Zbornik radova Koridor 10 - Kirilo Savić

3rd International Scientific and Professional Conference
CORRIDOR 10 - a sustainable way of integrations
When using the 7 % discount rate the economic net present value was negative, but nevertheless the
results are acceptable, as it would have a positive NPV when using 4.5 % discount rate.
In the frame of financial and economic analysis we also made a sensitivity analysis of the calculated
indicators for changes in the valuation of individual input elements. We have calculated the following
changes: increase and decrease of investment costs by 20 %, increase and decrease of the overall
effects of investment by 20 %, increase of investment costs by 20 % and at the same time reduction of
the economic effects by 20 %, decrease of investment costs by 20 %, and an increase of the
economic effects of 20 % and the consideration of 3,5 % discount rate.
Table 1: Economic profitability indicators
Change in valuation elements
Conditions "Z1"
NPV
IRR (in
milionEUR)
Conditions "Z2"
NPV
IRR (in million
EUR)
- Increase of investment costs by 20 % 2,71 % -1.300,35 2,96 % -2.089,92
- Decrease of investment costs by 20 % 7,48 % 89,64 6,81 % -62,84
- Increase of the overall effects of investment by 20 % 5,79 % -315,19 5,75 % -566,81
- Decrease of the overall effects of investment by 20 % 3,15 % -895,53 3,11 % -1.585,95
- Increase of investment costs by 20% and at the same
time decrease of the impacts by 20 %, 1,42 % -1.590,52 1,69 % -2.599,49
- Decreaseof investment costs by 20% and at the same
time increase of the impacts by 20 % 8,95 % 379,80 8,27 % 446,73
- Consideration of 3,5 % discount rate 4,55 % 439,84 4,51 % 820,49
Basic calculation 4,55 % -605,36 4,51 % -1.076,38
The results showed that the calculation of the profitability indicators is more sensitiveon the change in
investment value then on the change in effects. Past experience shows that the investment value is
actually one of the most critical components of investment projects, because any changes in the
realization of projects (longer execution of the project, changes in technology performance, ...) reflect
to the change in investment value.
We have also simulated the best and worst case scenarios. In the best case scenario, we considered
a reduction of investment costs and at the same time increasing effects of investments by 20 %, which
showed that in this case all the economic indicators would be positive.
In the worst case scenario, we considered an increase of investment costs and at the same time
reducing effects of investment by 20 %, which showed that in this case IRR is higher than 0 while the
NPV, using a discount rate of 7 %, was negative.
Given that the European Commission has recommended the use of lower discount rates than those
prescribed in the Republic of Slovenia, we performed the calculation of the profitability indicators using
3,5 % discount rate. Also in these calculations profitability indicators in both conditions "Z1" and "Z2"
were positive.
We have made qualitative and quantitative risk analysis, namely for those risks whose existence is
most likely to arise, based on previous experience in the implementation of transport infrastructure
projects. Qualitative risk analysis has been made so, that risks were divided into five segments, which
dealt with the issue in the context of strategic documents and legislation, elaboration of documentation
and land acquisition, financing investment projects and macroeconomic effects. To each risk we gave
an assessment of the likelihood to occur, its impact on the project and risk management measures.
Quantitative risk analysis was made for the changes in investment costs of the project, as the
investment costs of the projects has proven to be one of the most critical in the sensitivity analysis. We
made it on the basis of Monte-Carlo method using the software @ Risk.
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