Definition:
An initial cost approximation provided with limited project information, offering a broad overview to assess the project’s financial feasibility.
Key Components:
- High-Level Cost Assessment: General estimation without detailed data.
- Assumption-Based Calculations: Relies on industry benchmarks and analogous projects.
Use Cases/Industries:
- Early-Stage Project Evaluation: Assessing potential investments in new energy ventures.
- Feasibility Studies: Determining if a project warrants further exploration.
Advantages:
- Quick Assessment: Provides a rapid financial snapshot to determine project viability.
- Resource Efficiency: Requires minimal time and effort to generate.
- Supports Early Decision-Making: Helps in securing initial stakeholder interest.
Challenges:
- Low Accuracy: Subject to significant variance as project details are undefined.
- Potential Misleading Information: May create unrealistic expectations if not clarified as a rough estimate.
- Lack of Granular Data: Limited input data can lead to under- or overestimation.
Related Terms:
Order of Magnitude Estimate, Rough Cost Estimate, Preliminary Budget Estimate
Example:
A renewable energy company provides an indicative estimate for a new offshore wind farm, using similar past projects as benchmarks to estimate total installation costs and feasibility.
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Synonyms:
Preliminary Estimate, Ballpark Figure
