You have recently completed an Advanced Diploma of Accounting and been recruited to John Holland Australia. You have been asked to provide preliminary advice on whether John Holland should make an investment in Infra Structure Victoria. This is a large construction company that is proposing to build a rail tunnel between Melbourne City and regional centres in Victoria. The tunnel is scheduled to open in 2015.

The projected cash flow of the tunnel project:

Year	$M
2010	-450
2011	-500
2012	-550
2013	-650
2014	-200
2015	200
2016	300
2017	320
2018	340
2019	360
2020	400
2021	400

Additional information:

1. Estimated market inflation = 2%
2. Domestic Risk-Free rate = 6%
3. Beta for tunnel projects = 1.3

Task 1

Undertake an analysis of the proposed tunnel project and advise on whether John Holland should invest in shares of Infra Structure Victoria. Relevant calculations must be shown using a spreadsheet. Use Analysis of the proposed tunnel project