project Mozal

We assumed that the cost of graphite which according to exhibit 8 has been growing slower year on year would grow steadily at 4% and that power costs would grow at 12% per year up to 1989. We also assumed that the benefits of laminate technology will only be felt starting in 1981. With 1980 as the base year, the NPV calculation was done as at December, 1980 and we assumed that the cash injection of $2.5million dollars would occur instantaneously in December 1980. Using a median assumption of power cost savings of 17.5%, we arrive at an NPV of $12.865million for the laminate investment. The applicable range and full calculations are presented below.

a) Discounted cash flows from the projects by the suitable division of a hurdle rate to get the net present value which financially makes sense since risks among different divisions do vary.

year 1 net income would do). Then, its year 2 opening net assets are $276.36,

Project 1 embedded risk can be assessed by evaluating the market risk, success/failure rate of the project.

g. The replacement chain approach- projects with unequal lives. So with this approach, we analyze both projects over an equal life. We repeat project one to equal the life of project B to have a full comparison.

The purpose of this analysis is to compare and contrast two projects in terms of Project Management, Quantitative Analysis and Economics while illustrating the

See Table 1: Expected non-operating cash flow when the project is terminated at year 4 = 165,880$

We addressed our concerns towards the efficiency of this resolution as we proposed a motion that is ensuring the efficiency of the financial aid use in improving health service and infrastructure in vulnerable nations. As the delegate of Congo started as the first speaker, she stated in her speech that cooperation with Anti-Corruption agencies should be enforced in order to monitor the expenditure of financial aid as well as enforcement of laws from those agencies. The delegate of Venezuela took consideration of the correlation of this topic that can be elaborated on QARMA number 3 regarding governmental responsibility on this issue. Some delegates also added that those financial aids should be more transparent by making financial reports that will later on be published by the WHO for reliability that could be viewed publicly. While the delegate of United Kingdom proposes a solution to hold a minimum development requirement for countries granted financial aid, by doing so it could ensure that the use of financial aids are efficiently used. While the others have the same opinions, as they are convinced that there needs to be cooperation with other UN bodies such as the Economic and Financial Affairs Council (EcoFin) having a role to do the

Discounting a project at a reasonable rate, takes charge of the possible depreciation of the project value in the future. Estimated returns on a project can dwindle for so many reasons such as market fluctuations, price changes, technological innovations, depreciation in the value of money. Even the fixed assets of production are subject to the law of diminishing returns. A pipeline value can be fixed but that value depreciates over time due to ageing, wear

The use of an accounting rate of return also underscores a project 's true future profitability because returns are calculated from accounting statements that list items at book or historical values and are, thus, backward-looking. According to the ARR, cash flows are positive due to the way the return has been tabulated with regard to returns on funds employed. The Payback Period technique also reflects that the project is positive and that initial expenses will be retrieved in approximately 7 years. However, the Payback method treats all cash flows as if they are received in the same period, i.e. cash flows in period 2 are treated the same as cash flows received in period 8. Clearly, it ignores the time value of money and is not the best method employed. Conversely, the IRR and NPV methods reflect that The Super Project is unattractive. IRR calculated is less then the 10% cost of capital (tax tabulated was 48%). NPV calculations were also negative. We accept the NPV method as the optimal capital budgeting technique and use its outcome to provide the overall evidence for our final decision on The Super Project. In this case IRR provided the same rejection result; therefore, it too proved its usefulness. Despite that, IRR is not the most favorable method because it can provide false results in the case where multiple negative

They will end up with 6.3 billion external funding needed. While in the long-term, the operating cash flow increased but the capital expenditure increased also. They actually will end up with 6.6 billion dollar needed to finance.

5. The project is assumed to end in year 4. Do you think that this is realistic? Can you estimate the value of the project’s operating cash flows beyond year 4? State any assumptions you made.

Project finance is best understood in terms of a risk allocation which reconciles the potentially conflicting objectives of borrowers and lenders by utilizing the long-term economic and commercial linkages between the sponsors, lenders and third party participants involved with a project. (Howcroft &Fadhley, 1998).

This point of view explored functions for agencies such IMF and World Bank would discussed at last part of this essay.

The following paper analyzes a project from financial perspectives using the capital budgeting techniques like Net Present Value (NPV) and Internal Rate of Return (IRR).