VCE Summer Internship Program 2021

Smart Task Submission Format

[ Download This Format in .DOCX format and then Edit it and SUBMIT ]
Intern’s Details
Name P. Bala Sai Saroj Ram

Email-ID 2201194@ipeindia.org

Smart Task No. Smart Task-1

Project Topic Financial Modelling and Analysis

Smart Task (Solution)

Task Q1: What is Finance? How is Finance different from accounting? What are important basic points that
should be learned to pursue a career in finance?

Task Q1 Solution:

Finance is the management of massive amounts of money, often by governments or big businesses.
ACCOUNTING FINANCE
Clients Individuals, businesses, Individuals, businesses,
governments. governments.
Main Employers Public accounting firms,
corporations. Banks, corporations.

Financial Responsible for preparing them. Responsible for analyzing them.

Statements
Viewpoint Backward looking. Forward looking.
Focus Accuracy, reliability. Insights, analysis.
Business Purpose Communicating the financial Figuring out how to add value.
position.

Thought Process Rules based. Analysis based.

Attention to Detail High. High.

500 Words (Max.)

Task Q2: What is project finance? How is project finance different from corporate finance? Why can’t we
put project finance under corporate finance? Define 20 terminologies related to project finance.

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Task 2 Solution:

The financing of a long-term infrastructure or industrial project using a non-recourse financial structure that
depends solely on the project's cash flows for loan repayment and holds the project's assets as security is
known as project finance.
There are two ways in which project financing (non-recourse debt) varies from corporation financing:
1) Creditors have no claim on profits from other ventures if the project fails, whereas investors have this right
with corporate finance.
2) It usually prioritises the project's cash flows over any corporate claims.
Project Finance unquestionably feeds into Corporate Finance, but at what level is a key requirement to
consider.

For example, if a delivery boy's expenses for going to the bank are tracked by Corporate Finance as: Town
bus: Rs 7.50, vehicle fare: Rs 124, and Metro fare: Rs 25, he will be unable to focus on the company's overall
performance. The CFO would most likely focus on the entire transportation charge. He would leave it if it
was acceptable. If not, he will delegate the assignment to the next level of management to investigate and
determine whether cost savings are attainable. They may proceed to the next level, eventually reaching the
Project Manager / Controller, who will examine the specific expenses.
Finance for trade. Project financing is a term that refers to the financing of Off-balance sheet project finance
for significant international development projects and public-private partnerships around the world, including
limited-recourse and non-recourse. Financing for a project. Finance for Projects The terminology used in
project finance are highlighted.

500 Words (Max.)

Task Q3: What is non-recourse debt / loan? What is mezzanine finance, explain with an example.

Task Q3 Solution:

Non-recourse debt is a type of loan that is backed by property as collateral. If the borrower defaults, the issuer
can seize the collateral but cannot pursue further reimbursement from the borrower, even if the collateral does
not cover the full amount owed. This is one of the few cases where the borrower is not personally liable for
the loan.
Mezzanine financing is a mix of debt and equity financing that offers the lender the opportunity to convert the
loan into an equity interest in the company in the event of default, usually after the senior lenders have been
paid. There is a risk difference between senior debt and equity in terms of risk.
Example:
Company ABC, a surgical device manufacturer, receives $15 million in mezzanine loan funding from Bank
XYZ. The funds were used to replace a higher-interest $10 million credit line with better terms. Company
ABC was able to increase its operating capital and pay off a higher-interest debt, allowing it to bring more
items to market. Bank XYZ will receive 10% interest payments per year and will be allowed to convert the

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Smart Task Submission Format

debt into an ownership holding if the company defaults. Bank XYZ was also able to prevent Company ABC
from borrowing more money and impose specific financial ratio requirements on it.

Company 123 issues Series B 10% Preferred Stock with a par value of $25 and a liquidation value of $500 in
a preferred equity example. When funds become available, the stock will pay out dividends on a regular basis
until the maturity date is reached. The comparatively high liquidation value is a takeover defence, making
stock acquisition for such purposes unprofitable.

500 Words (Max.)

Task Q4: Explain in detail with reasons of what the sectors are or which type of projects are suitable for
project finance?

Task Q4 Solution:

Type of projects are suitable for project finance.

Explanation:
 In today's environment, business is moving at a breakneck pace. Commodity demand and supply are
always in balance around the world. In the market, the company that successfully matches demand
with supply wins.
 Project finance has also become a vital link in the supply and demand chain.
 If a trader has 4-5 brands for a specific product, such as paint, he tends to sell the best brand, which
provides him with a good margin. In exchange, these brands venture into project finance, such as
third-party financers, who make the payment for the company immediately and receive payment from
the trader via a 60-day credit period.
 The trader, the corporation, and the project financer all benefit from this three-way business
arrangement. In this way, business grows in a beneficial way. These are things that should be adopted
in any firm.

500 Words (Max.)

500 Words (Max.)

Please add / delete blocks if needed.

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