Project Finance Report

Assignment Requirements

 

Sections:
1. Titles: Billiton (BHP)
Choose a multi-million or billion projects that BHP has conducted or is going to conduct.

2. Executive summary of a large project of BHP (at least multi-million). Use 300 words to sell the idea with background information, purpose, objectives (e.g. social benefits, technology advance).

3. Table of contents: An outline of the report.

4. Background and project objective: Several paragraphs highlighting the reason for doing the project, discussing key features of the project. Describe the impacts on investors and the community, with background history. Describe the characteristics of the project when it is completed.

5. Building a case:

– Why investors should invest this project (show what assets of the project that will earn money in the future.
– Provide statistical data, and predictions regarding to the annual cash flows (expenses & incomes) of each assets that the project will include.
– Show all solid references such as annual reports, revenues, business growth rates, upgrades and of similar project in the world.
– Also show how economic recession or sluggish will affect the cash flows of the project.
–
– Make reasonable assumptions on the following:
– Define the shareholder community. For instance, the sponsors, raw material suppliers, potential investors, stakeholders. Provide solid references regarding to the background information of the shareholders.
– Define debtor community. For instance, financial institutions, banks, cocky billionaires.
– Define several agreements as contracts, negotiations among and between the shareholders, debtors, project stakeholders, sponsors.

–
– Always use tables to present the followings:

– Make up a debt: equity ratio for the project.

– Make up a WACC (the discount rate) for the project.

Total funds = total equity + total debts
– WACC = (debti/ total funds)*Kdi + (equityi/ total funds)*Kei

– Assume there was no sufficient budget for the project at the beginning. Show how equity money and debts are being created.
– Show all interest rates for each single investor and debtor (the banks). Provide solid references to all interest rates (annual reports).
– Assume and work out a reasonable payback period for the project based on rigid references and calculations.
– Assume all banks can only lend an amount of money to the project for financing. In other words, this works like instalment investments.
– Assume all shareholders cannot provide the project with lump sum investments and can only invest with instalments.
– Base on the interest rates of each single investor and debtor, work out the present values and future values of the funds (both debts and equity money) that they invest.
– Also work out the annual incomes of the project (future value).
– Work out the annual incomes of the project (present value).
– PV = expenses or incomes/(1+WACC)^ n, where n stands for the project year.
http://www.financeformulas.net/Present_Value_of_Annuity.html
– FV formula
– http://www.investopedia.com/terms/f/future-value-annuity.asp
–
– Describe the capital expenditure of the project.
– (All works must be related to BHP Billiton).
– Risks managements: Identifications of potential risks (uncertainties with <85% probability), strategy in dealing with the positive risks (enhance, accept) and negative risks (escape, mitigate, transfer, accept), risk mitigations, contingency plans for those risks.

6. Analysis and format:
– Show the annual incomes (future values) for each shareholder (sponsors, investors), debtors (banks, institutions, billionaires) that they are going to earn each year as the project is completed and starts to generate positive cash flows on its own.
– Shown the annual incomes (present values) for each shareholder and debtor as the project starts to generate positive cash flows on its own.

7. Recommendations to the BHP project.
A final pitch, sell the project with a few short and simple sentences. (e.g Why investors will like the project and become the shareholders of the project, is it risky?)
8. Referencing: APA reference format
9. Appendices: Show all hand writing or detailed calculations here.

 

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