A proper costing of any project is essential for determining its viability and profitability. Any financial institution entertains an entrepreneur on the basis of the cost estimates of the project. For any cost over-run, the entrepreneur would find it difficult to arrange for the extra fund for completion of the project which usually leads to time over-run, fund flow etc. Hence, there is a need for proper determination of the cost of capital. Following are the essential elements of project cost:-
- Land and site development
- Building and civil works
- Plant and machinery
- Engineering fees for acquisition of technology
- Miscellaneous fixed assets which include
Furniture, Office equipment, Cars and trucks, Power equipment, Air conditioning systems, Fire fighting systems, Pollution control systems and other such systems.
- An exhaustive schedule of such fixed assets must be prepared and their prices ascertained for estimation of the cost.
- Preliminary and capital issue expenses.
- Provision for contingencies.
- Margin money for working capital.
A sample table has been shown below for arriving at the summary of Project Cost.
|
Item |
Cost (in Rs) |
|
Site Building Plant and machinery Furniture, furnishing and interior Food and beverage equipment Laundry and housekeeping equipment Specialized equipment Misc. accessories Linen and uniform Architectural fee (4%) Interior designing fee (10%) Facilities planning fee (10%) Project management and supervision (1.5%) Contingency (2.5%) Pre-opening expenses Cost of finance Total |