Npv cash flow model, Financial Accounting

Assignment Help:

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.


Related Discussions:- Npv cash flow model

Find annual acquiring firm, Find the annual reports of the acquiring firm a...

Find the annual reports of the acquiring firm and answer the following questions for the five years before merger took place I)   What information is provided about merger a

Acc 400, d. Prepare the summary journal entry required to transfer finished...

d. Prepare the summary journal entry required to transfer finished component kits from the Cutting Department to the Finishing Department in January. e. Compute the total cost assi

Prepare a cash budget, The following information for the six months ended ...

The following information for the six months ended 31 December 2009 relates to the business of Mr N Morris: a) Opening cash (including bank) balance Rs 1,200 b) Productio

Financial managment, How is a company’s cost of capital affected by its tax...

How is a company’s cost of capital affected by its tax rate?

One more interest payment, 1. What will be the value of every of these bond...

1. What will be the value of every of these bonds when the going rate of interest is 4%? Suppose that there is only one more interest payment to be made on Bond S. Round your answe

Dividends out of the capital profits , Dividends out of the capital profits...

Dividends out of the capital profits Dividends out of the capital profits are apportioned on the same basis as dividends out of income (Re. Doughty). (a) Variation of sec

Distribution under the intestacy provisions, DISTRIBUTION UNDER THE INTESTA...

DISTRIBUTION UNDER THE INTESTACY PROVISIONS When a person dies without leaving a will, his estate is distributed according to the Law of Succession Act. When a person dies, fou

Trustees remuneration-trusts laws and accounts, Trustees remuneration A...

Trustees remuneration A trustee may not receive remuneration except: 1. By order of the court, if the trust is very onerous or the services of the trustee very valuable;

Show the foreign tax credit, Q. Show the Foreign Tax Credit? Foreign Ta...

Q. Show the Foreign Tax Credit? Foreign Tax Credit - A U.S. taxpayer who pays or accrues income tax to a foreign country may elect to credit or deduct these taxes in a determin

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd