$53.5M
NPV modelled
14% project IRR vs. 12.46% WACC
5
Risk categories stress-tested
Construction, demand, financing, regulatory, FX & inflation
-$1.16M
Monte Carlo mean NPV
10,000-run stress test on the same model
Context
Two linked reports for the Board of Directors of ABC Pty Ltd, written for BUSM4417 (Project Financial Management & Appraisal) and BUSM1276 (Evaluating and Managing Project Risk), on a Build-Operate-Transfer water-treatment facility: $85M capex, a 20-year concession, financed 75% debt at 12% against 25% equity, with revenue locked in through three offtake contracts.
What I did
Built the full 20-year financial model in Excel first, cash flows, loan amortisation, NPV, project and equity IRR, WACC, CAPM, DSCR, and interest cover, then wrote a second report that used that same model as the thing to attack. I ran a 10,000-iteration Monte Carlo simulation on revenue and cost assumptions and stress-tested the base case across five risk categories, pairing each with a specific mitigation: EPC contract caps, take-or-pay clauses, debt sculpting, and reserve accounts.
Result
The base case looked bankable: positive NPV, project IRR above WACC, equity IRR above the CAPM-required return, average DSCR of 6.24. The stress test told a less comfortable story, mean NPV under plausible revenue and cost variation fell to roughly -$1.16M, with debt coverage tightest in the early operating years. I recommended the board proceed, but only alongside active early-year monitoring and the mitigation set the risk assessment specified.
Why it matters
Board-level appraisal isn't finished when the base case is positive. It's finished when someone has tried to break the model and reported honestly on what it takes to do that, exactly what I'd bring to a business case or investment paper.