The document presents a financial model for a 10-year public-private partnership project to build and operate a school with 500 students. It projects revenues of $20 million annually from tuition and expenses of $5 million annually. Construction will cost $100 million over 2 years, financed with 75% debt at 10% interest and 25% equity. The model calculates cash flows, debt repayment, depreciation, and profitability over the 10-year period.

1. Final Exam Answer
Project Finance Financial Model
Life of PPP 10years
Revenues
No. of Students 500
Tuition/Semester 20,000,000
Estimated Revenue 20,000,000,000 (Annual)
Expenses
Cost/Student/Semester 5,000,000
5,000,000,000 (Annual)
Capital Expenditures 100,000,000,000
Construction Period 2 years
Depreciation Method Straight Line
Years of Depreciation 10years
Tax Rate 20%
Inflation Rate 2%annually
Debt Financing Percent 75%
Debt Term 8years
Interest Rate 10.00%annually
Terminal Value P/E Ratio 12

2. Year -1 0 1 2 3 4 5 6 7 8 9 10
MacroEconomicAssumptions
InflationRate 0% 0% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%
InflationIndex 1 1.02 1.04 1.06 1.08 1.10 1.13 1.15 1.17 1.20
InterestRate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
SourcesandUsesDuringConstruction
Uses
Construction 50,000,000,000 50,000,000,000
Sources
Debt 37,500,000,000 37,500,000,000
Equity 12,500,000,000 12,500,000,000
DebtBalanceSchedule
BeginningBalance - 37,500,000,000 75,000,000,000 67,500,000,000 58,950,000,000 49,575,000,000 40,200,000,000 30,825,000,000 21,450,000,000 12,075,000,000 2,700,000,000 -
Add:NewDebtIssues 37,500,000,000 37,500,000,000 - - - - - - - - - -
CalculatedDebtRepayments - - 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 2,700,000,000 -
Less:ActualDebtRepayments - - 7,500,000,000 8,550,000,000 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 2,700,000,000 -
EndingBalance 37,500,000,000 75,000,000,000 67,500,000,000 58,950,000,000 49,575,000,000 40,200,000,000 30,825,000,000 21,450,000,000 12,075,000,000 2,700,000,000 - -
InterestExpense 7,500,000,000 6,750,000,000 5,895,000,000 4,957,500,000 4,020,000,000 3,082,500,000 2,145,000,000 1,207,500,000 270,000,000 -
DepreciationExpense
PlantBalance
BeginningBalance - - 100,000,000,000 90,000,000,000 80,000,000,000 70,000,000,000 60,000,000,000 50,000,000,000 40,000,000,000 30,000,000,000 20,000,000,000 10,000,000,000
Add:CapitalExpenditures - 100,000,000,000 - - - - - - - - - -
DepreciationExpense - 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
EndingBalance 100,000,000,000 90,000,000,000 80,000,000,000 70,000,000,000 60,000,000,000 50,000,000,000 40,000,000,000 30,000,000,000 20,000,000,000 10,000,000,000 -
Construction Operations

3. IncomeStatement Year 1 2 3 4 5 6 7 8 9 10 TerminalValue
Revenues 20,000,000,000 20,400,000,000 21,224,160,000 22,523,248,385 24,379,888,400 26,917,366,766 30,313,326,878 34,820,484,123 40,797,746,874 48,757,084,106
Less:OperatingExpenses 5,000,000,000 5,100,000,000 5,306,040,000 5,630,812,096 6,094,972,100 6,729,341,692 7,578,331,719 8,705,121,031 10,199,436,719 12,189,271,027
EBITDA 15,000,000,000 15,300,000,000 15,918,120,000 16,892,436,289 18,284,916,300 20,188,025,075 22,734,995,158 26,115,363,093 30,598,310,156 36,567,813,080
Less:Depreciation 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
EBIT 5,000,000,000 5,300,000,000 5,918,120,000 6,892,436,289 8,284,916,300 10,188,025,075 12,734,995,158 16,115,363,093 20,598,310,156 26,567,813,080
Less:InterestExpense 7,500,000,000 6,750,000,000 5,895,000,000 4,957,500,000 4,020,000,000 3,082,500,000 2,145,000,000 1,207,500,000 270,000,000 -
EBT (2,500,000,000) (1,450,000,000) 23,120,000 1,934,936,289 4,264,916,300 7,105,525,075 10,589,995,158 14,907,863,093 20,328,310,156 26,567,813,080
Less:Taxes - - 4,624,000 386,987,258 852,983,260 1,421,105,015 2,117,999,032 2,981,572,619 4,065,662,031 5,313,562,616
NetIncome (2,500,000,000) (1,450,000,000) 18,496,000 1,547,949,031 3,411,933,040 5,684,420,060 8,471,996,127 11,926,290,474 16,262,648,125 21,254,250,464
CashFlow
NetIncome - - (2,500,000,000) (1,450,000,000) 18,496,000 1,547,949,031 3,411,933,040 5,684,420,060 8,471,996,127 11,926,290,474 16,262,648,125 21,254,250,464
Add:Depreciation - - 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
CashFlowfromOperations - - 7,500,000,000 8,550,000,000 10,018,496,000 11,547,949,031 13,411,933,040 15,684,420,060 18,471,996,127 21,926,290,474 26,262,648,125 31,254,250,464
Less:CapitalExpenditures 50,000,000,000 50,000,000,000 - - - - - - - - - -
CashFlowBeforeFinancing (50,000,000,000) (50,000,000,000) 7,500,000,000 8,550,000,000 10,018,496,000 11,547,949,031 13,411,933,040 15,684,420,060 18,471,996,127 21,926,290,474 26,262,648,125 31,254,250,464
Plus:DebtFinancing 37,500,000,000 37,500,000,000
Plus:EquityFinancing 12,500,000,000 12,500,000,000
Less:DebtRepayment - - 7,500,000,000 8,550,000,000 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 9,375,000,000 2,700,000,000 -
Dividends - - - - 643,496,000 2,172,949,031 4,036,933,040 6,309,420,060 9,096,996,127 12,551,290,474 23,562,648,125 31,254,250,464
TerminalValue
EquityCashFlow (12,500,000,000) (12,500,000,000) - - 643,496,000 2,172,949,031 4,036,933,040 6,309,420,060 9,096,996,127 12,551,290,474 23,562,648,125 31,254,250,464 255,051,005,563
FreeCashFlow (50,000,000,000) (50,000,000,000) 14,000,000,000 14,240,000,000 14,734,496,000 15,513,949,031 16,627,933,040 18,150,420,060 20,187,996,127 22,892,290,474 26,478,648,125 31,254,250,464 255,051,005,563
AnnualDSCR
CashforDSCR 15,000,000,000 15,300,000,000 15,913,496,000 16,505,449,031 17,431,933,040 18,766,920,060 20,616,996,127 23,133,790,474 26,532,648,125 31,254,250,464
DebtService 16,875,000,000 16,125,000,000 15,270,000,000 14,332,500,000 13,395,000,000 12,457,500,000 11,520,000,000 10,582,500,000 2,970,000,000 -
AnnualDSCR 0.89 0.95 1.04 1.15 1.30 1.51 1.79 2.19 8.93
EquityIRR 28.29%
ProjectIRR 19.36%
AverageDSCR 2.19
MinimumDSCR 0.89