Question
In: Finance
18.4-4 Project financing is the arrangement of financing for very large individual long- term capital projects
18.4-4 Project financing is the arrangement of financing for very large individual long- term capital projects
Solutions
Expert Solution
PROJECT FINANCING
Project finance is the finance is the long term financing for infrastructure and industrial based projects on the basis of the projected cash flows and not on the basis of sponsor’s balance sheet. The project debt and equity that is used to finance the project are paid back from the cash flows that the project generates.
Project finance is especially used in infrastructure, power production, and extraction of oil sectors. These sectors are considered to be most appropriate for developing structured financing technique. This is because they have a reasonable market, low technological risk and there is possibility that it is sold only to a single buyer or few large buyers which is based on multiyear contracts.
The entity that is need for funds to finance a new project goes in for project finance due to the following reasons:
- The new proposal of the entity is financed on the balance sheet.
- The new proposal is incorporated into newly created economic entity and financed off the balance sheet.
jeff jeffy answered 2 years agoRelated Solutions
4. Relaxation Resorts Inc. is a large company that is considering three long-term capital investments. Each...
4. Relaxation Resorts Inc. is a large company that is
considering three long-term capital investments. Each investment
has a useful life of five (5) years. Consider the
profit for the following three alternative
investment options:
Discount Factor
Project A
Project B
Project C
Capital Investment
$175,000
$195,000
$205,000
Annual Profit:
Year 1
0.86957
$15,500
$21,000
$25,000
Year 2
0.75614
15,500
19,500
23,000
Year 3
0.65752
15,500
17,000
20,500
Year 4
0.57175
15,500
15,500
17,000
Year...
4. Relaxation Resorts Inc. is a large company that is considering three long-term capital investments. Each...
4. Relaxation Resorts Inc. is a large company that is
considering three long-term capital investments. Each investment
has a useful life of five (5) years. Consider the
profit for the following three alternative
investment options:
Discount Factor
Project A
Project B
Project C
Capital Investment
$175,000
$195,000
$205,000
Annual Profit:
Year 1
0.86957
$15,500
$21,000
$25,000
Year 2
0.75614
15,500
19,500
23,000
Year 3
0.65752
15,500
17,000
20,500
Year 4
0.57175
15,500
15,500
17,000
Year...
Discuss the relationship of operation financing and long-term financing
Discuss the relationship of operation financing and long-term
financing
it lists the sources of long-term financing used by companies to finance investment capital, in order...
it lists the sources of long-term financing used by companies to
finance investment capital, in order of lowest to highest cost, and
explains what is the factor that causes one source of capital to be
more or less expensive than other sources.
Module 20: Long-Term Financing 1. Why do public organizations use municipal bonds to finance long-term capital...
Module 20: Long-Term Financing 1. Why do public organizations
use municipal bonds to finance long-term capital projects?
2. A major urban center is planning to issue a $100 million,
20-year, semiannual-interest-paying municipal bond for the
construction of a stadium.
a. The interest rate is 5.875%, based on the economic and
financial conditions of the city and city government.
b. The design and issuance costs are estimated to be $10 million
and 1%, respectively.
c. What is the total interest paid...
Explain why you would use either short term or long term financing for managing working capital.
Explain why you would use either short term or long term
financing for managing working capital.
Banks are financing acquisition projects, i.e. for Venture Capital funds. An exemplary project shows the following...
Banks are financing acquisition projects, i.e. for Venture
Capital funds. An exemplary project shows the following data:
A
VC fund purchased the target company on 1.1.2020 for a price of
€300k at a Price/EBIT-multiple of 7.5x. 40% of the purchase price
is funded by equity of the VC, remaining amount by bank loan at an
interest of 10% p.a., collateralized by the shares of the target
company. The loan will be repaid on 31.12.2023, accrual for loan
repayment is planned...
Banks are financing acquisition projects, i.e. for Venture Capital funds. An exemplary project shows the following...
Banks are financing acquisition projects, i.e. for Venture
Capital funds. An exemplary project shows the following data:
A VC fund purchased the target company on 1.1.2020 for a price
of €300k at a Price/EBIT-multiple of 7.5x. 40% of the purchase
price is funded by equity of the VC, remaining amount by bank loan
at an interest of 10% p.a., collateralized by the shares of the
target company. The loan will be repaid on 31.12.2023, accrual for
loan repayment is planned...
Long term capital gain
Jayne purchased General Motors stock 6 years ago for $20,000. In 2016, she sells the stock for $35,000. What is Jayne’s gain or loss?a. $15,000 short-term gainb. $15,000 long-term gainc. $15,000 ordinary lossd. $15,000 extraordinary gaine. No gain or loss is recognized on this transaction
Discuss the separate types of risk that affect capital investment decisions surrounding long- term financing decision...
Discuss the separate types of risk that affect capital investment
decisions surrounding long- term financing decision that will be
made by management.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Instructions: Each of the following scenarios illustrates one of Freud’s defense mechanisms from the list below....
- What are the SHDN, LNA in opamp What are the TXCO coding algorithm for binary and...
- Need to program a maze traversal program using dynamic array and stacks. The problem is faced...
- what were some of Ida B Wells significant contributions to the civil rights movement?
- In 2007, there were many people in Sri Lanka who have an opinion that the government...
- Example #2: Write the following set of four linear equations with 4 unknowns x1, x2, x3,...
- "In the digital age, our personal and collective privacy is threatened like it never has been...
ADVERTISEMENT