[Australian Undergraduate] Important Finance group project - Assignment Example

The construction would incur maintenance and utility cost from the drainage and the dike systems, the solid wastes and the recycling of materials that were not used after completion of the construction process. Besides, other cost associated with maintenance and utilities include the sewer system, water supply, operations and maintenance, constructions of the systems that still need polishing up and the salaries and benefits of the employees. The average daily cost is represented in the diagram below for all the utilities.

These costs represent estimates computed for the first three months to obtain the daily cost in the first 90 days. However, it is likely that the amount may be slightly higher during the first one month. The values will fall thereafter with the third and fourth months and even subsequent duration recording lower values owing to the decreasing utilities and maintenance requirement. The breakeven analysis helps in the determination of the point at which the management can know whether the business attains a level that it makes neither losses nor profits (Tucker, 1963).

It is also the point that the cost of production for the business equals the sales, hence no profit. Although breakeven is a firsthand tool for the assessment of the health status of the business by showing how the uncertainties may be critical for the venture, it does not capture market dynamics. Every market should be considered as dynamic because the trends may vary depending on several conditions. The changing trends dictate pricing and changes in the prices at large. Breakeven analysis does not take into accounts these trends, so it may give a general outlook that has an impact on expectations (Tucker, 1963).

Since breakeven analysis involves adjustment of variables so that the values can give a figure of $0 NPV, and that each variable undergoes adjustment one at a time, it does not capture the possible effects that may influence two or more variables together.