Financial Analysis Nh-17 Kuttippuram-Edapalli

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Corporate Finance Case Study
Kuttippuram- Edappali Highway Project (NHAI)

Submitted by: Group 4, Section A

Contents
Introduction3
Financial analysis and Feasibility study4
Duration of the project4
Construction cost of the project4
Maintenance cost (Recurring Cost)5
Operation Expenses5
Revenue sources6
Toll revenue6
Other income6
Government Grant6
Proposed sources of finance6
NPV & IRR Calculation7
Calculation of Beta7
Tax Calculation8
Tax Rate8
Minimum Alternate Tax (MAT):8
Tax Exemptions (Under Section 80 IA):8
Exhibits8

Introduction

The Ministry of Road and Transport has decided to take up the development of several National Highway Corridors for the efficient movement of traffic. These corridors are to be built in Public Private Partnership (PPP) model. National Highway Authority has been entrusted to implement these projects within the frameworks of PPP model. One such corridor is to be built on the NH17 from Kuttipuram to Edapally in the state of Kerala. The Project Highway also leads to Mangalore, Goa and Mumbai from Kuttipuram, forming an important link connecting northern districts of Kerala which includes Kozhicode, Kannur, Kasargod and Wayanad. NH-17 links to southern districts of Kerala via. NH-47. The salient proposals for up gradation and improvement of the NH47 are classified into the following engineering aspects. * Widening of the project road into 4 lane configurations based on traffic capacity. * Improving the horizontal and vertical geometry of the existing road based on the design standards including realignment where ever justifiable. * Design of pavement for widening and strengthening of the existing road. * Improvement of all major and minor intersections.

* Rehabilitation and widening of the existing structures including bridges, culverts, ROBs, underpasses, grade separators etc and design of new ones. * Provision of comprehensive road furniture for complete road safety. The report contains an analysis of the expected cash flows from the project over the coming thirty years. While carrying out the estimation, the objective has been to look at the feasibility and benefit of implementing this project only on the basis of the financial perspective. The underlying assumptions wherever necessary have been clearly mentioned. Financial analysis and Feasibility study

The objective of the feasibility study is to provide the estimation of cost and benefit associated with this project. The feasibility study would analyze the viability along parameters such as payback period, NPV of the projected cash inflows, Internal Rate of Return determined by the organization and the Weighted Average Cost of Capital using the overall capital structure for the organization. Then we plan to perform a ‘sensitivity analysis’ for the project by changing certain key parameters such as traffic over the highway and the toll fare charged from the commuters. Certain key parameters that we have taken for our analysis are: Duration of the project: 35 years, breakup of which is provided below * Base Year 2006

* Construction period – 2008 to 2010
* Project opened for traffic – 2011
* End of the analysis period –2040
Number of operating years for the project is taken as 30 years. Construction cost of the project: Rs. 13.9 Billion (Approx), breakup is provided below * All highway construction components including survey, design etc. * Social displacement costs

* Land acquisition
* Costs of environmental protection measures
* Contingencies and Quality control during construction period

Maintenance cost (Recurring Cost): This cost will be calculated proportionate to the traffic after taking an existing project as a benchmark. The breakup of maintenance cost is provided below * Annual Maintenance (Routine maintenance)

* Surface dressing / Resealing
* Overlay

Operation Expenses: These are the heads...
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