profits cash flow Basic Assessment 3 Viability Assessment Financially Viable Not Financially Viable Project fails to earn a sufficient return No opportunity for significant tariff Increases ID: 1002979
Download Presentation The PPT/PDF document "Finance Basics The Financial Analysis ha..." is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
1. Finance Basics
2. The Financial Analysis had to Consider Both Criteriaprofitscash flow
3. Basic Assessment3Viability AssessmentFinancially ViableNot FinanciallyViableProject fails to earn a sufficient return. No opportunity for significant tariff Increases. Project can earn an adequate rate of return based on market Weighted Average Cost of Capital.
4. Basic Assessment Cash Flow Assessment Positive Cash FlowThroughoutProject cash flow negative in any given year.Project cash flow is adequate.Problematic Cash Flow
5. How We Measure Financial Viability Project FIRR and NPV Measures Profitability of the ProjectThe NPV is the value of the sum of projected cash flows discounted at the cost of capital. Typically the assessment was done on the basis of total return. Any value over zero indicates adequate return, but the higher positive value show a higher return. The NPV calculation Does not give you’re the exact rate of return. Just tells you that you are either above or below your threshold level. The Financial Internal Rate of Return is the rate of return expressed as a percentage that the Project yields. Through extrapolation you can equate the two by either increasing or decreasing the discount rate so that the NPV equals zero. In other words if your NPV is 0 at 15% discount rate then the FIRR should be 15%.Projected Cashflows Measure Repayment ObligationsAlso conducted on the basis Project’s total return
6. Total Return Versus Return on Capital Total Return to Investment (ROI)Refers to a Projects return on total investment. Calculated as the NPV or FIRR based on cash flows that disregard debt servicing. This provides determines the total return that the project earns irrespective of financing option. Return to Capital (ROE)Refers to the total return only to the capital contribution and cash flows specifically incorporate the cost of financing and debt service to external borrowers. What are Advantages and Disadvantages of Each?
7. Why the Change in FA for Water Projects?Survey of Cost Recovery of WSPs in Different Economies
8. Why the Change?How Meaningful is a Project FIRR in an Environment Where Most WSPs Have Difficulty Recovering Even their O&M Costs?How Meaningful is the Project’s cash flow?
9. What Does it Take to Become Financially Sustainable?
10. If Money Could Truly Grow on Trees
11. Financial Sustainability Involves:Meeting Financial Obligations of the SystemReliability and Cost of External Funding Sources
12. Basic Financial Sustainability Assessment Revised Cash Flow Assessment Positive Cash FlowThroughoutProject Consolidated cash flow negative in any given year.Project consolidated cash flow is adequate. Problematic Cash FlowConsolidated refers to a single entity or an entire water system with multiple entities.
13. Obstacles to Financial Sustainability
14. The Ladder of Financial SustainabilitySource: Baietti 2005
15. Maturities of Financing have a Significant Effect on Tariff Levels
16. The Financial Analysis Primarily Consists of Two PartsThe Diagnostic – Measuring Historical Financial PerformanceThe Consolidated Financial Projection Incorporating Debt Service Analysis