Name: Aini Hazwani Binti Shahrir

Matric No.: A155202

KKKH 4543: URBAN TRANSPORT PLANNING

Task 4 – Financial Analysis

1. An 85 km urban highway is planned to be constructed to connect an industrial area to a planned sea port. Estimated cost is RM1,250
million and the construction period is planned to be 2 years. The highway project will be privatized and the concession period is 10
years. The concession company will be financed by a local bank. Financing period is 10 years and yearly repayment is RM 265.625
million for 8 years after the construction period. Maintenance cost is estimated to be RM 40 million a year and expected to be
increasing at 7% per annum. Toll collection is estimated to be RM 336 million a year and increasing at 9% per annum.

RM
Project Cost 1,250,000,000.00
Construction Period 2 Years
Concession Period 10 Years
Toll Revenue RM 336,000,000.00 /Year increasing 9% per annum
Toll Revenue Growth 0
Maintenance Cost RM 40,000,000.00 /Year increasing 7% per annum
Maintenance Cost Grow 0 /Year
Financing By Company 0
Financing By Bank 1 Discount rate 8%
Financing Duration 10 Years
Repayment to Bank RM 265,625,000.00 /Year

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 (a) Compute NPV cost and NPC income for the concession period. Use 8% discount rate.

Year Construction Cost Total Benefit NPV Cost NPV Benefit Cost Stream
0 RM 625,000,000.00 RM 625,000,000.00 RM (625,000,000.00)
1 RM 625,000,000.00 RM 578,703,704.00 RM (625,000,000.00)
2 RM 40,000,000.00 RM 336,000,000.00 RM 34,293,553.00 RM 288,065,844.00 RM 296,000,000.00
3 RM 42,800,000.00 RM 366,240,000.00 RM 33,976,020.00 RM 290,733,120.00 RM 323,440,000.00
4 RM 45,796,000.00 RM 399,201,600.00 RM 33,661,427.00 RM 293,425,093.00 RM 353,405,600.00
5 RM 49,001,720.00 RM 435,129,744.00 RM 33,349,747.00 RM 296,141,992.00 RM 386,128,024.00
6 RM 52,431,840.00 RM 474,291,421.00 RM 33,040,953.00 RM 298,884,048.00 RM 421,859,581.00
7 RM 56,102,069.00 RM 516,977,649.00 RM 32,735,019.00 RM 301,651,493.00 RM 460,875,580.00
8 RM 60,029,214.00 RM 563,505,637.00 RM 32,431,917.00 RM 304,444,562.00 RM 503,476,423.00
9 RM 64,231,259.00 RM 614,221,145.00 RM 32,131,621.00 RM 307,263,493.00 RM 549,989,886.00
Total Benefit RM 1,469,323,961.00 RM 2,380,609,645.00

(b) Compute Benefit-Cost ratio

B/C Ratio = 1.620207462

IRR = 21%
(c) Prepare computation table as in (a) with 54% discount rate and compute the Internal Rate of Return (IRR). (You can use cost
stream method to calculate IRR. In this case, you don’t have to compute NPV based on 54% discount rate).

Year Construction Cost Total Benefit Cost Stream

0 RM 625,000,000.00 RM (625,000,000.00)
1 RM 625,000,000.00 RM (625,000,000.00)
2 RM 40,000,000.00 RM 60,029,214.00 RM 296,000,000.00
3 RM 42,800,000.00 RM 366,240,000.00 RM 323,440,000.00
4 RM 45,796,000.00 RM 399,201,600.00 RM 353,405,600.00
5 RM 49,001,720.00 RM 435,129,744.00 RM 386,128,024.00
6 RM 52,431,840.00 RM 474,291,421.00 RM 421,859,581.00
7 RM 56,102,069.00 RM 516,977,649.00 RM 460,875,580.00
8 RM 60,029,214.00 RM 563,505,637.00 RM 503,476,423.00
9 RM 64,231,259.00 RM 614,221,145.00 RM 549,989,886.00

IRR = 21%
2. An urban highway of 22 km long linking sub-urban area with the CBD will be constructed. The cost of this project is estimated to be RM
950,000,000.00 and project duration is 2 years. Estimated saving in vehicle operating cost is 1,440,000 km-vehicle per day and saving in
travel time is about 30,400 man-hour per day. Average value of time is RM 13.50 per hour and vehicle operating cost is about 20 sen
per kilometer. Both savings are forecasted to increase at the rate of 9% per annum. Maintenance cost of the road is estimated to be
RM 3,000,000.00 per annum and will be increasing at the rate of 10.5% per annum. The project will be financed using federal
government soft load and repayment period is 12 years after the completion of the project. Discounted rate is 8%.

Length of road 22 km
Cost of project 950000000
Construction period 2 Years
Cost of project per year 475000000
Estimated vehicle operating cost 1440000 vehicle-km/day
Estimated travel time 30400 men-hr/day
Average travel time value 13.5 /hour
Vehicle operating cost 0.2 km
Reduction rate 9% /year
Road maintenance cost 3000000 /year
Road maintenance rate 10.50% /year
Payback period 12 Years
Discount rate 8%

Reduction in vehicle operating cost = Estimated vehicle operating cost x Vehicle operating cost
= 1440000 x 0.2
= 28800 RM/day

Reduction in travel time = Estimated travel time x Average travel time value
= 30400 x 13.50
 = 410400 RM/day

Total reduction per year = Reduction in vehicle operating cost + Reduction in travel time
= 288000 + 410400
= 698400 RM/day
= 698400 x 365 days
= 254916000 RM/day

(a) Compute NPV cost and NPC income for the concession period. Use 8% discount

Year Cost Benefit NPV Cost NPV Benefit Cost Stream

- RM 475,000,000.00 RM 475,000,000.00 RM (475,000,000.00)
1 RM 475,000,000.00 RM 439,814,815.00 RM (439,814,815.00)
2 RM 3,000,000.00 RM 254,916,000.00 RM 2,572,016.00 RM 218,549,383.00 RM 251,916,000.00
3 RM 3,315,000.00 RM 277,858,440.00 RM 2,631,554.00 RM 220,572,988.00 RM 274,543,440.00
4 RM 3,663,075.00 RM 302,865,700.00 RM 2,692,469.00 RM 222,615,331.00 RM 299,202,625.00
5 RM 4,047,698.00 RM 330,123,613.00 RM 2,754,795.00 RM 224,676,584.00 RM 326,075,915.00
6 RM 4,472,706.00 RM 359,834,738.00 RM 2,818,564.00 RM 226,756,922.00 RM 355,362,032.00
7 RM 4,942,340.00 RM 392,219,864.00 RM 2,883,808.00 RM 228,856,524.00 RM 387,277,524.00
8 RM 5,461,286.00 RM 427,519,652.00 RM 2,950,563.00 RM 230,975,565.00 RM 422,058,366.00
9 RM 6,034,721.00 RM 465,996,421.00 RM 3,018,863.00 RM 233,114,228.00 RM 459,961,699.00
10 RM 6,668,367.00 RM 507,936,098.00 RM 3,088,744.00 RM 235,272,693.00 RM 501,267,732.00
11 RM 7,368,545.00 RM 553,650,347.00 RM 3,160,243.00 RM 237,451,144.00 RM 546,281,802.00
Total Benefit RM 943,386,434.00 RM 2,278,841,362.00
(b) Compute Benefit-Cost ratio

Benefit-cost ratio = 2.415596918

IRR = 28%

(c) Prepare computation table as in (a) with 30% discount rate and compute the Internal Rate of Return (IRR).
(You can use cost stream method to calculate IRR. In this case, you don’t have to compute NPV based on 30%
discount rate. Assume a year is equal to 330 days and traffic flows are uniform throughout the year).

Year Cost Benefit Cost Stream

- RM 475,000,000.00 RM (475,000,000.00)
1 RM 475,000,000.00 RM (475,000,000.00)
2 RM 3,000,000.00 RM 254,916,000.00 RM 251,916,000.00
3 RM 3,315,000.00 RM 277,858,440.00 RM 274,543,440.00
4 RM 3,663,075.00 RM 302,865,700.00 RM 299,202,625.00
5 RM 4,047,698.00 RM 330,123,613.00 RM 326,075,915.00
6 RM 4,472,706.00 RM 359,834,738.00 RM 355,362,032.00
7 RM 4,942,340.00 RM 392,219,864.00 RM 387,277,524.00
8 RM 5,461,286.00 RM 427,519,652.00 RM 422,058,366.00
9 RM 6,034,721.00 RM 465,996,421.00 RM 459,961,699.00
10 RM 6,668,367.00 RM 507,936,098.00 RM 501,267,732.00
11 RM 7,368,545.00 RM 553,650,347.00 RM 546,281,802.00

IRR = 27%