![]() Learn project finance modeling, debt sizing mechanics, running upside/downside cases and more. Step-by-Step Online Course The Ultimate Project Finance Modeling PackageĮverything you need to build and interpret project finance models for a transaction. We remain in control of thi s by using a debt sizing macro. iterative process incomplete) or converging on the wrong solution. However this is not recommended at all – firstly because it will massively slow your model down – imagine instead of doing 1 calculation every time you press enter, it does 100… and secondly because the answer risks not converging (i.e. Why? Following the chain of logic here:įor the gearing ratio debt calculation, each subsequent debt amount must take into account the construction costs & interest & fees generated off that debt, thereby increasing the funding amount, thereby increasing the debt size (to retain the 75% of funding met by debt).īoth of these calculations can be solved iteratively, and Excel has this functionality through the Iterative calculation feature. Note that linking these would result in a circularity. The project finance model screenshot below shows the maximum principal repayment, and the opening balance. If you think about it, the maximum principal repayable, is really what your maximum debt size is. Understand that we needed to run all the CFADS forecasts to arrive at this maximum debt size. Now if we sum up all the principals, then we get back to what the maximum principal repayable is. Principal Payments = CFADS / DSCR – Interest Payments Rearranging again and summing these cash-flows over the debt tenor we get: Principal + Interest (aka Debt Service) = CFADS/DSCR. Recalling our formula from our article on DSCR:ĭSCR = CFADS / (Principal + Interest Payments) How can we rearrange the formula to calculate the debt size out of this? In the term sheet above, at all points throughout the debt tenor, the DSCR must be greater than 1.40x. This means that you can only contribute £4,000 per year, instead of £40,000.(+) other items (e.g. Once you take cash above your 25% tax-free allowance you’ll then become subject to the money purchase annual allowance (MPAA) of £4,000.The value of investments can rise and fall and there is no guarantee as to how your funds will perform.By withdrawing lump sums of your pension there is a chance that your retirement fund could run out sooner than if it were left in a more stable fund such as a lifetime annuity.Like all investments there is risk associated with flexi-access drawdown. The disadvantages of flexi-access drawdown Should you pass away before releasing all of your pension, you can nominate someone to receive the remaining funds on your behalf - such as a relative or charity.If you wish, this can be adjusted periodically to reflect the performance of your investment or to better suit your needs. If you decide to draw a regular income it’s possible to manage the amount you want, and at your desired intervals. ![]() This offers the opportunity for growth, unlike an annuity which provides a fixed income. Once you’ve taken your tax-free lump sum, the rest of your pension pot can be left invested.Whether you intend to use it to supplement your income, to help loved ones or fulfil a lifelong dream, it can be yours to spend however you wish. With flexi-access drawdown you can take up to 25% of your pension tax-free, as a lump sum or in portions.Your browser does not support HTML5 video tags
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