Trial calculation of the FIRR, etc. for the project was carried out based on the earlier mentioned preconditions, and the results shown in Table 5-13 were obtained. Moreover, in calculating the cash flow, discount calculation was carried out assuming a calculation period of 30 years and a discount rate of 10%.
Table 5-13 List of Overall Financial Profitability Indicators
The standard for financial assessment of a project in South Africa as given by the Central Economic Advisory Committee requires a minimum FIRR of 10%. Although profitability in the case of this project is somewhat low, it is judged to be at a level that makes investment possible.
(2) Profit and Loss Balance
When a simulation of the long-term profit and loss balance is carried out using the prerequisite borrowing conditions, a profit and loss trend like that shown in Figure 5-19 is obtained. The post-depreciation balance in the first year of operation is in the black, and this extremely promising result in terms of balance gives much cause for optimism. The main reason for this lies in the excellent operating balance of the project. The operating coefficient for the LRT line lies at around 60, indicating that the operating conditions of the undertaking are unparalleled as a railway concern. This is thought to be influenced by the fact that, whereas the small size of the railway leads to relatively small operating costs, a fairly high demand can be expected (just under 15,000 people per kilometer).
Furthermore, it was found that investment could be recouped in 14 years, reflecting the balance between the investment cost and operating income and expenditure. In terms of the long-term capital risk, too, the project can be described as a most promising concern.
