School of Property, Construction & Project Management — BUSM4617 Project Financial Management and Appraisal Assessment 3: Report Assessment Type: Report [Individual] Word limit: 2000 (+/– 10%) Due...

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School of Property, Construction & Project Management — BUSM4617 Project Financial Management and Appraisal Assessment 3: Report Assessment Type: Report [Individual] Word limit: 2000 (+/– 10%) Due date: Thursday of Week 7 11.59PM (AEST) Length: 2000 words Weighting: 30% Overview Aim This assignment is an opportunity for you to reflect on the materials covered. Specifically, your understanding of the characteristics of project financing can facilitate the identification of the key risks involved in a project finance deal. You can then explore the techniques learnt and suggest how these risks identified can be mitigated. Brief Based on your detailed and comprehensive financial evaluation of the proposed water treatment facility, ABC Pty Ltd has managed to persuade a few sponsors for this venture. The sponsors are deliberating on the use of project financing for the proposed venture. You are engaged as a consultant to provide advice on this matter. Before the SPV proceeds based on the detailed financial evaluation conducted in assessment 3, you are also asked to assess the likely key risks (5 key risks maximum) involved in the proposed project and how these key risks identified, can best be mitigated. You need to discuss and explain how these risks identified can have a significant impact on the project. In your risk mitigation strategies, you also need to explain and discuss why they are appropriate in mitigating the impact on the project objectives. Prepare a report to advise the interim board of ABC Pty Ltd on their concern above. Presentation of submission Ensure that the report is set out using an industry standard template and looks professional. Support the report with reference to relevant and current research. Your submission will be typed (and on A4 paper) and presented in a manner you would be happy to have it publicly displayed under your name. Treat this assignment presentation in a similar way that you would treat a submission to a client or the manager of the company you work for. Method of Presentation Page 1 of 5 1. Use Times Roman (12pt) or Arial (11pt) font. 2. Use 1.5 line spacing. 3. Provide Table of Contents and page numbers (bottom RH corner). 4. Provide References and Bibliography. 5. Sections to be clearly identified and numbered. 6. Identify the total number of words in the front. Assessment declaration: When you submit work electronically, you agree to the Assessment declaration (Links to an external site.) (Links to an external site.). Learning Outcomes Determine and apply knowledge of complex project management theory, principles and best practice to applied projects to contribute to the profession and discipline of project management Critically analyse, synthesise and reflect on project management theory and recent developments, both local and international, to extend and challenge knowledge and practice Professionally communicate and justify project scope, design, implementation, strategy and/or outcomes, engaging effectively with diverse stakeholders across a range of industry sectors Apply the specialist knowledge and technical skills required to creatively address the diverse needs of project stakeholders, formulating innovative solutions and demonstrating independent and sound decision making related to your professional practice and the discipline Referencing guidelines You must acknowledge all the courses of information you have used in your assessments. Refer to the RMIT Easy Cite referencing tool to see examples and tips on how to reference in the appropriated style. You can also refer to the library referencing page for more tools such as EndNote, referencing tutorials and referencing guides for printing. Use RMIT Harvard referencing style for this assessment. Submission format Upload as one single file via the assignments submission page within Canvas. Page 2 of 5 https://www.rmit.edu.au/students/student-essentials/assessment-and-exams/assessment/assessment-declaration https://www.rmit.edu.au/students/student-essentials/assessment-and-exams/assessment/assessment-declaration http://www.lib.rmit.edu.au/easy-cite/ http://www1.rmit.edu.au/library/referencing http://www1.rmit.edu.au/library/referencing Academic integrity and plagiarism Academic integrity is about honest presentation of your academic work. It means acknowledging the work of others while developing your own insights, knowledge and ideas. You should take extreme care that you have: Acknowledged words, data, diagrams, models, frameworks and/or ideas of others you have quoted (i.e. directly copied), summarised, paraphrased, discussed or mentioned in your assessment through the appropriate referencing methods, Provided a reference list of the publication details so your reader can locate the source if necessary. This includes material taken from Internet sites. If you do not acknowledge the sources of your material, you may be accused of plagiarism because you have passed off the work and ideas of another person without appropriate referencing, as if they were your own. RMIT University treats plagiarism as a very serious offence constituting misconduct. Plagiarism covers a variety of inappropriate behaviours, including: Failure to properly document a source Copyright material from the internet or databases Collusion between students For further information on our policies and procedures, please refer to the University website. Assessment declaration When you submit work electronically, you agree to the assessment declaration. Working as a group Many courses require you to work in a group to complete various assessments. It is the collective responsibility of all group members to actively contribute and complete any project. If any individual is unavailable during this time, the group will need to adjust responsibilities to allow for the work to be completed. It is recommended that students elect a group leader to take responsibility for this. Working in a group requires consistent interaction and communication. This should be done within Canvas, Google Hangouts, email etc. Should any individual be unavailable for an extended period of time, it is the responsibility of the group members, or group leader, to advise their tutor to discuss the situation. This should be raised as early as possible if students wish to apply for an extension or special consideration. Only one copy of a group assessment needs to be submitted, however all group names must be added to the report submission. For further information about understanding group work, visit RMIT Learning Lab. Page 3 of 5 https://emedia.rmit.edu.au/learninglab/content/understanding-group-work Assessment Criteria Criteria Ratings Pts Underst HD D CR PA NN and key • Clearly • Identified most • Identified •Identified • Limited risk identified most risks and most risks and some risks identification involved risks and analysed clearly analysed key and provided of the risks in comprehensivel all the key risks risks involved some analysis involved in project y described and involved in the in the project of the risks project finance analysed the project finance finance deal involved in the finance deal key risks deal project finance involved in the deal project finance deal 12.0 to >9.6 pts 9.6 to >8.4 pts 8.4 to >7.2 pts 7.2 to >6.0 pts 6.0 to >0 pts 12.0 pts Describe HD D CR PA NN and • Succinctly • Explained and • Described • Provided • Limited explain explained and described and explained some possible descriptions the comprehensively appropriate risk some possible risks mitigating of proposed techniqu described mitigation risks mitigation solutions to risk es that appropriate risks solutions to key solutions to key risks mitigation can best mitigation risks key risks solution solutions to key mitigate risks the risks identified 12.0 to >9.6 pts 9.6 to >8.4 pts 8.4 to >7.2 pts 7.2 to >6.0 pts 6.0 to >0 pts 12.0 pts Page 4 of 5 Report HD D CR PA NN • Exceptional Writing report format • Very • Competent • Satisfactory • Structure, and flow competent report format report format Unsatisfactor Techniq between report format and flow within and flow within y report ue, sections. • and flow within & between sections. • format and Argument Excellent & between sections. • Limited flow between constru grammar, sections. • Very Good grammatical sections. • syntax and good grammar, grammar, and syntax Unacceptable ction referencing; few syntax and syntax and
Answered Same DayFeb 26, 2021BUSM4617

Answer To: School of Property, Construction & Project Management — BUSM4617 Project Financial Management and...

Soumi answered on Feb 28 2021
157 Votes
BUSM4617
PROJECT FINANCIAL MANAGEMENT AND APPRAISAL
TOTAL WORD COUNT:
Table of Contents
Introduction    3
Five Major Risks involved in Project Finance Deal    3
Key Impacts of these Risks on the Project    4
Ways to Mitigate the Identified Risks    5
Suitability of the Mitigating Strategies    6
Conclusion    6
References    8
Introduction
Project financing is the concept of financing the industrial, long-term infrastructure and service projects. Both debt and equity can
be used for the purpose and the same is repaid through regular/operating cash flows. It is an attraction for the private sector as the projects can be funded without affecting the balance sheet/ off-balance sheet. This assignment deals with the financing issues of ABC Pty Ltd and the strategies to mitigate such risks. The assignment also deals with the key impacts of the risks on the projects. The sustainability of the strategies has also been discussed to ensure that the strategies are capable of mitigating the risk in the true sense.
Five Major Risks involved in Project Finance Deal
Risk of Interference of Sponsors in Operations: As noted by Zou et al. (2016), in case of project financing, the major issue is that the revenues are generated after the completion of construction phase. The time-required for completion of construction is generally long. In the given scenario, setting up of water treatment plant is a mega project and will require substantial investment. The revenue will be generated after completion, which will require time. As the sponsor waits for a long period to get the return, there might be an interference from the sponsor in the operations of ABC Pty Ltd. The sponsor may not provide full liberty to the management to undertake the operations, which may be a significant constraint.
Risk of Restrictions by the Sponsor: As commented by Lin and Parinyavuttichai (2015), in order to ensure continuous returns, the sponsor may put certain restriction like fixing a debt-equity ratio, working capital management rule and others. This may not match with the intent of the manager of ABC Pty Ltd, which may be an issue for the project. The sponsor may interfere in the day-to-day operations to ensure that there is a minimum return from the project. This may negatively affect the expansion plans of the organisation.
Off Take Risk: There is a risk related to expectation of stable revenues during project financing. As stated by Jayasudha and Vidivelli (2016), in case of negative business scenario, the actual revenue may be less than the expected revenue, which may lead to issues relating to repayment of loans. In such a case, there may be issues between the sponsor and the company as the sponsor might not be willing to accept the scenario of low profitability. This may be have a negative impact on the project of ABC Pty Ltd, which may lead to downfall of the whole organisation. In such circumstances, the funds are blocked for both the sides. The business is unable to generate ample revenue, due to which there is financial pressure from the pressure.
Repayment Risk: There may be issues relating to repayment of debts procured by the sponsored. In the given scenario, there may be issues, in which ABC Pty Ltd may have to opt for additional debt. In such scenario, the third party funds are repaid first and the sponsor can be paid. This might lead to insecurity in the minds of the sponsor regarding the repayment. In addition to that, there are certain repayment schedules that the company has to abide by. According to the opinion of Vanclay (2017), high interest is a fixed obligation on the company, which may limit the operational freedom of the company.
Political Risk: As commented by Herteleer et al. (2018), there is always a political risk to the organisations irrespective of the economy, in which the business operates. The risk level may differ but the existence of risk cannot be ignore by any business. In the given scenario, there may be political restrictions on the manner, in which the sponsor can fund the project. In case of unforeseen circumstances, there may be political pressure on the sponsor to fund the project in a particular manner. Such issues arise generally in case of funding across counties, that is, the sponsor and the borrower belong to different countries.
Key Impacts of these Risks on the Project
The above-mentioned risks can have a negative impact on the project. According to the views of Thaler and Levin (2018), interference in the operations by the third party may limit the freedom of the company to take decisions relating to expansion, capacity utilisation and others. Restrictions by the sponsor may have a...
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