This document presents a financial analysis of a motorway project between IIT Kharagpur and Midnapore Town, spanning 72 km over 20 years. It details investment costs, operating expenses, revenues, and cash flows, projecting a positive net cash inflow by year 4 and emphasizing the importance of toll revenues for financial sustainability. Additionally, economic benefits such as time savings and accident reductions are quantified, with a focus on calculating the net present value and internal rate of return of the investment.

1. P.G. Lakshmi Priya (17WM60R04)
Chandra Vanshi Thakur (17WM60R07)
Sushant kumar (17AG62R10)
Rohitashav yadav(17AG62R05)
Girdhari Lal(17AG62R01)
1
SCHOOL OF WATER RESOURCES
INDIAN INSTITUTE OF TECHNOLOGY KHARAGPUR
Presented by:-
Case Study- Investment in a Motorway

2. Introduction
 Information about project
 Motor way - Between IIT area and Midnipur town
 Length – 72 Km
 Time Horizon – 20 years
 Benefits
 Time savings
 Abatement of emissions exposure
 Reduction in accidents
 Generate some additional traffic
2

3. Financial Analysis
Investment cost
Operating costs
Revenues
Financial return on investment cost
Sources of financing
Financial sustainability
3

4. Financial Analysis
 Investment cost
4

5. Operating costs
Administrative
 General expenditures
Revenues
 Toll taxes
Financial Analysis Contd…
5

6. Investment costs Total
Year
1 2 3 4 5 6 7 8 9 10
Works 502 167.333 167.333 167.333 0 0 0 0 0 0 0
Junctions 230 76.667 76.667 76.667 0 0 0 0 0 0 0
Land
Acquisition
60 60 0 0 0 0 0 0 0 0 0
General
expenses
42 14 14 14 0 0 0 0 0 0 0
Other expenses 18 6 6 6 0 0 0 0 0 0 0
Total 852 324 264 264 0 0 0 0 0 0 0
Administration
cost
0 0 0 5 5 5 5 5 5 5
Maintenance
cost
0 0 0 42.6 42.6 42.6 42.6 42.6 42.6 42.6
Total operating
cost
0 0 0 47.6 47.6 47.6 47.6 47.6 47.6 47.6
Revenue 0 0 0 85.2 89.46 93.933 98.629 103.56 108.74 114.176
Net cash inflow -324 -264 -264 37.6 41.86 46.333 51.029 55.961 61.139 66.576
Table: Financial Analysis
6

7. Investment
costs
Year
11 12 13 14 15 16 17 18 19 20
Works 0 0 0 0 0 0 0 0 0 0
Junctions 0 0 0 0 0 0 0 0 0 0
Land
Acquisition
0 0 0 0 0 0 0 0 0 0
General
expenses
0 0 0 0 0 0 0 0 0 0
Other expenses 0 0 0 0 0 0 0 0 0 0
Total cost 0 0 0 0 0 0 0 0 0 0
Administration
cost
5 5 5 5 5 5 5 5 5 5
Maintenance
cost
42.6 42.6 42.6 42.6 42.6 42.6 42.6 42.6 42.6 42.6
Total operating
cost
47.6 47.6 47.6 47.6 47.6 47.6 47.6 47.6 47.6 47.6
Revenue 119.885 125.879 132.173 138.781 145.720 153.007 160.657 168.690 177.124 185.980
Net cash inflow 72.285 78.279 84.573 91.182 98.121 105.407 113.057 121.090 129.524 138.380
Contd…
7

8.  Financial return on investment cost
 Financial net present value of the project (FNPV)
 Financial internal rate of return (FRR)
Where
 St =balance of cash flow at time t
 nt =financial discount factor chosen for discounting at time t
 The financial internal rate of return - discount rate that produces
a zero FNPV
FNPV = Σ [St / (1+FRR)t ] = 0
FNPV= 𝒕=𝟎
𝒎
𝒏𝐭 𝐒𝐭=S0/(1+i)0+S1/(1+i)1+……….+Sn/(1+i)n
8

9. Investment
costs at
constant
prices
Total
Year
1 2 3 4 5 6 7 8 9 10
Works 502 167.333 167.333 167.333 0 0 0 0 0 0 0
Junctions 230 76.667 76.667 76.667 0 0 0 0 0 0 0
Land
Acquisition
60 60 0 0 0 0 0 0 0 0 0
General
expenses
42 14 14 14 0 0 0 0 0 0 0
Other expenses 18 6 6 6 0 0 0 0 0 0 0
Total 852 324 264 264 0 0 0 0 0 0 0
Administration
cost
0 0 0 5 5 5 5 5 5 5
Maintenance
cost
0 0 0 42.6 42.6 42.6 42.6 42.6 42.6 42.6
Total operating
cost
0 0 0 47.6 47.6 47.6 47.6 47.6 47.6 47.6
Revenue 0 0 0 85.2 89.46 93.933 98.629 103.561 108.739 114.176
Net cash inflow -324 -264 -264 37.6 41.86 46.333 51.029 55.961 61.139 66.576
Net present
value
-305.66 -234.959 -221.659 29.782 31.280 32.663 33.937 35.110 36.188 37.175
Table: FNPV and FRR
9

10. Investment
costs at
constant prices
Total
Year
11 12 13 14 15 16 17 18 19 20
Works 502 0 0 0 0 0 0 0 0 0 0
Junctions 230 0 0 0 0 0 0 0 0 0 0
Land Acquisition 60 0 0 0 0 0 0 0 0 0 0
General expenses 42 0 0 0 0 0 0 0 0 0 0
Other expenses 18 0 0 0 0 0 0 0 0 0 0
Total 852 0 0 0 0 0 0 0 0 0 0
Administration
cost
5 5 5 5 5 5 5 5 5 5
Maintenance cost 42.6 42.6 42.6 42.6 42.6 42.6 42.6 42.6 42.6 42.6
Total operating
cost
47.6 47.6 47.6 47.6 47.6 47.6 47.6 47.6 47.6 47.6
Revenue
119.885 125.879 132.173 138.782 145.721 153.007 160.657 168.690 177.124 185.980
Net cash inflow
72.2846 78.2792 84.5736 91.181 98.129 105.407 113.057 121.090 129.524 138.380
Net present value
38.0788 38.9027 39.651 40.329 40.942 41.493 41.985 42.423 42.809 43.147
IRR 4.39%
Financial net present value
of the investment
-116.377
Contd….
10

11.  Sources of financing
 State Government
 Financial sustainability
 The incoming flows
 Toll taxes.
 outgoing flows
 Investment costs
 Administration cost
 Yearly maintenance
11

12. Table: Financial Sustainability
Year 1 2 3 4 5 6 7 8 9 10
AVAILABLE
FUNDS
350 300 250
Revenue 0 0 0 85.2 89.46 93.933 98.6296 103.561 108.739 114.176
Total operating
cost
0 0 0 47.6 47.6 47.6 47.6 47.6 47.6 47.6
Total
Investment cost
324 264 264 0 0 0 0 0 0 0
Net cash flow 26 36 -14 37.6 41.86 46.333 51.029 55.961 61.139 66.576
Cumulative 26 62 48 85.6 127.46 173.793 224.823 280.7838 341.923 408.4991
12

13. Contd…
Year 11 12 13 14 15 16 17 18 19 20
AVAILABLE
FUNDS
0 0 0
Revenue 119.885 125.879 132.172 138.7818 145.721 153.007 160.657 168.690 177.124 185.981
Total operating
cost
47.6 47.6 47.6 47.6 47.6 47.6 47.6 47.6 47.6 47.6
Total 0 0 0 0 0 0 0 0 0 0
Net cash flow 72.285 78.279 84.573 91.1818 98.1209 105.407 113.057 121.090 129.524 138.380
Cumulative 480.784 559.063 643.636 734.818 832.939 938.346 1051.403 1172.494 1302.018 1440.399
13

14. Economic Analysis
 Time Benefits
 Vehicles operating cost
Table: Conversion factors for each type of cost
Type of cost Conversion factor(CF)
Work 0.68
Junctions 0.70
Land Acquisition 1.00
General 0.75
other Expenses 0.80
Maintenance cost 0.75
Administration cost 0.8 14

15. Contd…
 From market to accounting prices
 Monetisation of non-market impacts
 Inclusion of additional indirect effects
 Discounting of the estimated costs and benefits
 Calculation of the economic performance indicators (economic
net present value, economic rate of return and B/C ratio).
15

16. ECONOMIC BENEFITS CF 1 2 3 4 5 6 7 8 9 10
Positive benefits
Time saving
0 0 0 30 33 34.65 38 41.9265 46.1191 50.7310
Abatement of Emission
exposure 0 0 0 4.0 4.2 4.4 4.6 4.9 5.1 5.4
Accident
reduction
0 0 0 5 5 5 5 5 5 5
New business
0 0 0 2 2.2 2.42 3 2.9282 3.2212 3.54312
Tolls
0 0 0 85.2 89.46 93.933 99 103.561 108.739 114.176
Negative impacts 0 0 0
Increased Vehicle operating
cost
0 0 0 -20 -21 -22.05 -23 -24.3101 -25.5256 -26.8019
Environmental pollution
increasded
0 0 0 -4 -4.2 -4.41 -4.6 -4.86203 -5.10513 -5.3603
TOTAL ECONOMIC
BENEFITS 0 0 0 102.2 108.66 113.953 121 129.105 137.553 146.648
Table: Economic Analysis
16

17. TOTAL ECONOMIC
BENEFITS
0 0 0 102.2 108.66 113.953 121 129.105 137.553 146.648
Works
Junctions
0.68 113.78 113.78 113.7867 0 0 0 0 0 0 0
0.7 53.666 53.666 53.667 0 0 0 0 0 0 0
Land Acquisition 1 60 0 0 0 0 0 0 0 0 0
General expenses 0.75 10.5 10.5 10.5 0 0 0 0 0 0 0
Other expenses 0.8 4.8 4.8 4.8 0 0 0 0 0 0 0
Total 0
242.75
3
182.75
3
182.75333
Administration cost 4 4 4 4 4 4 4
Maintenance cost 32.368 32.368 32.368 32 32.368 32.368 32.368
Total
cost
242.75
3
182.75
3
182.75333 36.368 36.368 36.368 36 36.368 36.368 36.368
Net benefit -242.75
-
182.75
-
182.75333
65.832 72.292 77.585 85 92.7377 101.185 110.2804
-229.01
-
162.65
-
153.44322
52.14511 54.0207 54.6943 56 58.1847 59.8916 61.5800
ENPV
559.88
1
₹ 1,424.91 ₹ 865.03
ERR 14%
B/C ₹ 1.65
Contd…..
17

18. ECONOMIC BENEFITS CF 11 12 13 14 15 16 17 18 19 20
Positive benefits
Time saving 55.80417 61.38459 67.52305 74.27535 81.70289 89.87318 98.86049 108.7465 119.6212 131.5833
Abatement of Emission
exposure 5.6 5.9 6.2 6.5 6.8 7.2 7.5 7.9 8.3 8.7
Accident
reduction 5 5 5 5 5 5 5 5 5 5
New business 3.897434 4.287178 4.715895 5.187485 5.706233 6.276857 6.904542 7.594997 8.354496 9.189946
Tolls 119.885 125.8792 132.1732 138.7818 145.7209 153.007 160.6573 168.6902 177.1247 185.9809
Negative
impacts
Increased Vehicle operating
cost -28.142 -29.5491 -31.0266 -32.5779 -34.2068 -35.9171 -37.713 -39.5986 -41.5786 -43.6575
Environmental pollution
increased -5.6284 -5.90982 -6.20531 -6.51558 -6.84136 -7.18343 -7.5426 -7.91973 -8.31571 -8.7315
TOTAL ECONOMIC
BENEFITS 156.4446 167.0019 178.3855 190.6668 203.9232 218.2399 233.7094 250.4331 268.5218 288.0967
Works 0.68 0 0 0 0 0 0 0 0 0 0
Junction
s 0.7 0 0 0 0 0 0 0 0 0 0
Land Acquestion 1 0 0 0 0 0 0 0 0 0 0
General expenses 0.75 0 0 0 0 0 0 0 0 0 0
Other expenses 0.8 0 0 0 0 0 0 0 0 0 0
Adminstration
cost 4 4 4 4 4 4 4 4 4 4
Maintenance cost 32.368 32.368 32.368 32.368 32.368 32.368 32.368 32.368 32.368 32.368
Total
cost 36.368 36.368 36.368 36.368 36.368 36.368 36.368 36.368 36.368 36.368
Net benefit 120.0766 130.6339 142.0175 154.2988 167.5552 181.8719 197.3414 214.0651 232.1538 251.7287
ENPV 559.881
ERR 14%
B/C ₹ 1.65
18

19. Sensitivity analysis
 Financial context
 Investment costs
 Yearly Maintenance cost
 Revenue
 Economic Context
 Reducing the value of time savings
 Increasing the vehicles operating costs
19

20. Variable impact in the scenario analysis
FRR/ERR (%) FNPV/ENPV (%)
Financial Analysis -10% Base 10% -10% Base 10%
Total Investment cost 5.4 4.39 3.49 -192.605 -116.37 -40.15
Yearly Maintenance 4.98 4.39 3.78 -158.25 -116.37 -74.5
Revenue (Toll) 2.75 4.39 5.87 -9.91 -116.37 -222.84
Economic Analysis
Time saving 13.22 13.82 14.4 612.82 559.88 506.94
Vehicle 14.12 13.82 13.52 534.89 559.88 584.87
20

21. -40.00
-30.00
-20.00
-10.00
0.00
10.00
20.00
30.00
40.00
50.00
-10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%
RelativevarianceinFRR/ERR
Relative range of variable
IMPACT OF VARIABLE ON IRR
Investment Cost
Yearly Maintainance
Revenue
Time Saving
Vehicle Operating cost
21

22. -100
-80
-60
-40
-20
0
20
40
60
80
100
-15% -10% -5% 0% 5% 10% 15%
ChangeinFNPV/ENPV
Change in Variable
IMPACT OF VARIABLE ON NPV
Investment cost
Yearly Maintainance
Revenue
Time saving
Vehicle Operating Cost
22

23. Conclusions
 Financial Analysis
 FNPV : -116.37
 FRR : 4.39 %
 Economic Analysis
 ENPV: 559.881
 ERR : 14%
 B/C : ₹ 1.65
 Risk Assessment
 Sensitivity Analysis : Revenue and Investment cost are critical
variables
23

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