Valuation of Residential Properties affected by Pollution in Eket, Niger Delta using the Growth Explicit Discounted Cash Flow Model

Abstract

This paper examines the application of growth explicit discounted cash flow model to the valuation of residential properties affected by environmental pollution from the activities of oil and gas firms in Eket area of the Niger Delta Region. Data for the study were obtained from 178 residential properties affected by environmental pollution in the study area, selected randomly for the study. In the valuation of residential properties affected by environmental pollution in the study area, it was found that the value obtained using growth explicit discounted cash flow model was 15.41% higher than that obtained using the conventional valuation technique. This result is due to the ability of the growth explicit discounted cash flow model to incorporate rental growth and rent review frequency in its computation. The paper recommends that in the valuation of residential properties with complex rental gearing, affected by environmental pollution from oil industry activities as is the case with the properties under study, growth explicit discounted cash flow models are necessary if accurate, sound and logical valuation must be achieved.