Tuesday, September 8, 2009



1. simplest of handling risks
2. magnitude in the ROR by small change in the components of which are uncertain
3. selct variable –whose estimated values may contain significant errors or elements of uncertainty
4. key variables are – cost, price, project life, market share etc
Cut off rate
Selling pricegraph

Sales when decline
Cost of fixed assets
Working capital
Variables cost

Adverse change in variable percentage

1. identify crucial variables that makes greatest impact in the NPV of the project
2. graphical presentation – better visual appeal
3. by confining SA to adverse changes in the variable that can be reasonably expected to occur one can obtain range of NPV that can be reasonably anticipated
4. knowledge is helpful for making decisions

Railways Risk Factors:
1. land - delay in acquisition – litigation
2. earth work availability of sand
3. soil condition – geographical factors –weak/loose Eg TEN-NGC line due to weak soil
4. alignment due to local or popular demand Eg KRCL in Madgaon line in Goa State
5. availability of sleepers – wooden/ Pre Stressed Concrete Sleepers – snags in production- ban on wooden sleepers as environmental policy of the Govt
6. availability of rails – change in the production pattern of the steel mills – delay in production- change in the Govt policy
7. estimated earnings – net production of commodities short fall in projected and traffic due to climatic and natural causes – import and export potential
8. delay in rolling stock in ordered quantity Eg Hassan – Mangalore line for transport of ore to Port of Mangalore diverted to road
9. cost and time over runs – likely delay due to paucity of funds/allotment

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