Assignment 3: Financial Analysis

1. An 85 km urban highway is planned to be constructed to connect an industrial area to a planned sea port. Estimated cost is RM 1,250 million and the construction period is planned to be 2 years. The highway project will be privatised and the concession period is 10 years. The concession company will finance RM 125 million of the total cost using its own source and 90% will be financed by a local bank. Financing period is 10 years and yearly repayment is RM 265.625 millions for 8 years after the construction period. Maintenance cost is estimated to be RM 40 million a year and expected to be increasing at 7% per annum. Toll collection is estimated to be RM 336 millions a year and increasing at 9% per annum. (a) Compute NPV cost and NPV income for the concession period. Use 8% discount rate. (b) Compute Benefit Cost Ratio. (c) Prepare computation table as in (a) with 54% discount rate and compute Internal Rate of Return (IRR). (You can use cost stream method to calculate IRR. In this case you dont have to compute NPV based on 54% discount rate ).

2. An urban highway of 22 km long linking sub-urban area with the CBD will be constructed. The cost of this project is estimated to be RM 950,000,000.00 and project duration is 2 years. Estimated saving in vehicle operating cost is 1,440,000 km-vehicle per day and saving in travel time is about 30,400 man-hour per day. Average value of time is RM 13.50 per hour and vehicle operating cost is about 20 sen per kilometer. Both savings are forecasted to increase at the rate of annum. . Maintenance cost of the road is estimated to be RM 3,000,000.00 per annum and will be increasing at the rate of 10.5% per annum. The project will be financed using federal government soft loan and repayment period is 12 years after the completion of the project. Discounted rate is 8%. (a) Compute NPV cost and NPV saving for the whole construction and repayment period (b) Compute Benefit Cost Ratio. (c) Prepare computation table as in (a) with 30% discount rate and compute Internal Rate of Return (IRR). (You can use cost stream method to calculate IRR. In this case you dont have to compute NPV based on 30% discount rate ). (Assume a year is equal to 330 days and traffic flows are uniform through out the year). 9% per