Npv cash flow model, Financial Accounting

As discussed earlier, the base case public sector comparator (PSC) will be a benchmark for different project bidding proposals when choosing the preferred bidder to provide the best value for money, and the NPV is proposed to measure the long-term value for money for a PPP project. In this the project NPV cash flow model was constructed to describe risk-free cash flow which does not include any valuation of risks. The risk network addressed in section 6.2 will be modeled to link with the NPV cash flow model, which will be able to produce time-profiles of NPV for the base case (PSC). According to an accounting principle, the project cash flow can be calculated as:

Net Cash Flow F = [sum of revenue (operation revenues) - sum of expense (construction costs + operation costs + interest + depreciation))*[1-tax rate] + annual raising capital - annual principal repayment + depreciation, which will be further converted to be net present values discounted over time.

Based on the major components of a project NPV cash flow as stated, this researcher divided the structure of risk-free cash flow model into one major model linked with six sub-models. The project cash flow model is used to calculate NPV values and the six sub-models are: (a) operating revenue sub-model which is used to calculate operation costs;

(b) Construction cost sub-model which is used to calculate construction costs;

(c) Operating cost sub-model which is used to calculate operation costs;

(d) Project financing sub-model which is used to calculate principal repayment and interest; Depreciation sub-model is used to calculate depreciation;

(e) Discount rate sub-model which is used to calculate discount rate. later, a risk cost network for the expected risk effects was modeled and linked to the related sub-models to address its impact on project cash flow. All of the sub-models linked with the risk cost network were linked to the project cash flow model in order to calculate NPV values by compounding all risk effects. This way, the model structure was clear for ease of management, especially when observing the NPV value changes by changing a risk variable.

Posted Date: 2/25/2013 5:34:24 AM | Location : United States







Related Discussions:- Npv cash flow model, Assignment Help, Ask Question on Npv cash flow model, Get Answer, Expert's Help, Npv cash flow model Discussions

Write discussion on Npv cash flow model
Your posts are moderated
Related Questions
How the value of information received by decision maker How the value of information received by decision maker eventually begins to decline. This is, maybe, since additional i

#Which of the two ratios are the greatest? 1.67.1 or 0.29.1

As of January 1, 2011, the partnership of Canton, Yulls, and Garr had the following account balances and percentages for the sharing of profits and losses: Cash 80,000 non cash

Illustration of Admissions and Retirements Jim and Ken have been trading in partnership for several, sharing profits or losses equally after allowing for interest on their capi

Q. Explain the Negative Assurance? Negative Assurance - Report issued by an ACCOUNTANT based on limited procedures which states that nothing has come to accountant's attention

State the types of business organizations There are numerous types of business organizations: Service business-doctors, lawyers, barber shop etc. Merchandising busin

effects of public debt on production, d

The standard EOQ analysis is depends on the assumption which the price per unit keeps constant irrespective of the size of the order. While quantity discounts are obtainable, that


Q. What is Asset? Asset - An economic resource which is expected to be of benefit in the future. Probable futureeconomic benefits attained as a result of past transactions or e