16236 Property Cash Flow Analysis
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Subject handbook information prior to 2021 is available in the Archives.
Credit points: 6 cp
Subject level:
Undergraduate
Result type: Grade and marksRequisite(s): 16136 Introduction to the Built Environment OR 16468 Introduction to the Built Environment
Description
This subject examines application and theory of cash flow analysis; discounted cash flow analysis with computer modelling; working capital management; forecasting and theory; various forms of risk analysis, including sensitivity and scenario analysis with computer skills; and forecasting and validity issues. It introduces forecasting approaches including regression, time series and chaos; validity of forecasting for future property variables in cash flow valuation.
Subject learning objectives (SLOs)
On successful completion of this subject, students should be able to:
| C-1. | Ability to effectively apply a variety of communication skills and technologies in professional contexts |
|---|---|
| C-2. | Ability to work effectively in a team in a professional context |
| I-1. | Openness to consideration of creative and innovative ideas |
| P-2. | Ability to make investment decisions in various contexts |
| R-1. | Ability to engage in critical and reflective thinking in built environment contexts |
| R-2. | Ability to source, evaluate and use information within defined parameters |
| R-3. | Ability to analyse, structure and report the results of research |
Course intended learning outcomes (CILOs)
This subject also contributes to the following Course Intended Learning Outcomes:
- Effectively apply a variety of communication skills and technologies in professional contexts (C.1)
- Analyse data to make investment decisions in various contexts (P.2)
- Engage in critical and reflective thinking in built environment contexts (R.1)
- Source, evaluate and use information within defined parameters (R.2)
- Critically analyse, structure and report the results of research (R.3)
Teaching and learning strategies
2 hour lectures, and one hour tutorials.
In this subject students will learn the basic knowledge and skills to make investment decisions using discounted cash flow (DCF) modelling skills for various income–producing properties. Students will research the property market, build cash flow models and conduct risk analysis on various properties, as well as write reports to demonstrate their understanding of the subject matter. Students will learn from the literature on financial and economic variables that influence property cash flows and impact on their decisions. Much of the learning will take place in student's own reading, research and practice of modelling. The learning experience of students involves a combination of interactive face to face workshops, computer lab tutorial, online activities and discussion and independent reading.
Content (topics)
This subject includes contents as follows:
- Revision of present value, future value, annuities.
- Investment and valuation decision making using Net Present Value and Internal Rate of Return methods
- Market research and variables considered for developing DCF models for projects
- Pro-forma cash flow statement and DCF modeling
- Conducting sensitivity and scenario analysis in DCF models
- Applications of DCF modeling from the perspective of different stakeholders
Assessment
Assessment task 1:
1a Research and Analysis (20%)
1b Investment Decision Using DCF (20%)
| Objective(s): | This task addresses the following subject learning objectives: C-1, I-1, P-2, R-1, R-2 and R-3 This task also addresses the following course intended learning outcomes that are linked with a code to indicate one of the five CAPRI graduate attribute categories (e.g. C.1, A.3, P.4, etc.): .1, C.1, P.2, R.1, R.2 and R.3 |
|---|---|
| Weight: | 40% |
| Criteria: | Refer to the subject assessment documents |
Assessment task 2:
In Class Quizzes
| Objective(s): | This task addresses the following subject learning objectives: R-1 This task also addresses the following course intended learning outcomes that are linked with a code to indicate one of the five CAPRI graduate attribute categories (e.g. C.1, A.3, P.4, etc.): R.1 |
|---|---|
| Weight: | 10% |
| Criteria: | Refer to the subject assessment documents |
Assessment task 3:
120 minute examination
| Objective(s): | This task addresses the following subject learning objectives: C-1, P-2 and R-1 This task also addresses the following course intended learning outcomes that are linked with a code to indicate one of the five CAPRI graduate attribute categories (e.g. C.1, A.3, P.4, etc.): C.1, P.2 and R.1 |
|---|---|
| Weight: | 50% |
| Criteria: | Refer to subject assessment documents |
Recommended texts
Rowland, P. (2010), Australian Property Investment and Financing, Sydney: Thomson Reuters.
References
Shapiro, E., Mackmin, D. and Sams, G. (2013) Modern Methods of Valuation, Routledge.
Frino, et al. (2006), Introduction to Corporate Finance, Pearson/Prentice Hall.
Fischer, D (2000), Income Property – analysis and valuation, FP Media.
Brueggeman, W. B and Fisher, J D (2008), Real Estate finance and Investment, 13th edition, McGraw-Hill.
Hoesli, M and Macgregor, B D (2000), Property Investment – principles and practice of portfolio management, Longman.
Patrick, R (1997), Property investments and their financing, North Ryde, N. S. W. LBC Information Service.
Peirson, G; Brown, R and Howard, P (2000), Essentials of Business Finance, Sydney: McGraw-Hill.
Scott, D F; Martin, J D; Petty, J W and Keown, A J (1999), Basic Financial Management, NJ: Prentice Hall.
Waxman, P (2004), Investing in residential property – understanding the Australian property market, 6th edition, Wrightbooks.
Other resources
Journal of Property Investment & Finance
Journal of Real Estate Research
Journal of Real Estate
Journal of Real Estate Finance and Economics
Journal of Property Valuation & Investment
Journal of Real Estate Development
http://www.rba.gov.au/
http://www.abs.gov.au/