Hi Everyone,

I am working on a project related to a hypothetical light rail project.

However, calculating the net present value and what to include in the excel sheet is very confusing, I've tried to search the web but no specific answers have been given that helps me.

A light rail project is considered, details of project is:

Today is 1 January 2012, project commences today.

Estimated annual life of the project: 15 years

Estimated annual visitors using light rail project (assumed that all will be using):

(000's)

2012 = 290
2013 = 310
2014 = 325
2015 = 380
2016 = 380
2017 = 420
2018 = 460
2019 = 490
2020 = 530
2021 = 590
2022-2036 = 640

It is estimated that locals will add a further 10% to the numbers using the light rail system in each year.

Capex:

($m)
2012 = 27.3
2013 = 43.4
2014 = 62.9
2015 = 15.9

Operating and maintenance costs:

2016 = 3.3
2017 = 3.3
2018 = 3.4
2019 = 3.6
2020 = 3.6
2021 = 3.7
2022-2026 = 3.9

Above costs excludes depreciation charges on initial capital expenditures

Ticket Price:

$10 per journey fixed until 2020, when it will then rise to $14 per journey.

Angerona government will award block grants of $60 million towards the capital costs, which will be paid in three equal installments commencing at the end of the third year if the light rail system is completed within three years. Finally, a subsidy of $2 per ticket will be provided for the first three years' operations.

If the number of passenger journeys exceeds 2 million in any one year, 25% of the total ticket subsidy that has been received must be repaid. This rule will apply in every year until the whole of the ticket subsidy is repaid.

Estimated residual value of equipment and track:

$2.4 m

I calculated the cost of capital and it is: 8%

To finance the light rail investment project, the company will raise by issuing ordinary shares to ensure that negative cash flow does not incur during the construction phase of the project, it is expected that issue costs will account for 4% of the proceeds from the rights issue.