Project Financing Systems
Project financing systems are designed to minimize risk and increase investor returns.
Project finance systems involves the long-term financing of industrial projects and infrastructures that are based on projected cash flows of the intended project. The funds used are received through sponsorship which includes investors and the lending institution which grant the loans for the operation. Writers who offer finance assignment help at Edudorm essay writing service notes that these funds are mostly secured by the project assets which are entirely paid through the cash flows generated. For this cash flow to be generated there is the need to make the project worthy. This means adding value to the project to facilitate easier compliance to the loan terms issued (Kerzner & Saladis, 2009).
Importance of Project financing systems
Generally, the purpose to create the value of the project involves capital contribution and commitment towards the project. Risk identification is a way of adding value to the project and allocation of key components (Kerzner & Saladis, 2009).This involves the number of technical experts involved, environmental risks as well as political and economic risks. Identification of the risk type and whether it is inherent to the project development and whether it is unfinanceable. Joint ownership and concession agreements such as pre-emption and disposal rights, injection of share capital, resolution of force and disposal policy create value since it deter opportunistic behavior and aligns incentive to the parties involved (Kerzner & Saladis, 2009). Experts who offer financial services assignment help at Edudorm essay writing service notes that project delivery methods play a great role in creating the value for the project. This involves pattern implementation of financing resources to the involved parties. This is the distribution of risk that is associated with the project meanwhile simultaneously ensuring returns to the involved parties. This ensures each member involved in the project performs to their best in order to make better returns (Kerzner & Saladis, 2009).
Impacts of Project financing systems
Project financing through large scale has its impacts on the share price and the cash flow of the project. The volatility of the project associated with the long-scale financing has an effect on the share prices. The less the volatility the market return on shares is considered to be high (World Bank, 2010). Due to the financing structure of the project that comprises of debt and equity is likely to affect the price of the shares. Different shares will be affected differently. The gearing ratio level is determined by the level of debt. The higher the risk the higher the returns and the share price increases (World Bank, 2010). Tutors who offer financial planning assignment help at Edudorm essay writing service indicates that debt financing is cheap and through the long- term financing the share prices may fluctuate. Debt financing does not dilute the earnings per share but has a financial risk to the project. The addition of equity financing by investors the share is diluted hence the shares value reduce (World Bank, 2010).
Projected cash flows determine the project value and the liquidity of the project .The project is expected to be gained in the project is subject to the long-term financing. The impact may result to the investors sacrificing some of their control and ownership since debt and interest have to be paid upon maturity (Finnerty, 2013). The impact of large-scale on cash flows may affect the operating cash flow and the terminal cash flow. This depends on how the project is performing. Writers who offer financial statement analysis assignment help at Edudorm essay writing service points that the cash flows realized varies from one period to another depending on the factors in each period. Large- scale is subjected to unpredictable economic factors and some risks may arise due to the changes affecting the realization of the projected cash flows (Finnerty, 2013)
Reference
Kerzner, H., & Saladis, F. P. (2009). Value-driven project management. Hoboken, N.J: Wiley.
World Bank. (2010). Global economic prospects 2010: Crisis, finance, and growth. Washington, DC: World Bank.
Finnerty, J. D. (2013). Project financing: Asset-based financial engineering. Hoboken, New Jersey : John Wiley & Sons, Inc.
