Finance for Brisbane Airport Corporation - myassignmenthelp.com

Question: Discuss about theFinance for Brisbane Airport Corporation. Answer: Project Description / Opportunity Summary of the different elements of the two expansion options The two main aspects of the expansion opportunities has been identified with the various type of the options which has been seen to be related to the decision whether the expansion should be based on construction of a new five storey car park with a 1,250 car capacity or construction of new 3.4km runway. The involvement of the key parties of the project has been seen with the airport authority, management and the staff of Brisbane Airport Corporation (BAC). Discussion on amount of investment The total amount of the cost of construction for new five storey car park with a 1,250 car capacity has been identified with total amount of $ 195000000 and establishment cost of $ 15000000. On the other hand the construction cost of 3.4km runway has been identified with an total investment of $ 1200000000. In addition to this, the total amount of establishment cost has been further seen to be discerned in form of $ 85000000. The first key ratio has been seen to be considered with Debt/Equity Ratio of 40%, while the Debt /Equity Ratio of 80% has been seen to state that the project for car park is seen with a better standing. Moreover the IRR for the expansion of the car park has been further seen to be considered with the main aspect of 9.24% and runway expansion is considered with IRR of 9.04. This has been clearly able to state that the investment for the expansion of car park is seen to be a better option. It has been further identified that the Debt Service Coverage ratio for the expansion of car park is seen with 5.85 and runway is 5.22. Henceforth, due to lower amount of debt service coverage ratio for runway project it has not seen to be ideal in nature. In terms of the revenue comparison of both the projects it has been seen that the expansion of the car park is seen to be more ideal in nature. This particular consideration has been seen to be evident with the total revenue of $210,000,000 has bee n evident with the construction operations and $ 827,517,010 has been seen to be evident with the revenues from the operations. In the contrast with the expansion invest in the Runway it has been seen that the revenue from the construction has been seen with a total amount of $1,285,000,000 and operations of $14,560,723,406. It has been further discerned that the various types of the cost such as operating cost, lifecycle cost, debt payment and the equity distribution has been identified to be in a better potion for the expansion investment in the car park project. This has been seen to be evident with the lower amount of the cost which has been identified with the lower amount of the cost with $157,500,948 operating cost for the car park project and $6,823,698,784 for the runway project. Some of the various types of the other evidence of the increased amount of the cost for the various types of the cost such as lifecycle cost and debt payment have been seen to be evident with the R unway project. Key Project Milestones Date Milestones 1.11.2017 Identification of the feasible project 15.11.2017 Sourcing of the use of funds 20.11.2017 Assignment of the people for operating and lifecycle operations 1.12.2017 Arrangement for the various types of borrowing and loans 12.12.2017 Finalise the project plan Investment Risk Assessment Risk Which Expansion More Riskier and Why Approach to Management and Mitigation Construction Risk due to unexpected ground conditions In general it has been identified that construction risk of new five storey car park with a 1,250 car capacity is seen to be higher than Construction of a new 3.4km runway. This is due to the engineering constraints for the entry and exit of 1250 cars. The main approach to the management needs to be made with the lower amount of the cost for the car park project than the runway project. It has been further identified that better revenue and financial ratios has been seen to be better in case of car park. Interest Rate Risk The interest rate of both car park and runway has been identified with 4.25%. Therefore, it cannot be discerned whether car park or runway is seen to be riskier in terms of the interest rate. In terms of approach to the management it cannot be discerned whether the recommendation can be made with the interest rate for the either of the project. Operational Costs Risk The operational cost risk has been identified to be higher in terms of runway project. This has been evident with lower amount of the cost with $157,500,948 operating cost for the car park project and $6,823,698,784 for the runway project. Based on the various considerations for the operating cost it has been seen that the expansion project for car park expansion is a better option. It needs to be further identified with the various types of the increasing aspect with the revenue and equity distributions. Facility Demand Risk The Facility demand risk for the runway project has been seen to be higher with car park project. It has been further seen that facility demand considerations for the car park is seen to be evident with the various type of the consideration with 3.5 km of the runway space and the various types of the additional operating cost which has been further seen to be evident with the same. The recommendation based on the facility operating risk for the runway project has been seen to be based on them main recommendation which will be able to be conducive for facilitating the runway project. Model Improvements The different types of the recommendations for the model improvements have been seen to be suggested in three ways: Consideration of facility risk The main form of the risk associated to the facility risk has been evident with higher with car park project. It has been further seen that facility demand considerations for the car park is seen to be evident with the various type of the consideration with 3.5 km of the runway space and the various types of the additional operating cost which has been further seen to be evident with the same. Due to the various types of the aspects for the facility risk, a specialised team needs to be appointed who will be able to consider the various types of the facility risk which has been seen to be associated to improvement in the present facility for car park. Consideration of recommendation for operating cost The different types of the recommendation for the operating cost has been considered with the different types of the consideration which has been seen to be utilising the higher amount of the revenues incurred from the expansion plan for car park project. Consideration of the recommendation based on the ratios The important recommendation for the improvement for the runway project can be improved with the increment in the IRR and Debt/Equity Ratio. It has been further seen that runway project needs to lower the total amount of the Debt equity ratio and needs to consider the various types of the considerations for the deteriorating metrics for higher amount of the loan and other borrowings. Recommendation The main form of the recommendation has been seen to be in favour of the car park project. The total amount of the cost of construction for new five storey car park with a 1,250 car capacity has been identified with total amount of $ 195000000 and establishment cost of $ 15000000. On the other hand the construction cost of 3.4km runway has been identified with a total investment of $ 1200000000. This shows that there is an increased amount of cost for runway project. Another aspect for the recommendation has been further seen to be considered with Debt/Equity Ratio of 40%, while the Debt /Equity Ratio of 80% has been seen to state that the project for car park is seen with a better standing. Moreover the IRR for the expansion of the car park has been further seen to be considered with the main aspect of 9.24% and runway expansion is considered with IRR of 9.04. Based on the various considerations for the operating cost it has been seen that the expansion project for car park expansio n is a better option. It needs to be further identified with the various types of the increasing aspect with the revenue and equity distributions. The lower amount of the cost which has been identified with the lower amount of the cost with $157,500,948 operating cost for the car park project and $6,823,698,784 for the runway project. Some of the various types of the other evidence of the increased amount of the cost for the various types of the cost such as lifecycle cost and debt payment have been seen to be evident with the Runway project. Due to the various types of the aforementioned the project of Car park is recommended. References Arnold, G. (2013).Corporate financial management. Pearson Higher Ed. Brigham, E. F., Ehrhardt, M. C. (2013).Financial management: Theory practice. Cengage Learning. Brigham, E. F. (2014). Financial management theory and practice. Atlantic Publishers Distri. Renz, D. O. (2016). The Jossey-Bass handbook of nonprofit leadership and management. John Wiley Sons. Petty, J. W., Titman, S., Keown, A. J., Martin, P., Martin, J. D., Burrow, M. (2015). Financial management: Principles and applications. Pearson Higher Education AU.