Zbornik radova Koridor 10 - Kirilo Savić

3rd International Scientific and Professional Conference
CORRIDOR 10 - a sustainable way of integrations
Figure 4. Example of interface for scenario analysis in the World Bank Toolkit
Important note is that the Toolkit is much more suitable for financial analysis in the field of
management of infrastructure, freight and passenger transport. The model can be used for a new rail
project only if estimated future parameters are available.
4. FINANCIAL ANALYSIS OF RAIL INFRASTRUCTURE PROJECTS
Every rail infrastructure project must be subjected to financial analysis in order to examine its cost
effectiveness. Project ratios that are usually considered for project financial feasibility include: financial
internal rate of return (IRR), return on equity (ROE) and annual debt service cover ratio (ADSCR).
IRR shows the yield of the project regardless of the financing structure. The minimum required IRR
depends on country and project characteristics and is usually expected to be 8% or more (commonly
above 12% in developing or transition economies). Calculation of IRR is itterative and is given with
Equation (1):
i
end of
period
first year of construction
(1
( OCFBF ) i
PROJECT . IRR)
i
0
(1)
where OCFBF is operating cash flow before financing.
ROE shows yield of the project for the shareholders through the remuneration of their investment with
dividends. The minimum expected ROE rate is usually 10% or more. ROE can be calculated
according to Equation (2).
Net income
Shareholder equity
ROE (2)
ADSCR shows the ability of the investment company to repay the debt. Project estimated viable for
the lenders when the ADSCR is greater than 1 for every year of the project life. Generally, the
minimum ADSCR should be greater than 1.2. ADSCR can be calculated according to Equation (3).
ADSCR
n
n
i 1
( CAFDS )
Debt
n
service
i
(3)
Debt service Principal Interest
(4)
i
i
i
Belgrade, 2012 64