The XYZ Pension Fund Resource-Constrained Case Assignment
The XYZ Pension Fund is resource-constrained and has only $8,000,000 available for co-investment in an infrastructure asset, and must show its Board of Trustees that it has selected the most potentially profitable investments. It is being offered 6 alternatives, each of which has reached construction completion, and with 25 years’ concession period remaining. These are:
Gross Investment required
Net Present Value $
Projected IRR %
Single toll road
Large general Hospital
Portfolio of PFI schools
Bridge River crossing
You are the projects’ financial advisor retained by the Trustees. Advise them (explaining your reasons);
Now consider a significant new PPP project (financed wholly by the private sector) where for some reason construction completion is delayed. Critically analyze and describe the consequences for the “D&B”/” Tier 1” Contractor, of the following situations:
a time overrun extending past the projected Completion Date
what the “penalties” might be on the [Tier 1] Contractor, and importantly also explain why “penalties” is written here in quotes; and
which parties might seek remedies and apply or enforce these “penalties” at each stage in a progressive delay;
giving an indication of how large they might be and why; and demonstrate how this would be calculated and applied.
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