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Principles of Project Finance, 2nd Edition by E. R. Yescombe

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Chapter 13

The Financial Model

This chapter reviews the main building blocks of information and assumptions used for projections that are assembled to create inputs for a project’s financial model (§13.2), namely: macro-economic assumptions (§13.3); project costs and funding (§13.4); operating revenues and costs (§13.5); accounting and taxation assumptions (§13.6).

The final model outputs (§13.8) will confirm the viability (or otherwise) of the project from the point of view of investors (and in the case of a process-plant or infrastructure project the costs to the Offtaker/Contracting Authority, or users). Lenders use the model to carry out sensitivity calculations to ensure that their loan is not unduly at risk in downside scenarios (§13.9). ...

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