Project Finance Investment Portfolio

PROJECT FINANCE
INVESTMENT
PORTFOLIO
Table of Contents

INTRODUCTION.......................................................................................................................3
TASK........................................................................................................................................3
1. Discuss the Basic difference between corporate finance and project finance. Also quote the
advantages and disadvantages of both............................................................................................3
2. State reasons why debt is cheaper than equity. Also explain Optimal structure............................6
3. How risk in a portfolio is examined. Describe the effect of portfolio as more asset being added.. .7
CONCLUSION...........................................................................................................................9
REFERENCES..........................................................................................................................10

INTRODUCTION
The corporate finance is defined as the area of the finance which deals in the various sources
of funding and the capital structure of the business corporations (Asai, 2020). It is very important
for the managers to take the necessary actions in order to increase the value of the business
enterprise to the shareholders, there are various tools which need to be considered in order to use
effectively and efficiently with the financial resources of the business organisation. It is
identified that debt financing involves the borrowing of the monetary aspect where it is observed
that equity financing is related to the selling a portion of equity within the business organisation.
This report will include the discussion on the various topic which is the dissimilarity among the
project finance as well as corporate finance attitude towards fund based capital projects,
explanation on why the debt is cheaper than equity and at last it will include discussion on how
the riskiness of portfolio measures, how to measure the more assets to the portfolio how to
eliminate risk within the portfolio.
TASK
1. Discuss the Basic variance between project and corporate finance. Also quote the benefits and
shortcomings of both.
It can be defined as a long-term, zero or limited alternative financing solution which is
available for the borrower against the assets, rights and interests which mainly depends upon the
concerned project. If any individual plan to start any industrial, infrastructure or public services
projects but need some resources for the same, then project financing is one of the best solutions
that they are looking for (Berrou, Dessertine, and Migliorelli, 2019). The repayment of loan can
only be completed by utilizing the cash flows which are created once the project is done rather
than the balance sheet of the investors. In case the debtor fails to pay the amount of loan, then the
creditor has a right to take control of the project. Along with this finance companies can generate
good margins if a firm use this system while partially shifting the related project risks. Generally,
this type of loan system is more in favor of investors, firms and lenders.
It mainly bridges the gap between the investors and lenders, an intermediary is created namely
special purpose vehicle (SPV). The main function of SPV is to manage the resources procuring
and managing to ensure that the project assets.

Difference between Corporate finance and Project financing:
Corporate financing:
 Corporate funding refers to the monetary supervision of a general business, such as
deciding the organization's financial model, then, at that fact, growing the money and
ultimate use of resources, and improving the functioning of the corporation. Interestingly.
 Stage: Benefited during the commencement of an organization and during any
development
 Basis of credit evaluation: Asset report, income, and by and large monetary strength of
the organization.
 Risk: Risk is normal and merged. Any awful undertaking might influence the over tasks
of the business element.
 Returns: Returns are Moderate as chance and returns are shared.
 Security/Collateral: Generally speaking, resources/incomes of the organization.
 Type of capital: Long-lasting and exists over the lifetime of the business
 Reinvestment: Least prohibitive agreements by the members, for the most part
administrative
 Financial structure: Normal and Simple monetary designs
 Transaction expenses: Minimal expense because of chance sharing and straightforward
design
 Financial elasticity: Higher monetary adaptability because of less prohibitive agreements
Project financing:
 Project financing mentions to taking monetary choices like wellsprings of assets,
contracts with merchants, and discussion.
 Stage: Benefited by laid out SPVs wandering into new tasks.
 Basis of credit evaluation: Project practicality investigation, project resource esteem, and
estimated income.
 Risk: Risk is confined and ringfenced to the task and doesn't gush out over to different
organizations/projects.
 Returns: Returns are high as the gamble is high
 Security/Collateral: Restricted to just the undertaking resources/incomes
 Type of capital: Limited and restricted to just the life expectancy of the undertaking