Your Financial Adviser Indicates The Likely Terms Of A Project Financing (Below)

Then he

suggests

Question

Your financial adviser indicates the likely terms of a Project Financing (below). Then he

suggests

that you consider adding Political Risk Insurance from MIGA at a cost of a $6 M

upfront fee. Set up the cash flows to calculate the all-in financing cost, assuming you agree to

add the MIGA PRI. Solve the all-in financing cost, expressing the answer in terms of an all-in

interest rate before and after-tax. You may assume that interest expenses and fees are tax

deductible @30 % in the year-incurred.

Loan Assumptions:

Loan Amount: $300 M

Tenor 8 years

Interest Rate 5%

Amortization $50 M/year, beginning at the end of year 3

Advisory Fees 1/ 2 %

Arrangement Fee 1%

Annual Compliance Costs $500 k

Finance