Project Finance - 1543 Words

1. How should PDVSA finance the development of the Orinoco Basin? Can you define project finance? Is Petrozuata a project? What are the costs and benefits of using project finance instead of the traditional (debt) finance – as Mr. Bustillos said, PDVSA could have finance the debt internally (p.7 of the case)? Project finance is a kind of Financing that has a priority does not depend on the creditworthiness of the sponsors proposing the business idea to launch the project. Approval does not even depend on the value of assets sponsors are willing to make available as collateral. Instead, it is basically a function of the project’s ability to repay the debt contracted and remunerate capital invested at a rate consistent with the degree of†¦show more content†¦On the other hand, more debt does not affect the risk of the project under taken, but means less equity holders , these bring more risk to equity holders, the cost of equity increases with debt. assume Ra is the WACC without leverage. Ke=Ra+(D/E)(1-Ï„)(Ra-kd) 0.2097=Ra+Ra(0.6/0.4)(1-0.35)-0.1(0.6/0.4)(1-0.35) Solving Ra=15.55% When leverage change, the IRR will also change following the formula below: IRR= Ra+(D/E)(1-Ï„)(Ra-kd) Leverage D/E Ra 1-Ï„ Kd IRR 80% 4.00 0.16 0.65 0.10 30.00% 70% 2.33 0.16 0.65 0.10 23.98% 60% 1.50 0.16 0.65 0.10 20.97% 50% 1.00 0.16 0.65 0.10 19.16% 40% 0.67 0.16 0.65 0.10 17.96% 4. What kind of debt (agency debt, bank debt, or Rule 144a bonds) should the sponsors of the project use to fund the deal? What are the advantages and disadvantages of each kind of debt? In your view will project bonds receive an investment grade rating? What is theâ€Å"weakest link† of the project? How can they improve the likelihood of getting an investment grade? In our opinion, the sponsors of the project should use Rule 144a bonds for its obvious advantages over the other two options. Agency debt: ïÆ' ¼ Might not raise enough money for the project since the majority of the debt would probably requireShow MoreRelatedProject Finance Assignment2466 Words   |  10 Pagescharacteristics of project finance Project finance is a form of long term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors. In most cases, a project financing structure involves a number of equity investors, the sponsors, as well as a group of banks or other lending institutions that provide loans to the operation. The loans are usually non-recourse loans, which are secured by the project assets andRead MoreThe Role Of Debt Of Project Finance Essay1064 Words   |  5 PagesTable of Contents Introduction 2 Role of Debt in Project finance 2 Pros and Cons of project finance debt 3 Identifying Project Risks 3 Difference from Corporate Lending: 4 â€Æ' Introduction Project finance is a term used freely by a number of professionals including bankers, journalists, and academics in order to describe a variety of financing activities. Project finance is a decades-old term that preexists corporate finance. However, the rolling growth in infrastructure undertakings in the developingRead MoreProject Finance Petrozuata4755 Words   |  20 PagesEvaluation of Petrolera Zuata, Petrozuata C.A. Project Finance Case Study    1    Table of Content Petrozuata introduction ....................................................................................................................... 4 1. How should PDVSA finance the development of the Orinoco Basin? What are the costs and benefits of using project finance instead of traditional internal debt finance? ...................... 4 1.1. Project finance scenario (BBB) ........................Read MoreConstruction Of Project Finance Transaction3475 Words   |  14 Pagesin the context of a project finance transaction. Project Finance Generally Industrial projects, such as power plants, toll roads, ports and oil and gas pipelines, are all typically financed through a complex legal, financial and regulatory structure involving multiple project parties, sophisticated documentation and extensive negotiation. Project finance transactions are typically either (i) limited recourse, where lenders do not assume the entire financial risk of the project and instead rely onRead MoreProject Finance : Project Management College Uk Essay1324 Words   |  6 PagesNAME: OMATSONE ONETORITSEBAWO LOUIS QUESTION: REPORT ON PROJECT FINANCE MODULE 12 TOPIC: THE PROJECTS APPROACH STUDENT ID: PMC 26995-NG-UK PROJECT MANAGEMENT COLLEGE UK TABLE OF CONTENT 1. INTRODUCTION OF PROJECT FINANCE†¦Ã¢â‚¬ ¦.†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦3 2. FEATURES OF PROJECT FINANCE†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..3 3. FINANCING STRUCTURE†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..5 4. METHOD OF FINANCING A PROJECT†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦6 5. CONCLUSION†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦7 6. REFERENCES†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦8Read MoreIntroduction to the Finance Company Project979 Words   |  4 PagesIntroduction to the Finance Company Project Your team is required to analyze the future business and economic prospects of a major, publicly traded corporation using financial concepts and techniques as well as the concepts and techniques from other business areas. Make sure any statements you make in your analysis are consistent with the knowledge base of finance. Also please include your calculations (including spreadsheets), data sources (be specific, including date and page number(s)), andRead MoreManagerial Finance Project Toys R1497 Words   |  6 Pages Managerial Finance - 1 - Managerial Finance Project Toys R in Brazil Managerial Finance - 2 - Summary My paper term paper is 8 - page for my managerial finance class that analyzes the prospects of Toys R for international expansion into Brazil . The analysis consists of financial analysis of the company and en vironment analysis of the country. It relies on eight external sources presented in APA format. Body of the paper Introduction Toys R Us Inc., is a leading toy and baby productsRead MoreMonitoring And Control Project Finances1554 Words   |  7 Pagesability to optimally monitor and control project finances, make recommendations and describe how the recommendations will improve monitoring and control of project finances. The identification of areas that require new approaches have been discovered by examining historical project documents, gathering information from project finance specialist and interviews with project managers. The three main areas that will allow for better control of project finances are â€Å"measuring, evaluating, and correcting†Read MoreProject Finance and Loan Analysis Essay1668 Words   |  7 PagesProject Finance Project financing is a non-traditional financing technique that is now being used even by many high-profile corporate projects. It is increasingly emerging as the preferred alternative to finance fixed assets and other large-scale projects. As a study, Project Finance includes understanding the rationale for project financing, how to prepare the financial plan, assess the risks, design the financing mix, and raise the funds. As per the International Project Finance Association, ‘ProjectRead MoreEssay Mt480 Corporate Finance Unit 9 Project1159 Words   |  5 PagesStudent MT480-01: Corporate Finance Unit Nine: Assignment Date Assignment: Complete the following exercises and problems from the textbook. Some problems ask multiple questions; be sure to answer every part of the exercise or problem unless otherwise noted * Chapter 28: Practice Questions 2, 10, 11, and 13 * Chapter 34: Practice Questions 2, 3, and 7 Chapter 28: 2. Table 28.1 shows the 90-day forward rate on the South African rand. a. Is the dollar at a forward discount