Mobility Engineering - Finance and Management of Infrastructure Investments

Full exam

Section I – Q1 The following projects is assigned. Consider that: • Pre -Construction, Construction and Corporate Taxes represent a transfer of money across different groups of society. • Contingencies are a figurative cost to foresee uncertain cash outflows. • Employees wages (cost item “Employees”) are not competitive with respect to market standards, that are 15% higher than those reported by the current project. In a competitive market, the willingness to pay is 25% higher than the revenues reported in the current project. • CO2 emissions are a negative externality. No CO2 emission would be generated in case the project is not realized. • The carbon price (€/ton CO2) is equal to 80€/ton CO2 during the CAPEX phase (years 1 -3) and equal to 100€/ton CO2 during the OPE X phase (years 4 -8). • All costs and revenues items are net of VAT. Based on such information, compute Financial and Economic Cash Flows for the years 1 -8, and the Financial and Economic Internal Rate of Return for the project.Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Land Site Purchase 25 000 000.00 € Pre-Construction Tax 10 000 000.00 € Construction Phase Contingency 500 000.00 € 300 000.00 € 200 000.00 € Construction Costs 9 000 000.00 € 12 000 000.00 € 9 000 000.00 € Construction Tax 2 250 000.00 € 3 000 000.00 € 2 250 000.00 € Employees 1 700 000.00 € 2 693 000.00 € 3 725 000.00 € 4 123 000.00 € 4 168 000.00 € 4 411 000.00 € 4 881 000.00 € 4 204 000.00 € Other Operating Costs 1 756 500.00 € 1 611 000.00 € 1 887 000.00 € 1 824 000.00 € 1 516 500.00 € Operating Business Contingency 500 000.00 € 600 000.00 € 550 000.00 € 700 000.00 € 750 000.00 € Corporate Tax 1 000 000.00 € 1 500 000.00 € 1 500 000.00 € 2 000 000.00 € 2 000 000.00 € Revenues 15 000 000.00 € 16 440 000.00 € 20 303 000.00 € 24 668 000.00 € 29 133 000.00 € Residual Value 30 000 000.00 € Item Project A Unit of Measure CO2 generated 25 kg CO2/mq per year CO2 Cost 80 €/ton Surface 1000000 mq Item Project A Unità di Misura CO2 generated 100 kg CO2/mq per year CO2 Cost 100 €/ton Surface 1000000 mq CAPEX OPEX Section I – Q1 (Solution: Financial Analysis) Item Item Description Land Site Purchase Yes ( -) Pre -Construction Tax Yes ( -) Construction Phase Contingency No. It is a provision for construction risks. It is not certain that it will lead to a negative cash -flow Construction Costs Yes ( -) Construction Tax Yes ( -) Employees Yes ( -) Other Operating Costs Yes ( -) Operating Business Contingency No. It is a provision for construction risks. It is not certain that it will lead to a negative cash -flow Corporate Tax Yes ( -) Revenues Yes (+) Residual Value Yes (+)Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 FCF -47 950 000.00 € -17 693 000.00 € -14 975 000.00 € 8 120 500.00 € 9 161 000.00 € 12 505 000.00 € 15 963 000.00 € 51 412 500.00 € FRR 3.55% Section I – Q1 (Solution : Economic Analysis) Item Item Description Land Site Purchase Yes ( -) Pre -Construction Tax No, it is a transfer from one group in society to another Construction Phase Contingency No. It is a provision for construction risks. It is not certain that it will lead to a negative cash -flow Construction Costs Yes ( -) Construction Tax No, it is a transfer from one group in society to another Employees Yes ( -) Other Operating Costs Yes ( -) Operating Business Contingency No. It is a provision for construction risks. It is not certain that it will lead to a negative cash -flow Corporate Tax No, it is a transfer from one group in society to another Revenues Yes (+) Residual Value Yes (+) CO2 emissions Yes ( -) it is a negative externality associated to the project. Section I – Q1 (Solution: Economic Analysis) Environmental externalities are assessed by multiplying the total amount of CO 2 emissions generated with the unitary cost of CO 2 emissions : ▪ We convert the cost of CO 2 emissions from €/ton to €/kg. ▪ We compute the total CO 2 generated as the product between CO 2 generated per mq and the total project area surface: �� 2��� = �� 2 ��������� ��� �� ∗ ������� ▪ Economic externalities are computed as the product between the total CO 2 generated and the cost of CO 2: ���������������� = �� 2 ��� ∗ �� 2����Item Project A Unit of Measure CO2 generated 25 kg CO2/mq per year CO2 Cost 80 €/ton CO2 Cost 0.08 €/kg Surface 1000000 mq CO2 Tot 25000000 kg CO2 Externality 2000000 € Item Project A Unità di Misura CO2 generated 100 kg CO2/mq per year CO2 Cost 100 €/ton CO2 Cost 0.1 €/kg Surface 1000000 mq CO2 Tot 100000000 kg CO2 Externality 10000000 € CAPEX OPEX ECF -37 955 000.00 € -17 096 950.00 € -15 283 750.00 € 2 252 050.00 € 4 145 800.00 € 8 419 100.00 € 13 397 850.00 € 50 065 150.00 € ERR 1.91% Section I – Q2 Based on the information contained in the following Table, please compute: • The Commitment Fee for the years 0 -3. • The Annual Debt Service Cover Ratio in the years 4 -6. • The commitment fee interest rate is 3%.Total Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Commitment Fee Senior Debt Drawdown 150000 30000 50000 60000 10000 0 0 0 3% Capitalized Interests 3500 0 1500 2000 3000 2500 1750 1000 Debt Repayment 0 0 0 0 0 10000 15000 20000 Revenues 0 0 0 0 0 50000 60000 70000 Operating Cash Flows 0 0 0 0 0 25000 30000 35000 Commitment Fee ??? ??? ??? ??? ADSCR ??? ??? ??? Section I – Q2 (Solution) ��������������� ����������� ���� ������� � = ��������������� ����������� ���� ������� �−1 + ����������� ���� ������� � ������ ��������������� ����������� ���� ������� � = ����� ����������� ���� �������� − ��������������� ����������� ���� ������� � ��������������� � �� � = ������ ��������������� ����������� ���� ������� � ∗ ��������������� � �� ���� � ���� � = ������������������������ ��������ℎ ���������� ������ ������������������� ������+����������������������� ������Total Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Commitment Fee Senior Debt Drawdown 150000 30000 50000 60000 10000 0 0 0 3% Capitalized Interests 3500 0 1500 2000 3000 2500 1750 1000 Debt Repayment 0 0 0 0 0 10000 15000 20000 Revenues 0 0 0 0 0 50000 60000 70000 Operating Cash Flows 0 0 0 0 0 25000 30000 35000 Commitment Fee ??? ??? ??? ??? ADSCR ??? ??? Cumulative Senior debt Drawdown 30000 80000 140000 150000 ??? Unused Cumulative Senior debt Drawdown 120000 70000 10000 0 Commitment Fee 3600 2100 300 0 ADSCR 2.00 1.79 1.67 Section II – Q3 The following project is assigned. Select the correct answers. • The critical path is A -C -F-G. • The probability that the critical path is concluded after week 14 is larger than 60%. • The probability that the critical path is concluded before week 19 is larger than 70%. • The probability that the path A -C -F-G is concluded before week 16 is larger than 80%. • None of the other answers is correct. Activity Immediate Predecessor Duration (Weeks) Time Optimistic (months ) Average Time (months ) Time Pessimistic (months ) Std . deviation A - 2 1 2 3 1 B - 4 1 3 11 3 C A 5 4 5 6 1 D A 3 1 2 9 2 E B 5 2 4 12 4 F C,D,E 4 3 4 5 1 G F 3 1 2 9 2 Section II – Q3 (Solution) 2 7 5 C 4 9 2 0 4 4 B 0 4 0 2 5 3 D 6 9 4 9 13 4 F 9 13 0 4 9 5 E 4 9 0 The critical path is B -E-F-G. The project duration is 16 weeks. 0 2 2 A 2 4 2 13 16 3 G 13 16 0 Section II – Q3 (Solution) ➢ Path B-E-F-G : P(Duration > 14 ) = P(z > 14 −16 9+16 +1+4) = � ሺ ) � ≻ − 0.37 = 1 − � ሺ� < − 0.37 ) = 1 -(1 -P(z