1) What were the probable pros and cons for this project when initially decided upon?

Question

2) Analyze the projectâ€™s return in the initial business plan. Discuss the effect of possible legal

constraints.

3) How is the projectâ€™s profitability affected by the revision of the business plan in 2009?

4) What are the companyâ€™s options to make the project viable in mid-2009?

5) How would you negotiate a possible price at which to sell the project to a new operator? Consider

both sides: seller (current shareholders) and buyers (new operator). Would you consider alternative options?

NA0266 Project Finance for Autopistas del Centro Francisco J. LÃ³pea LubiÃ¡n n lare spring 2009, Oaaldo ManÃns, Finance Manager (CFOAa Al Cenro (AC), a private company operating a toll road bypass in Mairid, was analyz- ing with growing concern the drop in rveues and opeeating cunings tae com pany was experiencing as a result of the reduced traffic on its toll road.n z0ueoverall freeway traffie in Spain fell by 12 pcroent, quite similar to the drop in traffic the com- pany had, and the trend did not sugpest any improvement in 2009. Martiner found the decline both surprising and unexpocted,as variaticns in htaditionally been reated oaly marginally to variats ia GDPAigure I shows, the drop in toll-road traffic in other countries had bcen more moderaExhibit 1 po- vides some historical macroeconomic inforrmation abeat Spain. Figure 1: Toll-Road Traffic Data Percenit Changa in Number of Vehicles from Pravious Period PERFORMANCE OF THE MAIN TOLL-ROA, OERATORS IN EUROPE AND THE USA Fratda as Francia Francia Esaa Espata Espaa Portugal EEEE EEEE Hala the wathoe and NACIRA&2013 by Francico J.Lopca Lubiis. Coract peron: Fuciaco . Lope uliin. ÃŽE Buioaa Sdool C/ Maria de Melin. 12, à¸£à¹Œà¸›à¹€à¸Šà¸´001 28006 Madrid. Spuin. à¹‚à¸”1ubien@ e-Au. Th cast, Instucors manal, and symopsh werc anonymousy perr viweand accepiod by the American Case Reseanch Assodacion (NACRA) fee its annual neexing, Ocober 13-15.201 San Antonin, Ten. Project Finance for Autopistas del Centroll

Prateek · Accepted Answer

1. The pros of the project are as follows:
a. The project has a positive free cash flow with liquidation.
b. Thus, the creditors will be paid sufficiently.
c. The project has positive EBITDA to pay off its interest expenses
d. Revenue has been increasing year on year, showing that the project is profitable in the future as well.
The cons of the project are as follows:
a. The project expects to have a negative cash flow from 2004-06.
b. The payback period for an investor is too long.
c. Further, there is also a negative free cash flow of Euro 18.3 billion from 2004-13.
2. The project has a free cash flow at the time of liquidation, which amounts to Euro 18,921,898. However, there is a negative expected future cash flow of Euro 18.3 billion, which may affect the total return to an investor. There could even be some legal constraints that may affect the profitability. This includes the situation wherein the project is not getting approved by the relevant government authorities.
3. Due to plan’s revision, there is a negative free cash flow to the project from 2004-13 of about Euro 18.3 billion.
4. As per the exhibits, it can be seen that there will be a 10% decline in revenue in 2009. This will affect the profitability of the project. The management may try to cut down the expenses during the period, in order to sustain.
5. A fair price of the project shall be determined using the NPV method to determine the price at which it should ideally sell. A buyer would always want to buy lower and the seller will always try to sell higher.

1) What were the probable prosand cons for this project when initially decided upon? 2) Analyze the projectâ€™s return in the initial business plan.Discuss the effect of possible legal constraints....

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