6.2 Financial Evaluation
The cash flow is shown in Table.6.2.1 and its FIRR calculation in Table.6.2.2.
It is concluded that the Project can be soundly operated if the purchasing price of a VLCC is \18,200 (US$140) or below, owing to the advantageous borrowing conditions of the loan.
The sale price of round reinforcing bar is assumed at \42,900/ton at the time of 2003, with price escalation of 1% annually. Sale price of round reinforcing bar may fluctuate. The sale price of re-rolling material is assumed at \20,800/ton (US$160/ton) with same annual escalation. The sale price of melting scrap iron is assumed at \13,000/ton (US$100/ton) and it remains constant through the life period of the Project. These assumption made taking into account the possibility of price fluctuation.
However, from the cash flow analysis, it is concluded that the Project is sensitive to variation of factors such as the purchasing price of VLCC.
The present price of a ship is US$120 as or June 1998. In early 2000 the peak is expected for demolishing VLCC for a few years. Therefore, the viable running can be assumed from this point.
Therefore, to secure the stable operation of the Project, carrying out of various incentive schemes by SCA will be of absolute necessity on management of these above material produced from ship breaking.