Topic: Build-operate-transfer

Under an arrangement of concession service, the company of Chegg who is a private contractor, is instructed to construct a hotel for the government (given a completion period of 2 years), operate and maintain the hotel for 8 years, after its completion, and then transfer the hotel to the government at the end of Year 10. In exchange, the government grants Chegg, company 300,000,000 per year from year 3 up to year 10. At contract inception, Chegg makes the following estimates: Year Contract Cost Construction services 1 Stand-alone selling price Forecast + 30% Forecast + 30% Forecast + 10% 500,000,000 500,000,000 20,000,000 2 Operation services 3-10 The cash flows are seen to be taking at the end of each year and the rate of interest is computed as 19.10% REQUIREMENT: For Year 3, How much would be the profit to be made ? Under an arrangement of concession service, the company of Chegg who is a private contractor, is instructed to construct a hotel for the government (given a completion period of 2 years), operate and maintain the hotel for 8 years, after its completion, and then transfer the hotel to the government at the end of Year 10. In exchange, the government grants Chegg, company 300,000,000 per year from year 3 up to year 10. At contract inception, Chegg makes the following estimates: Year Contract Cost Construction services 1 Stand-alone selling price Forecast + 30% Forecast + 30% Forecast + 10% 500,000,000 500,000,000 20,000,000 2 Operation services 3-10 The cash flows are seen to be taking at the end of each year and the rate of interest is computed as 19.10% REQUIREMENT: For Year 3, How much would be the profit to be made