Which of the following statements about project finance are correct?

1. (a) Assets of the sponsors are usually used as collateral in a project finance investment.

2. (b) The leverage possible in a project finance investment depends strongly on the existing capital structure of the sponsor firms.

3. (c) Assets and liabilities of the project finance investment are not on the balance sheet of a sponsor company.

4. (d) An economic rationale for investing in a project finance investment is to get access to the future cash flows it creates.

5. (e) Leverage of project finance investments is usually much higher than in the sponsor firms.

47. Question Which of the following statements about project finance are correct?

1. (a) In a project finance investment, a separate legal entitity that conducts a project is created.

2. (b) If cash shortfalls occur, lenders can usually take recourse to sponsors for substitute payments.

3. (c) Project finance is usually used to finance intangible assets that are employed to obtain a single cash flow at the end of the investment period.

4. (d) The asset created by project finance is often used as collateral in a project finance deal.

   (e) Project finance is often used for investments that create stable and predictable cash

   flows.

   48. Question Which of the following statements about contamination risk are correct?

5. (a) The expected joint return of two projects is independent of their correlation.

6. (b) The larger the correlation between projects, the higher their joint risk.

7. (c) The larger the correlation between projects, the lower their joint risk.

8. (d) The larger a new project compared to existing investments, the larger is its influence on the risk of the existing projects.

9. (e) The larger a new project compared to existing investments, the smaller is its influence on the risk of the existing projects.

multiple answers are possible