Reference no: EM133069828

Question 1:

ABC Builders Pvt. Ltd. is estimating the feasibility of entering into a contract to build and operate the metro rail network in Surat. As part of the financial analysis, they want to understand the impact of customer traffic on total revenue. They determine that the total revenue is dependent on the advertisement boards put up at metro stations and the revenue from sale of metro tickets to passengers. Assume that on an average, the expected ticket price per passenger is 40 Rs and the number of passengers travelling in the metro per month is 50,000. Further, the average monthly revenue generated from advertisements and billboards is Rs. 6,15,000. The company now wants to assess how a variation in the number of passengers by 5% and advertising revenue by 10% will affect the overall revenue of the metro project. Using Microsoft Excel, assist the company in finding out the revenues after consideration of these variations.

Question 2:

Explain the concept of "Option to Expand" with reference to projects with embedded options using an appropriate numerical example.

Question 3:

Explain the concept of Weighted Average Cost of Capital (WACC) using appropriate example of your choice.