Group Project: Emmar Properties in Dubai, UAE
(ENGG938) Engineering Economics
Dr. Raid Al Amour
By: Ayman ElHalabi ID # 3162758
Fadi Deratani ID # 2462540
Mohammed Al Khanji ID # 3741242
Mohammad Nabil Ibrahim ID # 3517056
Table of Contents
Case Description 3
Study Questions 4
Solution Assumptions 4
Scenario Analysis 11
Results Discussion 11
Conclusion & Recommendations 12
Emaar Properties PJSC is a United Arab Emirates Based company, it is a Public Joint Stock Company (PJSC) listed on the Dubai Financial Market. Emaar was established in 1997 with an initial paid-up capital of AED 1 billion. It is currently one of the Gulf's largest land and real estate developer. (Wikipedia) With over 60 companies, Emaar's activities include property investment and development, property management services, education, healthcare, retail and hospitality sectors, as well as investing in financial service providers (Wikipedia). Emaar Properties has joint ventures and projects across the region covering Algeria, Egypt, India, Indonesia, Morocco, Saudi Arabia, Syria, Turkey, and Tunisia and now heading towards the Americas. Recently Emaar announced plans to expand the retail sector with investments of over US$4 billion to develop approximately 150 malls in the mega emerging markets of the Middle East, North Africa and the Indian subcontinent. Since Emaar is the biggest developer in the Gulf region, and since Dubai has announced its interest and already started promoting for the eco- tourism, moreover it has also dedicated a 350-million square meter area as an eco-zone(uaeinteract,2006). In these Plans, Emaar is considering some investment proposal, one of which is an eco-tourist resort, which we are as a group going to analyze and propose proper recommendations which is the scope of this report application. Case Description
Emaar is deploying AED one million as an initial investment, with AED 660,000 as depreciable assets and an expected project life for 10 years duration.
The revenues for this project will come from three areas, accommodation, food, and retail sales of environmentally friendly items. Costs are also predicted to be as percentages of the revenues.
After 8 years, the project will need major refurbishment, so decision will have to be made whether to continue or not. If not continuing an amount of AED 100,000 will be generated from the salvageable items of the assets.
This case study, will analyze the project with its expected revenues and costs, it also will consider the threats and the declining forecasted revenues, as well as the probability of increasing costs.
The Case Study
1. Depreciation is Decline Balance Method
2. Any Income Tax with negative value consider to be zero 3. For part C it is assumed that the revenue will be decreased 30 % because of the international tourism market effect and it will increase 25 % from the domestic market. As a result the net effect will be 5% decrease 4. Gains Tax in this case study is negligible, since the book value and the salvage value are equal and then Gains will be equal to Zero, and thus no tax charges will be deployed. In this Scenario its kept the positive figure of the gain tax and didn't change it to Zero since it is a very small amount.
For the Annual revenues and costs are as follow:
By using the declining balanced method for depreciating the assets and the equation (Bn=I (1-AlPHA)^n)
And given the initial assets costs (I) = 660000, salvage value (S) = 100000 and For N = 8 years
ALPHA = 0.210127474
With the Revenues are 30% less than forecasted
And by keeping the...