Question
You work for a project finance bank. The following information is available for a toll road project that you are considering for a loan. It
You work for a project finance bank. The following information is available for a toll road project that you are considering for a loan. It is a sample for just one year of what would be a multi- year financial projection schedule. These numbers represent the summary of all parties experts on costs and usage of the toll road, and the financing payments that your advisor thinks you should get if you provide the loan as well as the dividends that the sponsors should get for a particular year in the project. For the reserve accounts, a drawdown from the account is indicated by a negative number and a payment into the account is indicated by a positive number. The applicable corporate tax rate is 20%. All numbers provided below are in $ million. Expected revenue: 200 Operating and maintenance costs: 55 Insurance costs: 5 Capex: 22 Depreciation: 9 Addition to maintenance reserve account: 20 Addition to debt service reserve account: 8 Senior debt interest: 30 Senior debt principal: 45 Dividends: 15 (i) Please compute the Cash Flow Available for Debt Service (CADS) and the Debt Service Coverage Ratio (DSCR). (ii) Should your bank make the loan? Why / why not?
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