Discussion of "Win-Win concession period determination methodology" by Xueqing Zhang

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1 Ttle Dsussn f "Wn-Wn nessn perd determntn methdlgy" by Xueqng Zhng Authr(s) Wu, M; Chu, KW; Shen, QP Cttn Jurnl Of Cnstrutn Engneerng And Mngement, 0, v. n., p. Issued Dte 0 URL Rghts Jurnl f Cnstrutn Engneerng nd Mngement. Cpyrght Amern Sety f Cvl Engneers.

2 Edtrl Mnger(tm) fr Jurnl f Cnstrutn Engneerng nd Mngement Mnusrpt Drft Mnusrpt Number: COENG-R Ttle: Dsussn f "Wn-Wn Cnessn Perd Determntn Methdlgy" by Xueqng Zhng Artle Type: Dsussn Crrespndng Authr: Dr Mn Wu, Crrespndng Authr's Insttutn: The Unversty f Hng Kng Frst Authr: Mn Wu Order f Authrs: Mn Wu; Kwng W Chu, PhD, Chr Prfessr; Q P Shen, PhD, Chr Prfessr, Hed Mnusrpt Regn f Orgn: HONG KONG

3 *Mnusrpt Clk here t dwnld Mnusrpt: Cnessn perd dsussn pper (Fnl).d Dsussn f Wn-Wn Cnessn Perd Determntn Methdlgy by Xueqng Zhng June 00, Vl., N., pp.0-. DOI: 0.0/(ASCE)CO Wu, Mn, Crrespndng uthr, Prfessr, Mngement Shl, Chngqng J Tng Unversty (n leve); Reserh Assstnt Prfessr, Dept. f Rel Estte nd Cnstrutn, the Unversty f Hng Kng Eml: mnwu@hku.hk Chu, Kwng Wng, Chr Prfessr, Dept. f Rel Estte nd Cnstrutn, The Unversty f Hng Kng Eml: hrrbkw@hku.hk Shen, Q Png, Chr Prfessr nd Hed, Dept. f Buldng nd Rel Estte, The Hng Kng Plytehn Unv., Hung Hm, Kwln, Hng Kng. Eml: bsqpshen@net.plyu.edu.hk We rgue tht there re nnsstenes n Eqs (), () nd () n Zhng (00, p.) nd suggest revsns t Eqs () nd () t retfy the nnsstenes. The dsunt rtes n Eq. () nd Eq. () n Zhng re nt nsstent. Eq. () ws the frmul fr lultn f the net present vlue f the ttl pret nstrutn st, nd ws expressed by Zhng s where = T C R () s net present vlue f the ttl pret nstrutn st, C s the pret nstrutn st n yer, R s dsunt rte, T s the pret s nstrutn mpletn tme, C s the pret nstrutn st n yer. The dsunt ftr fr sh flw n yer s R, whh mens tht the referene yer fr dsuntng s the strtng yer f nstrutn f the pret. Eq. () ws the frmul fr lultn f the net revenues n the pertn perd nd ws expressed by Zhng s

4 0 0 0 where T T NCF R R () T T T Q P OM T NCF s the net sh flw ( NCF ) n pertn yer, s the net present vlue f NCFs, T s the pret frnhse pertn perd, Q s the serve/prdut demnded n yer durng the pertn perd, P s the pre f unt f serve/prdut n yer durng the pertn perd, durng pertn. OM s the pertn nd mntenne st n yer Sne the referene yer fr dsuntng n Eq. () s the strtng yer f nstrutn f the pret, n rder t be nsstent wth Eq. () n the referene yer fr dsuntng, Eq. () n Zhng (p.) thus shuld be mdfed s T T NCF R R () revsed T T T Q P OM T The dsunt rtes n Eq. () n Zhng (p.) re ls nnsstent. Eq. () ws develped bsed n the prnple tht the frnhse pertn perd shuld be lng enugh t enble the nessnre t reup hs nvestment nd ern resnble return ver the perd. The nessn perd s the sum f the pret nstrutn perd plus ts frnhse pertn perd. Eq. () n Zhng ws T T T T Q P OM C R R ()

5 0 0 0 where T s the mnmum length f the pret frnhse pertn perd eptble by the nessnre, P s lwer thn the mxmum publ ffrdble pre fr prtetng the publ nterest, R gvernment nd the nessnre. s n nternl rte f return (IRR) n equty greed by the hst The dsunt ftr fr sh flw n yer s R, gn, ths mens tht the referene yer fr dsuntng s the strtng yer f nstrutn f the pret. In rder t be nsstent n the referene yer fr dsuntng, the dsunt ftr fr sh flw n yer durng the pertn perd thus shuld be Eq. () n Zhng (00) shuld be mdfed s: T T T Q P OM C R R T R, rther thn R. Hene, () revsed T summrze, n rder t be nsstent n the referene yer fr dsuntng, Eq. () nd Eq. () n Zhng hve t be mdfed. Referene: Zhng, X.Q. (00). Wn-Wn nessn perd determntn methdlgy. J. Cnstr. Eng. Mnge., (), 0.