes routine maintenance and emergency response. The authority estimates that flooding creates direct repair costs, business interruption, health impacts and transport disruption. Option A has the greatest visible protection but requires land acquisition and affects heritage views. Option B has lower initial cost but requires coordinated private-property participation. Option C has lower structural exposure but produces substantial disruption during relocation.

Analysis

The technical team examines hydrology, ground conditions, construction access, residual flood risk and climate allowances. The economic team values avoided damage, travel reliability, health effects and environmental impacts, while removing taxes and grants from resource-cost calculations and applying an approved shadow carbon value. The financial team tests the authority’s capital ceiling, grant conditions, operating budgets and debt-service capacity.

Incremental analysis compares each option against do-minimum and then compares the leading options directly. This prevents the authority from selecting an option merely because it has a positive BCR when another mutually exclusive option creates greater net value. Sensitivity tests vary rainfall intensity, avoided-damage estimates, programme delay, land cost and maintenance performance.

Approach and outcome

The preferred recommendation is conditional: adopt Option B if landowner participation exceeds a defined threshold and a maintenance fund is secured; otherwise progress a scaled version of Option A. The business case includes a staged gateway, monitoring of flood frequency and a trigger for expansion. This outcome recognises that the best decision may be a flexible pathway rather than a single irreversible design.

Learning points

The case demonstrates the importance of a credible baseline, incremental economic appraisal, distributional analysis, constructability, affordability and adaptive governance. It also shows why a numerical ranking should be interpreted alongside deliverability and residual risk.

Challenges and limitations

Feasibility studies can create false precision. Early quantities are uncertain, benefits may be difficult to attribute, and discount rates embed judgements about time and risk. Forecasts may exhibit optimism bias, strategic misrepresentation or demand overestimation. BCRs can obscure scale: a small project with a high ratio may produce less total value than a larger project with a lower ratio. NPV may omit non-monetised cultural or ecological value. IRR can be misleading with non-conventional cash flows or mutually exclusive alternatives.

These limitations do not invalidate appraisal. They require transparent assumptions, independent challenge, ranges rather than single-point estimates, explicit treatment of unpriced effects and post-project evaluation. The business case should state what evidence would change the decision and how that evidence will be collected.

Best-practice decision sequence

A defensible sequence is to define the need; establish do-nothing and do-minimum baselines; develop credible alternatives; test technical and statutory constraints; estimate whole-life incremental costs and benefits; separate economic and financial models; select an appropriate discount rate; assess procurement and financing; test uncertainty; document non-monetised effects; obtain independent assurance; and establish benefits-realisation and post-occupancy review. The decision should be proportionate to project scale and risk, but never proportionate at the expense of transparency.

Chapter Summary

Project development transforms a need into a tested investment proposition. A complete feasibility study considers strategic, technical, economic, financial, commercial and institutional dimensions. Options must be compared with a credible baseline using incremental costs and benefits; sunk costs are excluded and opportunity costs included. Economic appraisal measures social resource value and may use shadow prices, while financial appraisal addresses the owner’s cash position, funding and affordability. Transfers such as taxes, grants and interest require careful treatment in economic analysis.

Whole-life costing captures construction, operation, maintenance, renewal and residual value. NPV is generally the strongest primary investment criterion, while IRR, payback and BCR provide complementary information with important limitations. Financing analysis should examine debt service, capital structure, financing cost, DSCR and affordability separately from economic value. Sensitivity, scenario and switching analysis reveal dependence on uncertain assumptions. A professional business case combines quantitative evidence with constructability, environmental and social assessment, governance, risk management and benefits realisation.

Key Terms

Strategic alignment: Consistency between a project and approved organisational, regional or national objectives.

Need statement: Evidence-based description of the problem or opportunity a project addresses.

Do-minimum case: The credible baseline intervention against which project options are compared.

Incremental analysis: Comparison of changes caused by an option relative to a baseline or competing option.

Technical feasibility: Assessment of whether required performance can be achieved and delivered in practice.

Constructability: The extent to which a design can be safely, efficiently and reliably constructed.

Whole-life cost: Present value of relevant capital, operating, maintenance, renewal and end-of-life costs.

Economic appraisal: Assessment of net benefits to society using resource and welfare effects.

Financial appraisal: Assessment of cash flows, returns and affordability for a specified entity.

Shadow price: An analytically estimated value representing opportunity cost when market price is distorted or absent.

Transfer: Payment that redistributes income or funds without itself representing a net social resource use.

NPV: Discounted value of all project cash flows, including investment cost.

IRR: Discount rate that makes project NPV equal to zero.

BCR: Present value of benefits divided by present value of costs.

Discount rate: Rate used to convert future values into present values.

Capital structure: Proportions and characteristics of debt, equity and other funding.

DSCR: Cash flow available for debt service divided by scheduled debt service.

Sensitivity analysis: Examination of results when assumptions are changed.

Optimism bias: Systematic tendency to underestimate costs, time or risks and overestimate benefits.

Benefits realisation: Planned measurement and management of outcomes after investment.

Review Questions

Short Answer Questions

1. Why is a do-minimum case required in project appraisal?

2. Distinguish economic appraisal from financial appraisal.

3. Define NPV and state what a positive value indicates.

4. What is constructability, and why should it be assessed early?

5. Explain the purpose of a DSCR.

Long Answer Questions

1. Explain how a civil engineering project should progress from need identification to an approved business case.

2. Critically compare NPV, IRR, payback and BCR as investment decision tools.

3. Discuss the treatment of transfers, shadow prices and externalities in economic appraisal.

4. Explain how capital structure, debt service and affordability affect project decisions.

5. Describe a rigorous approach to whole-life value and uncertainty analysis.

Analytical / Application Questions

1. A proposed facility has a positive NPV but fails the sponsor’s minimum DSCR during its first two operating years. Explain possible responses and distinguish value from affordability.

2. Two mutually exclusive transport options both have BCRs above 1, but one has a higher NPV and the other a higher IRR. Explain how the decision should be analysed.

3. Design a sensitivity and scenario-analysis plan for a flood-defence project whose benefits depend on uncertain climate projections, avoided damage and maintenance performance.

Multiple Choice Questions with Answers

Question 1

Which statement best defines incremental analysis?

A. Comparing an option’s gross cost with its gross benefit

B. Comparing an option with the relevant baseline or competing option using only changes caused by the decision

C. Adding sunk costs to every alternative

D. Ranking projects only by construction cost

Correct Answer: B. Comparing an option with the relevant baseline or competing option using only changes caused by the decision

Question 2

A project has present-value benefits of £90 million and present-value costs of £75 million. What is its BCR?

A. 0.83

B. 1.15

C. 1.20

D. 1.65

Correct Answer: C. 1.20

Question 3

Using the cash flows -£1,000, £400, £500 and £600 at years 0 to 3, which is the approximate IRR?

A. 10.0%

B. 16.7%

C. 21.75%

D. 30.0%

Correct Answer: C. 21.75%

Question 4

Which appraisal measure is generally most appropriate for ranking mutually exclusive projects when the discount rate and cash-flow boundary are consistent?

A. Simple payback

B. NPV

C. Construction duration alone

D. Number of project activities

Correct Answer: B. NPV

Question 5

In a social economic appraisal, which item is normally treated primarily as a transfer rather than a net resource cost?

A. Concrete consumed in construction

B. Construction labour time

C. A tax payment transferred to government

D. Fuel consumed by construction plant

Correct Answer: C. A tax payment transferred to government

Question 6

If annual CFADS is £20 million and annual debt service is £14.24 million, the approximate DSCR is:

A. 0.71

B. 1.00

C. 1.40

D. 2.40

Correct Answer: C. 1.40

Question 7

A real cash-flow forecast should normally be discounted using:

A. A nominal discount rate including expected inflation

B. A real discount rate consistent with the real cash flows

C. The project’s tax rate

D. The construction inflation rate only

Correct Answer: B. A real discount rate consistent with the real cash flows

Question 8

Which statement about IRR is correct?

A. It always produces one unique rate for every cash-flow pattern

B. It is unaffected by project scale or timing

C. Multiple sign changes can produce multiple or no real IRRs

D. It is always superior to NPV for mutually exclusive projects

Correct Answer: C. Multiple sign changes can produce multiple or no real IRRs

Question 9

What does one-way sensitivity analysis do?

A. Changes one assumption while holding other assumptions constant

B. Guarantees the forecast outcome

C. Removes all uncertainty from the model

D. Counts taxes as both benefits and costs

Correct Answer: A. Changes one assumption while holding other assumptions constant

Question 10

Which item is most directly associated with constructability review?

A. Testing whether site access and temporary works support the proposed construction sequence

B. Calculating the organisation’s income tax rate

C. Selecting a discount rate without examining risk

D. Ignoring commissioning and maintenance access

Correct Answer: A. Testing whether site access and temporary works support the proposed construction sequence