Question 1:
Analyse the benefits one could get from project financing
• Allows the promoters to undertake projects without exhausting their ability to borrow amount for traditional projects.
• Limits financial risks to a project to the amount of equity invested.
• Enables raising more debts as lenders are sure that cash flows from the project will not be siphoned off for other corporate uses.
• Gives stronger incentives for careful project evaluation and risk assessment.
• Facilitates the projects to undergo careful economic and technical review.
• Removes the dependency on alternative nature of funding a project.
• Facilitates the arrangement of liability financing and credit improvement, accessible to the project but unavailable to the project sponsor.
• Active the diversification of the project sponsor's investments to reduce political risk.
• Provides more incentive for the lender to cooperate in an atmosphere of a troubled loan.
• Enables to have prolonged credit opportunities.
• Matches specific assets with specific liabilities
Question 2:
Describe the different evaluation methods of project funding
NPV, IRR, profitability index