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 1 year 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.
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.
Most companies borrow money for long term projects and in addition to this long term debt...
Most companies borrow money for long term projects and in
addition to this long term debt they also have other long term
commitments (such as a lease). What types of long term commitments
might a company have and how do we gauge their ability to pay these
commitments in the future?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- A researcher wishes to estimate the proportion of adults who have high-speed Internet access. What size...
- (1) What are some pitfalls in writing an RFP? What information should be provided as part...
- You are creating an enhanced entity relationship model for a campus information system. A junior team...
- 1.-Evolving into Multinationalism. As a firm evolves from purely domestic into a true multinational enterprise, it...
- A guidance counselor claims that high school students in a college preparation program have higher ACT...
- As a supervisor of a production department, you must decide the daily production totals of a...
- how can a virus encode a protein larger than the size of its genome?
ADVERTISEMENT